Tax Tips

What You Should Know About Claiming Unemployment (& Taxes)

April 1, 2013 : Jenna Bromberg - Past Contributor

Are you claiming unemployed — or were you unemployed at some point this year? You still have to file taxes. But there are a few special considerations for taxpayers who receive unemployment compensation (and plenty of ways to bring that tax bill down).

1. Unemployment benefits are taxable

As you know, the unemployment benefits you receive must be reported as part of your gross income when you file your taxes. Unless you’ve chosen to have taxes withdrawn directly from your unemployment checks, no taxes are withheld from unemployment compensation when you receive your benefits. So, to avoid a major bill at tax time, it’s a good idea to make estimated tax payments throughout the year if you don’t choose to have taxes withheld.

If you’re unable to make your tax payment in full, you may be able to arrange an IRS tax payment plan by submitting Tax Form 4868 available on the IRS website.

2. Job hunting expenses are tax deductible

The good news: You may be able to deduct unreimbursed expenses you incur during your job search as long as you’re pursuing a job within your previous career field. If you meet qualification criteria, deductible expenses could include:

  • Mileage, airfare and lodging expenses for job interviews
  • Employment agency fees
  • Résumé preparation expenses
  • Employment counseling fees
  • Phone charges for long distance calls directly related to your job search
  • Postage costs
  • Advertising expenses

Splurging on some new interview attire? Sorry: not deductible. Contrary to popular belief, wardrobe related expenses are NOT considered tax deductible, even if they are related to job search efforts.

To claim qualifying job search tax deductions, you must itemize your expenses and take the expenses as a miscellaneous deduction. In addition, your total miscellaneous expenses must exceed 2 percent of your adjusted gross income (AGI).

3. Relocation expenses could help lower your tax bill

Next up: if you received unemployment compensation at some point during the year and landed a new gig, you may be in luck if you’re relocating. If you’re relocating for a new position that is within the same career field, you may be able to deduct your moving expenses without itemizing. To claim relocation deductions you must meet the following requirements:

  • Your new job must be at least 50 miles farther from your prior residence than your old job was from that residence.
  • You must be employed full-time at the new workplace for at least 39 weeks in the twelve month period following your move.

More questions about your specific situation? Get help from a tax pro

Jenna Bromberg - Past Contributor

Jenna Bromberg - Past Contributor

H&R Block

Jenna helped manage the national social media programs at Houlihan's Restaurants, Inc. and was a copywriter for all three brands in the HRI family before joining H&R Block.

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