With the tax season kicking off, if you are unemployed or were unemployed in 2009, you want to make sure not to miss out on many deductions and exemptions available this year. To help you navigate this year’s returns, we have put together this checklist of things to keep in mind. We recommend that you carefully study this list of the deductions and credits to which you may be entitled because of your unemployed status, before filing tax returns this year.
Here are some of the things to keep in mind:
2009 Stimulus Package for Unemployed
This year you can enjoy reduced taxes on unemployment income. Normally, individuals receiving unemployment benefits must report them as income and pay income tax on them. The 2009 bill signed by President Obama makes the first $2,400 of unemployment income nontaxable.
Deductions for Spending Money on Job Searching
If you were on a job hunt in 2009, you may be able to deduct many of the expenses incurred while looking for a job. By declaring such itemized deductions, you may be able to lower the amount of your taxable income. For example, anything you spend on creating, printing and mailing your resume is deductible and so are the fees for resume writing services, career coaches or headhunters. You may also write off phone charges associated with your job search, as well as transportation costs: miles driven to an interview (including parking and tolls) or plane, bus or train fare, for example. However, there are limitations: you may not deduct the value of your time or new clothes for your interview. Consult a professional if you are not sure and always make sure to keep your receipts
Claiming Your Unemployed Spouse on Your Return
If your spouse has lost their job, you can claim them as your dependent to get a tax credit. If you have been paying for their living costs, you qualify to receive a tax credit. Just make sure to keep the financial records (proof of how much money you spent on supporting your spouse) just in case you get audited.
Expanded Earned Income Tax Credit
Many couples who file jointly and have children qualify for the expanded Earned Income Credit. The credit increases for families with three or more children to 45 percent (5% increase) of the first $12,570 of earned income. The new Child Tax Credit will cover more low-income earners this year.
More information on family tax credits
Health Insurance Assistance for Unemployed
Lowered cost for COBRA health insurance is a valuable benefit for workers who lost their health insurance when they lost their jobs. This government subsidy is designed to help unemployed people keep their health insurance.
More information on the health insurance assistance for unemployed
Making Work Pay Credit
If you have been working for a part of 2009 or your spouse is working, you are entitled to a payroll tax credit for 2009 and 2010 of up to $400 a year for single taxpayers, and up to $800 for couples filing jointly.
More information on Making Work Pay Credit
Other Credits & Deductions
Keep in mind that there may be additional credits and deductions that are not related to your employment status, however may still result in a significant tax refund. Such things are: buying a home (First-time Homebuyers Credit), buying a car (Car Sales Tax Deduction) or paying for college education (Expanded Hope Credit).
Note: Because of many recent changes and complexity of some individuals’ situations, if you are not certain about your particular case, we do recommend that you consider enlisting professional help to have someone prepare or review your tax returns. You can write off tax preparation fees so it may be a good idea to get a second opinion even if you typically prepare your own returns. Some tax professionals even offer discounts for unemployed so make sure to ask them about it.
Great post Andrew! So much so that I plan to share this with others I know who are also affected by recent layoffs. Thank you.
Mike Twaddell
IMHO really not sound advice re claiming a spouse as a dependent. If a married couple files a joint return there's already an exemption for the spouse, which is same as a dependent. I don't know the nuances of the tax tables and how filing status might affect tax rates, etc, but would be willing to bet that if a married couple has filed a joint return for years, then one spouse files an married filing separately return w spouse as a dependent, that might stand out to IRS like a big red flag (unless the unemployed spouse simultaneously files a married filing separately return showing no income etc.). If somebody wants to run the numbers and post the results, knock yourself out but I'd personally stay away from this strategy...
Martha Matsuda
Andrew, Thanks for this information. I saw info about the reduction in Federal taxes somewhere on line but am glad you're writing about it here. And your suggestion about expenses for job hunting is great. The other tips aren't applicable for me; however, I do like the sound of an "Expanded Hope Credit." :)
Joseph Burton
Agreed. This is all very helpful advice. I will have to look even more closely this year into what might be deductible and how (reduction to AGI or tax credit).
Jerry Albertini
Andrew,
Thanks for this helpful advice. I will keep it handy when I prepare our 2009 Joint Return.
With the tax season kicking off, if you are unemployed or were unemployed in 2009, you want to make sure not to miss out on many deductions and exemptions available this year. To help you navigate this year’s returns, we have put together this checklist of things to keep in mind. We recommend that you carefully study this list of the deductions and credits to which you may be entitled because of your unemployed status, before filing tax returns this year.
