Your Trade Can Lead to Big Deductions

No matter what type of skilled trade you work in, whether you are a computer service technician, a mechanic, a laborer, or any other job which requires a unique skill-set, you may be able to reduce the amount of taxes you owe each tax year by claiming certain deductions.

If you work for a specific company, and you are considered an employee, you will receive a Form W-2, Wage and Tax Statement from your employer. However, if you work on your own, you are considered to be self-employed. In these situations, you should receive a Form 1099-MISC, Miscellaneous Income. Self-employed individuals with net earnings greater than $400 are required to pay self-employment tax on their income, as reported on Schedule C. It may be recommended that you also pay estimated taxes four times throughout the tax year to account for the amount you owe on a Schedule C.

Generally, you are able to lower the amount you owe in taxes by claiming expenses related to your trade that have not been previously reimbursed. As long as you keep your receipts, you may be able to deduct expenses such as:

  • Required safety equip and personal protection gear, such as steel-toed shoes
  • Maintenance and upkeep costs for uniforms or other required clothing, including hard hats, coveralls, and gloves, as long as they are not suitable for street wear.
  • Equipment that is replaceable within the year
  • Licensing fees, flat rate occupational taxes, or other certification costs, as long as it is not for the first certification you receive
  • Premiums on liability and accident insurance
  • Union or association dues
  • Costs associated with obtaining trade publications

While you are searching for a job, you may be able to deduct and costs you incur, provided you are looking for a job in the same field of employment as your last job. For example, if you are an electrician, you can deduct costs related to searching for another electrical job. If you hold an odd job just to make money, you are not automatically disqualified from deducting the expenses.

In addition, you can deduct some educational or training courses, but they have to meet certain requirements. The requirements usually cover refresher courses, vocational training, and updates on new technology. If a class or education allows you to get a job in another field, it is not eligible to be deducted. So, an electrician can’t deduct biology classes. Also, if the education is required for you to meet minimum skills for your current occupation, it is not deductible.

If you are self-employed and file a Schedule C, you are entitled to additional deductions, such as:

  • Traveling expenses if you use your own vehicle for business expenses
  • Any fees associated with legal or professional services related to the business
  • Rental fees for property used by the business
  • Business trip expenses, though they need to meet all the standard requirements for time away and distance
  • Equipment repair costs
  • Business supplies
  • Bad business debts
  • Personal property or excise taxes
  • Advertising costs
  • Compensation, salaries, or commissions paid to employees