Tax Time [From the Hey Jane archives]

March 30, 2009 at 3:22 pm | Posted in Finances, Hey Jane Column | Leave a comment

Hey, Jane, It’s tax time. What academic expenses can I deduct?

Here are responses from SWS members. Responses are usually kept anonymous but the last one is from one of our own SWSers who is a tax expert so she agreed to have her professional identity revealed. We hope this helps in these perilous financial times.

There are two categories of deductions: one is professional expenses – what helps you advance as a faculty member — professional organization dues and meeting expenses, expenses incurred in doing research, books, journal subscriptions, newspaper subscriptions if you use items in teaching, fees and editorial expenses for submissions to journals, travel that adds to your professional expertise as a teacher. The other is business expenses against what you earn in royalties, lecture fees, and other non-salaried income — here I deduct 1/2 of home phone bills, internet costs, my home computer and printer and other home office supplies (you have to argue that you can’t use your office for writing), meals with people to discuss publication projects.

I would add/clarify that you get to deduct a “home office” IF it is used exclusively for your work (that part of your house then gets “depreciated”). (If you use a tax program like Turbotax, it does the calculations for you; you can deduct the tax program too.)  I think there are also some rules, that you have to “make” money in terms of your nonsalary “self-employment” some number of years, i.e., you can’t deduct computer, etc., and always spend more than you earn in your self-employment.  But these rules may have changed…But if you have a mortgage, and a home office, then this can offset quite a bit of any honorariums, etc. you have earned.

You can also deduct some travel expenses, e.g., if you rent a cabin, or go to a writing retreat center…or anything you are not reimbursed for from your department (ASA, SWS, etc.) that is professional travel.

And…for something completely wild, IF you get a Fulbright, or do a sabbatical abroad, and you are out of the country 11 months out of 12, the income earned is tax free.  the 11 out of 12 can be in two tax years, e.g., September thru July, and does not have to be continuous, and can be any country (including Mexico and Canada).  (You may have to pay taxes in the country in which you are living, but that is not common I think.)  So, even though Fulbright does not pay much, together with travel and local living expenses, and being taxfree, and if you live reasonably modestly, that can be quite doable.

Someone used to publish a book on “Taxes for Academics” or something, that carefully outlined all the regulations and what kinds of things can be included.  I used it for several years, but don’t know if  it’s available now, might be worth keyword-checking on Amazon.  Has  anyone checked the AAUP website?  They may well have some material or  references.  There are indeed many things that can be deducted, but the  home-office deduction is very easy to go wrong with.

The book is: 2005 Tax & Financial Guide For College Teachers And Other College Personnel: For Filing 2004 Tax Returns (Tax Guide for College Teachers and Other College Personnel) (Paperback) by Donald T. Williamson (Author).

Unfortunately, it seems to be out of print, and because it’s specific to 2004 filing, may be outdated in its advice as well.  My school has a copy of it on file- you may want to check with your institution’s library!

From Hey, Jane: the following site noted that this guide is, indeed, out of print but listed some other helpful books: http://blogs.setonhill.edu/MikeArnzen/023023

Here are the ones I’ve found that seem to be most current. I haven’t seen them yet, so I cannot endorse them fully, but the first one — from NTSAA — has been very helpful for me in the past:

  • 2008 Educator’s Tax Guide Teachers Tax Service
  • Teacher’s Pocket Tax Guide 2008

If you know of others, please leave a comment about them. Others that I’ve recommended on this site before seem, sadly, to be unavailable or out of print — and I am longing especially for a new edition of the the THICK and highly useful AIS book, “Tax and Financial Guide for College Teachers and Other College Personnel”. They might be available used on ebay or elsewhere. Useful for guidance if you are new to figuring your taxes as an academic professional, but rely on them only with the knowledge that their specific legal references are probably falling out of date.

PROFESSIONAL EXPENSES (INCLUDING TRAVEL)

As an employee you will only be able to deduct professional expenses, including organization fees, journal subscriptions, travel expenses, conference expenses and so forth if you itemize your deductions.  In addition, there is a 2% of your Adjusted Gross Income (found at the bottom on the first page of your 1040) threshold — you can only deduct those expenses that exceed that 2%.

If you are given a stipend or grant for travel, it depends upon the source as to how it affects your taxes.  If the grant is from a non-profit source as part of an academic grant, it is generally non-taxable and does not
have to be accounted for on the return.  If it is a grant from your department or as part of your compensation from an endowment, then it needs to be accounted for.  There are two kinds of travel grants in IRS lingo — accountable and non-accountable.  The accountable grant means that you have to present receipts after the trip and return the difference or wait for a reimbursement.  You generally do not need to account for this on your tax return as you have essentially been reimbursed for your expense.

If it is non-accountable, it means that you are given a lump sum of money and you are not required to return any receipts or account for your trip in any manner or return any unused funds.  You need to know if your employer has included this lump-sum in their reporting of your income.  If they have, then you can only account for your expenses as described above, as part of your Schedule A, itemized deductions with the 2% threshold.  If the employer does NOT include your lump sum with your income on your W-2, then you should claim as income on line 7 of the 1040 any unused portions of the travel money and pay taxes on it accordingly.  You do not have to itemize in that case, just figure the net and if it is a positive amount,
you need to pay taxes.  If it is a negative amount (you spent more than the lump sum, you cannot deduct that extra unless you itemize).

I think someone asked if you could consider this kind of grant money as “other income” and file a Schedule C showing your expenses.  If it came from your employer, then you cannot.

Travel expenses include transportation (ground, air, etc), lodging, incidentals and 50% of your food. It can also include convention expenses such as registration fees or items purchased in order to participate in the convention (such as a manual for a workshop).

You can also deduct continuing education courses and training that pertains to your work as a professional expense as long as it isn’t something you are required to take as minimum requirement for your job.

You might also be able to deduct books and journals you buy for research or teaching, if the research is being done through the university.  You cannot deduct books and journals you buy for your own personal or professional development.  The key is that it must be something that directly contributes to your work.  (a subscription would be a professional expense, but buying a single copy for reading would not)

If the school provides a computer, office, phone, etc., you cannot deduct your home computer, office, phone, etc. as an employee expense.  Employee expenses have to be required by the employer in order to do the work you were hired to do.

TAX CREDIT for CHILD AND DEPENDENT CARE

If you pay for day care for a child or parent, you may be able to take a tax credit for some of your expenses (it is pretty low amount, but every little bit helps).  You need to have the tax ID (SS#, EIN#) of the institution or person you are paying for the care and the tax ID (SS#, ITIN#) for person(s) for whom the care is given.  You and your spouse must both be working. If one spouse is in school full time for more than 5 months of the year, that counts as working. (Exception to this is if the spouse is permanently and totally disabled).  The form you attach is 2441 to claim the credit.  It cannot be larger than the amount of taxes you
owe.

MOVING EXPENSES

You can deduct as an adjustment on the front page of the 1040 expenses you incur in moving.  Moving expenses are contingent upon having a new job. If you are employed you must work 39 of the 52 weeks after your move (if you can reasonably assume that you will meet this requirement, you do not have to wait until you have actually worked). You must also be closer to the new job than you were to the old job (if you had one) and you must have moved more than 50 miles. The new job has to have been accepted within 12 months of the move. If you meet these requirements, you can deduct the cost of moving your stuff and the cost of moving you.  Your stuff can be whatever expenses it took — paying workers, several trips, etc.  You can only deduct the last trip you take one-way to the new home.  So if you fly back and forth to find a house, for example, then you can only claim the last flight.  If you drive back and forth several trips moving stuff, you can claim all the trips.  You can also claim 1 months storage at the new location and the deposits for utilities.  You cannot claim deposits for apartments or closing costs on home, etc.  You cannot claim food for your trip, only transportation & lodging.

Pattie Thomas, Ph.D.
Adjunct Professor
College of Southern Nevada

General Manager
Liberty Tax Service
Las Vegas, NV
c:702-239-1414
e:pattie_thomas@yahoo.com

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