Tax tips for the unemployed

By Jen Haley, producer


NEW YORK (CNN) -- Tax time can be a painful time for many of us, and it's especially tough for people without jobs. If you're unemployed, there are a few twists and turns in the tax code that can work to your benefit.

Even if you didn't work last year, you probably still have to pay taxes. Unemployment benefits are taxed. Plus, if you received a W2 and made at least $9,350 (as a single person) you are required to send in a return, says tax analyst Mark Luscombe of CCH.

CDs & Money Market
MMA 0.39%
$10K MMA 0.35%
6 month CD 0.39%
1 yr CD 0.71%
5 yr CD 1.50%

Find personalized rates:
 

Rates provided by Bankrate.com.

Let's say you decided to freelance or start a business, you'll have to file a tax return if you made more than $400 in profit. If you are anticipating a tax refund, you must file - even if you didn't work at all.

1. Take advantage of new benefits

Traditionally, every penny of unemployment insurance is taxed. But with 8.4 million job losses since the start of the recession, that rule is changing this year.

If you received unemployment checks last year, you can exclude the first $2,400 when you file your return. You have to remember to do this math yourself, since the documents from your state employment agency won't exempt it. This benefit won't be around next year.

You can avoid a "penalty tax" on IRA and 401(k) withdrawals if you took the money out to pay for medical expenses. If you've been laid off and you're 55 years or older, you can take money out of your 401(k) without penalty.

2. Deduct your job hunting expenses

If you itemize, you can deduct job-hunting expenses. But there are rules. All of your deductions must exceed 2% of your adjusted gross income. Here are some things you can deduct: resume printing costs, postage, long-distance calls and faxes and travel expenses, including airfare, taxis or tolls. Make sure to hold onto all your receipts.

And don't forget that you can also deduct your medical expenses, if those expenses exceed 7.5% of your adjusted gross income. That used to be a high hurdle. But, if your income plunged because of unemployment, you may very well be able to deduct your medical expenses ... so hold onto drugstore receipts, prescription orders or co-pay information.

Talkback: Do you think unemployment benefits should be taxed? To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.98%3.95%
15 yr fixed3.05%3.05%
5/1 ARM3.32%3.71%
30 yr refi4.05%4.03%
15 yr refi3.12%3.11%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 16,805.41 127.51 0.76%
Nasdaq 4,483.72 30.92 0.69%
S&P 500 1,964.58 13.76 0.71%
Treasuries 2.27 -0.00 -0.09%
Data as of 3:56pm ET
Company Price Change % Change
Ford Motor Co 13.78 -0.62 -4.31%
Microsoft Corp 46.13 1.11 2.47%
Apple Inc 105.22 0.39 0.37%
Bank of America Corp... 16.72 0.12 0.72%
Yahoo! Inc 43.50 0.90 2.11%
Data as of Oct 24

Sections

New York headlines took a straight forward and direct approach with NYC's Ebola news. More

The midterm elections are around the corner, and the economy remains a top concern. With unemployment down and inflation low, why do people still feel the economy stinks? More

Shares of Facebook recently topped $80. They've more than quadrupled from their post-IPO lows of two years ago. Can Mark Zuckerberg keep the momentum in mobile going? More

Host a furniture market. Here's how small town High Point, N.C. rakes in this much money -- twice a year. More

If you're looking to fly this holiday season, the clock's ticking to get the best prices. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.