The clichés surrounding the concept of remaining optimistic in the face of hardships are evidence of the number of ways truly difficult situations can befall any of us. I suppose they're overused because they work-but that might just be the optimistic view. Regardless, as difficult as losing a job can be, there are a few bright points on the tax front. While you may not rejoice at the ability to claim additional deductions as a result of a decline in income, there are ways to use the situation to lessen your tax burden:
We'll start with the bad news. Unemployment benefits are considered taxable income; however, a portion of benefits is excluded, this amount is detailed in the link below:
http://www.irs.gov/newsroom/article/0,,id=205633,00.html
And now for the good news (or at least the optimistic view). Many deductions are only available if they exceed a certain % of Adjusted Gross Income. For the taxpayer who experienced a significant decline in income during the current year this may open up a host of deductions that had previously been unavailable. The below article provides a host of deductions that may help the unemployed:
http://www.usatoday.com/money/perfi/columnist/block/2009-02-09-unemployed-tax-breaks_N.htm
When one job is lost another is gained, or that's the idea anyway. There is a deduction available for job hunting expenses and the article below does a great job of spelling out what qualifies:
http://online.wsj.com/article/SB10001424052970204731804574388880246070404.html
For those of you that moved for that new job, moving expenses may be deductible if certain conditions are met. This article details the qualifying tests that determine whether the expenses are deductible as well as which expenses qualify:
http://www.smartmoney.com/personal-finance/taxes/writing-off-moving-expenses-9565/
And finally, for those job hunters that either returned to or stayed in school, a number of education deductions are available for the qualified:
http://www.kiplinger.com/features/archives/2007/01/educationtaxopedia.html
The above probably isn't enough to convince the employed to run out and quit their jobs in hopes of obtaining access to these breaks, but it does provide a bit of relief for those that qualify. Maybe the clichés had something going for them after all.
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