Employee deductions can reduce the amount of income tax working RVers must pay. These tax deductions aren't limited to RVers who run a business. These are unreimbursed job expenses.
by Martin M. Shenkman, CPA, MBA, JD
Miscellaneous Itemized Deductions for Working as an Employee from Your RV
You may be able to deduct the following items as unreimbursed employee expenses. Use the following as a list to make sure you don't miss any write-offs for your income tax returns:
• Business bad debt of an employee.
• Business liability insurance premiums.
• Damages paid to a former employer for breach of an employment contract.
• Depreciation on a computer or cell phone your employer requires you to use in your work.
• Dues to a chamber of commerce if membership helps you do your job.
• Dues to professional societies.
• Educator expenses that are more than you can deduct as an adjustment to income.
• Job search expenses in your present occupation.
• Laboratory breakage fees.
• Legal fees related to your job.
• Licenses and regulatory fees.
• Malpractice insurance premiums.
• Medical examinations required by an employer.
• Research expenses of a college professor.
• Subscriptions to professional journals and trade magazines related to your work.
• Tools and supplies used in your work.
• Travel, transportation, meals, entertainment, gifts, and local lodging related to your work.
• Union dues and expenses.
• Work clothes and uniforms if required and not suitable for everyday use.
• Work-related education.
• Home office or part of your home used regularly and exclusively in your work. This is a tough issue for RV'ers and will be addressed in a future article.
Are Your Expenses Acceptable Employee Deductions
You can deduct only unreimbursed employee expenses only if they meet a number of requirements. The expenses must be paid or incurred during your tax year. They had to have been paid or incurred to carry on your trade or business of being an employee. Finally, the expenses you seek to deduct have to be ordinary and necessary business expenses. This means that the expense is common and accepted in your trade, business, or profession. An expense is necessary if it is appropriate and helpful to your business. An expense does not have to be required to be considered necessary.
You May Have a Different Standard Deductions
The standard deduction amount depends on your filing status, whether you are 65 or older or blind, and whether an exemption can be claimed for you by another taxpayer. If any of these apply, you must use the Standard Deduction Worksheet on the back of Form 1040EZ, or in the 1040A or 1040 instructions. The standard deduction amount also depends on whether you plan to claim the additional standard deduction for state and local real estate taxes or state or local excise tax on a new vehicle, and whether you have a net disaster loss from a federally declared disaster. You must file Schedule L, Standard Deduction for Certain Filers to claim these additional amounts.
Reduction of Your Miscellaneous Itemized Deductions
You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income.
Not all miscellaneous itemized deductions are subject to this rule. For example, impairment-related work expenses of persons with disabilities are not reduced employee deductions. Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and other expenses in connection with your place of work that are necessary for you to be able to work.
Keep Good Records for your Employee Deductions
You must keep records to verify your deductions. You should keep receipts, canceled checks, paid bills, financial account statements, and other relevant documents. Uncle Sam Gives You a Choice
Most taxpayers have a choice of either taking a standard deduction or itemizing their deductions. If you have a choice, you can use the method that gives you the lowest tax.
How to Decide
Whether to itemize deductions on your tax return depends on how much you spent on expenses that you may be able to deduct. Money paid for medical care, mortgage interest, taxes, charitable contributions, casualty losses and miscellaneous deductions can reduce your taxes. If the total amount spent on those categories is more than your standard deduction, you can usually benefit by itemizing.
For RV'ers working as employees, the "miscellaneous" deductions could be an important tax break.
If you use a tax preparation program to prepare your returns you can simply input all the possible employee deductions and the program will help you determine which approach gives you the best tax result.
How Much Can You Get without Itemizing
The standard deduction amounts are based on your filing status. For the 2009 tax year the figures are:
• $5,700 for Single
• $11,400 for Married Filing Jointly
• $8,350 for Head of Household
• $5,700 for Married Filing Separately
• $11,400 for Qualifying Widow or Widower
The figures are increased each year for inflation (if inflation is significant enough).
If you're married but you and your spouse file separate income tax returns, and one of you itemizes deductions, the other spouse cannot claim the standard deduction and must also itemize deductions.
What Form to Use
You can claim the standard deduction on Forms 1040, 1040A or 1040EZ. If you qualify for the higher standard deduction for real estate taxes, new motor vehicle taxes (such as the sales tax on a moho), or a net disaster loss, you must attach Schedule L. To itemize your deductions, use Form 1040, U.S. Individual Income Tax Return, and Schedule A, Itemized Deductions. If you have enough employee business expenses this is the place to report them. You may also need Form 2106 Employee Business Expenses or Form 2106-EZ Unreimbursed Employee Business Expenses.
RV'ers working as employees may qualify for some valuable tax write-offs as employee deductions. Review the above checklist for ideas, see if you meet the requirements and finally determine whether your employee deductions are large enough to benefit you (i.e., that you should itemize).
Martin M. Shenkman, CPA, Esq. sponsors a free legal website LawEasy.com.
Martin is an RVer with a special cause. He is an avid fundraiser for the National Multiple Sclerosis Society and The Michael J. Fox Foundation For Parkinson's Research. See his RV4TheCure.com website for how you can help him fight MS. Besides RV business tax and legal information, he will share some of his RVing and fundraising experiences with us.
Caution: This article and other columns can never substitute for professional legal, tax, and accounting guidance. These columns can provide only broad general advice, which may not apply to your situation. The rules differ substantially from state to state. Tax, business, and other laws change rapidly over time so there can be no assurance that the information in this column is current. The best approach is to review the ideas in this article with your own CPA and attorney. The application of general tax and legal principles to some of the unique facts presented by RV working is particularly complex and there is little specific law providing guidance to rely upon.