Tax tips for the unemployed

Remember, however, that even if you're able to avoid an early distribution penalty, you'll still owe taxes on the amounts withdrawn from these retirement accounts unless you withdrew contributions from a Roth.

Look for a job

Hang on to all your job-search receipts. Expenses for such things as employment and outplacement agency fees, resume services and job-hunting travel, both in-town and out-of-town trips, can be deducted.

There are, however, limits to job-hunt tax breaks.

You must itemize to claim job-search expenses. These costs are miscellaneous deductions, meaning they and other eligible miscellaneous expenses must amount to more than 2% of your adjusted gross income before you can claim them. And your job-hunt expenses must be toward employment in your current professional field.

Start your own business

If some of those job-search expenses were toward investigating a possible business of your own, they count, too. Once you are successful in starting your own company, you can claim additional business tax breaks.

Expenses related to the process of operating your business generally are deductible. Don't forget auto expenses if you use your car for business. Keep thorough records and receipts to document all these new company costs.

If you operate your new business from your residence, you might be able to claim a deduction for your home office.

Health care costs that you as a business owner pay for yourself and your family are deductible.

The IRS is happy to let you deduct eligible business expenses because in the longer term, it's better for everyone. Your entrepreneurial success will not only help boost your personal bottom line, but will also mean more tax money for the U.S. Treasury.


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