Can I deduct job hunting expenses on my tax return?

If you currently employed and looking for another job in your line of work, job hunting expenses such as  cost of attending career fairs and resume preparation, miles driven to and from  and  out of town expenses for the interview or career fair, also fees paid to employment agencies are deductible. If you are looking for a job in the different field or changing your career, those expenses are not deductible. Also one needs to be currently employed to deduct job hunting expenses. One cannot take a break from work to attend a college or raise a child, then start looking for a job, and deduct expenses, those are not deductible.  Job hunting expenses are subject to 2% AGI limit and one needs to itemize in order to claim these expenses.

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Can I deduct hobby expenses?

Hobby is an activity where primary motivation for engaging into activity is to have fun, not to make profit.

Hobby expenses might be deductible. If hobby producing income, then one can deduct expenses associated with a hobby up to the amount of the income; however, a taxpayer cannot carry forward  the deductions. Meaning if expenses are $5000 and income earned from hobby $1000, one can deduct $1000 in expenses, but remaining $4000 will be lost and cannot be carried over to future years. Another thing to remember, that one can deduct hobby expenses only if he/she itemizes instead of taking a standard deduction and hobby deductions are subject to 2% AGI limit.

As far as tax law if the activity shows profit for 3 out of 5 years,  activity is considered to be engaged in for profit and treated a business.

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What is included into rental income and rental expenses?

If you have a place that you rent out, you have to report your income.

What is included in Rental Income? EVERYTHING!

In addition to rent payment, you have to include in the income

– any type of advance rent,

– payment to lease cancellation,

-security deposit (unless you are planning on returning it to your tenants at the end of the lease, but if you are keeping a part of the security deposit because tenants did not live up to the term of the lease, then you have to include that portion as your rent income.)

-if instead of the money you receive services or property, fair market value needs to be included as a rent income.

On a bright side, you can deduct pretty good list of expenses. Such as interest on your mortgage, real estate taxes, advertising, maintenance, utilities, insurance and homeowners dues and mileage.

You can deduct repairs that were done to keep a property in good operating condition.

If you did improvements that add value to the property such as change roof, add a pool, new fence, changed AC, etc these expenses have to be depreciated on a form 4562

And yes, if your expenses exceed your income, you can report loss up to $25,000; amount goes down for filers who AGI is above $100,000

Can I deduct my time or service working as a volunteer as charitable contribution?

One cannot deduct the value of time or services when he or she works as an unpaid volunteer, but can deduct cost of buying and cleaning uniform if  the uniform is unsuitable for normal wear.  For example nurse who is volunteering for local charity can deduct cost of buying and cleaning uniform. But if charity is asking for black bottom and white top-this is not deductible, because this type of clothes is suitable for normal wear.

If you make goods and donating them, you cannot deduct their value, only what it cost to make them. For example, if one makes cookies, deductible are only cost of cookies ingredients. If you are donating used clothes, value is calculated at 25% of the original cost, and of course you can deduct full price if your items  brand new, but not more than original price paid.

If value of donated property is overstated, IRS may assess the 20% or 40% penalty on the underpayment of the tax.

I paid to a lawyer. Can I deduct his fees?

It depends on a claim you hired attorney for. Legal fees are deductible only if they relate in some clear way to taxable income, thus fees occurred for personal claims are not deductible.  Car accidents or animal bites cases considered to be personal claims, and attorneys fees are not deductible.  However, taxpayer can deduct  legal cost involving claims of discrimination, sexual harassment, wrongful termination, etc.  Legal cost to collect alimony is also a deductible expense  since alimony is taxable income.

I am temporary working in California, but my home is in Chicago. Do I need to file California tax return?

YES.

Employee compensation (salary) need to be tax by the state where services where performed. Thus CaliforniaNon-resident tax return needs to be filled and taxes paid on income earned in California.

If you live in California, but work for a different state based company, your income is taxable by California state and you need to file California tax return for resident and include all your world-wide income.

Either way you look at it, if you earned money while in California, you need to file and pay state taxes. How much and what form to file, your tax professional will be able to determine.

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Is buying out-of-state tax-free?

Short answer is NO.

Sales tax is applied to ” tangible property”, anything you can see, touch, feel, weight, measure, etc. Californians do not pay sales tax on services.

When a consumer pays tax to a retailer- it’s a sales tax, when consumer pays tax directly to the state, sales tax becomes “use tax“. Both taxes have the same rate, which is 7.5% in California as of January 1,  2013 to December 31, 2016. One should calculate and pay use tax when tangible  items purchased from out-of-state retailers. Use tax has been in effect in California since 1935, but many people are not aware of it.

Your tax professional can help to chose which method to use when reporting use tax .