As a busy technology professional, you are busy serving other departments within your company or your clients with their technology problems. While many of you may be already aware of few of these deductions, there are many who have less information on what can and cannot be deducted. So, in order to help busy technology professionals, we have put together this quick list. You need to ensure you track all these expenses to get maximum savings at the time of tax filing.
If you are a self-employed technology professional, chances are you are already tracking this as part of your self-employed or S Corporation books in your accounting system. Ensure you set up a regular appointment with your CPA/ tax professional to avoid any last minute end of the year surprises.
If you are an employee, you may also deduct the same expenses as part of job-related expenses if they have not been reimbursed by your current employer.
As an employee, however, this deduction is limited to the amount that exceeds 2% of the adjusted gross income in your itemized deductions that are reported on your Schedule A. Therefore, if you have many expenses that are unreimbursed by your employer, you may consider converting to an S Corporation. This may especially apply for Information Technology client-serving professionals who travel worldwide on client projects.
We have put together this quick list of tax deductions that you may find useful :
1) Car deductions: Commuting by car from your office to client location is certainly deductible if not reimbursed by the employer. The commute from home to client location, certain rules may apply. In general, if the miles are higher as compared to your home to office, you may be able to deduct the differential. Consult a tax professional or CPA so they can help evaluate your tax situation on mileage. The mileage costs over a period of time can bring you significant savings. In 2017, the annual cost of deductible mileage is 53.5 cents per mile. There are many apps available on your smartphone that automatically track and provide the necessary reports for your tax filing. Automate as much as possible or you can maintain this in an excel worksheet.
2) Continuing education: It is very important for technology professionals to update their skill set and to be current with the developments in their field. Subscriptions to educational videos, magazines, costs of seminars, books, conferences, online courses and other continuing education that helps you do and improve your skillset can be deducted. However, an important point to note that you are not eligible to deduct expenses that help you qualify for a new profession.
Eg: You are a technology professional & are also taking law courses as an attorney. More than likely, these will be rejected by the Internal revenue Service as they are not directly linked to your technology profession. There may be few exceptions, so consult a tax professional if you have any questions.
3) Internet access: WiFi is everywhere, so if you are waiting for your next air travel at the airport or logging in from your hotel, any reimbursed internet access bills can be deducted as part of your unreimbursed expenses.
4)Office expenses: If you spent personal funds on paying for your office stationery, postage. These can certainly be part of your business deductions.
5)Home office: Most telecommute positions clearly state what is covered and not covered by corporations for remote technology professionals. Many employees are also provided a standard amount to cover overhead costs of operating from your home office. If however, you had unreimbursed expenses from your employer you can add this to your unreimbursed expenses deduction. There are few other rules that may impact what you can and cannot deduct. Eg: This has to be your primary place of business and should be for the convenience of your employer.
6) Travel costs: You will be able to deduct out of pocket costs of travel. Cost of parking, toll expenses all are covered if not paid by your employer.
7) Legal and professional services: You may be able to deduct costs of accounting and professional services used to prepare your tax returns.
8) Cell phone expenses: If you used your personal cell phone for business, you may apply a prorated percentage and add this to your deductible deduction on your itemized schedule.
9) Job search expenses: This may include the cost of producing a resume to travel expenses you incur while interviewing or searching for a job.
10) Software/hardware purchases: If you purchased a software online or other accessories for your work computer which was not paid by the employer, then you can deduct these expenses.
Items you cannot deduct
1) Professional clothing: This is often misunderstood. Appearing in interviews and client meetings in professional business suits & other accessories cannot be deducted.
This deduction is only available for certain professions eg: Airline crew members where uniforms are mandatory and not part of their everyday schedule.
2) Laundry expenses: Even if you are out on business travel, this cannot be deducted as part of unreimbursed travel expenses.
Overall all of these expenses should be ordinary and considered necessary. Eg: Taking an expensive business trip, extravagant purchases can raise red flags and should be avoided including an expensive car rental.
While these are general guidelines, for special situations you should consult a CPA or a tax professional who can further understand the circumstances & facts to see if you qualify for a tax deduction.
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