Tax Tips for the Unemployed
Magazine Money

Tax Tips for the Unemployed

The cost of relocating to a new job can be deducted if the new job is at least 50 miles farther away from the former home than the former home was from the former job. The costs, however, are only deductible if you worked full time for at least 39 weeks after the move, she warns.

Also keep track of healthcare costs.
Health insurance costs under the Consolidated Omnibus Budget Reconciliation Act or an individual plan are deductible, but only if medical expenses exceed 7.5% of adjusted gross income, Perez says.

After Petties’s layoff, she purchased COBRA coverage for herself; she has applied for her daughters to be insured under a state plan for children in low-income households because their father recently lost his job, too. Petties plans to deduct the cost of paying for COBRA, especially since it claims a significant 26% chunk of her monthly unemployment benefits.

Look into the Earned Income Tax Credit.
Check eligibility for the earned income tax credit, or EITC, which is a credit (not a deduction, which lowers your taxable income; a credit reduces the amount of tax you pay) for low- to moderate-income earners who have worked at some point during the year. The credit varies depending on the filer’s income and number of dependents. Petties will claim the EITC credit, $5,236, for a single filer with two qualifying children for the 2012 tax year, since her 2012 income will fall below the IRS’s threshold of $41,952.