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petermraz76
New Member

I had job related expenses of $3,262 but my federal refund is $1,071. Why? Are expenses deducted from taxable income rather than the amount of taxes paid?

My job related expenses consist of a portion of my rent and utilities (I work from home), internet service, cell phone plan, and insurance. I thought these would be deducted from my taxes and refunded?
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Marketstar
Level 7

I had job related expenses of $3,262 but my federal refund is $1,071. Why? Are expenses deducted from taxable income rather than the amount of taxes paid?

Job related expenses are a reduction of taxable income (not a dollar for dollar increase in your refund) if deductible.

Job related  expense is a miscellaneous deduction which you can only deduct if you itemize your deductions (medical, mortgage interest, property taxes, charitable deductions, ect) and if the total of your miscellaneous expenses (including employee business expenses) are greater than 2% of your Adjusted Gross Income.

So, you may not gain a tax benefit (or you may gain a limited tax benefit) for this deduction due to the above limitations.

 For example, if you itemize your deductions and your Adjusted Gross income is $50,000, 2% would equal $1,000.

You can only deduct the dollar amount that exceeds $1,000.


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3 Replies
Marketstar
Level 7

I had job related expenses of $3,262 but my federal refund is $1,071. Why? Are expenses deducted from taxable income rather than the amount of taxes paid?

Job related expenses are a reduction of taxable income (not a dollar for dollar increase in your refund) if deductible.

Job related  expense is a miscellaneous deduction which you can only deduct if you itemize your deductions (medical, mortgage interest, property taxes, charitable deductions, ect) and if the total of your miscellaneous expenses (including employee business expenses) are greater than 2% of your Adjusted Gross Income.

So, you may not gain a tax benefit (or you may gain a limited tax benefit) for this deduction due to the above limitations.

 For example, if you itemize your deductions and your Adjusted Gross income is $50,000, 2% would equal $1,000.

You can only deduct the dollar amount that exceeds $1,000.


petermraz76
New Member

I had job related expenses of $3,262 but my federal refund is $1,071. Why? Are expenses deducted from taxable income rather than the amount of taxes paid?

Thanks.  So if I understand that correctly:
Example 1: If my Adjusted Gross income is $50,000 and my business expenses are $5,000, I'm better off using the standard deduction of $6,300 as that will lower my taxable income by a greater amount.
Example 2: If my Adjusted Gross income is $50,000 and my business expenses are $8,500, I'm better off itemizing my deductions as that will lower my taxable income by $7,500 (the $8,500 less 2% of my Adjusted Gross income).
If this is correct, it seems that I'm better off using the standard deduction of $6,300 until my business expenses reach $7,300.  At that point, I should be indifferent between using the standard deduction and itemizing my expenses, as both methods will lower my taxable income by the same amount of $6,300.  However, once my business expenses exceed $7,300, I'm better off itemizing my expenses rather than using the standard deduction.  Is that correct?  Thank you.
Marketstar
Level 7

I had job related expenses of $3,262 but my federal refund is $1,071. Why? Are expenses deducted from taxable income rather than the amount of taxes paid?

Your math appears correct!

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