By Mark Buescher, C.P.A.Guest Columnist
Our recent economic crisis, or The Great Recession, as it is more often called, is considered by many economists to be the worst financial crisis since The Great Depression of the 1930’s. Although it technically ended in mid-2009, most areas of our country, including Madison County and the North Florida area, continue to feel its effects.
Obviously, plummeting real estate pricing, tighter lending practices and other economic changes have certainly been hard to swallow, but one of the most notable areas of our economy to be impacted is that of the job market. Unemployment hit a high point in Florida in December, 2010, at a rate of 12.0%. The rate has somewhat improved but is still at an astounding rate of 10.6% as of May, 2011, slightly higher than the national average of 9.2%.
Madison County’s unemployment as of May 31, 2011 was slightly above the state average at a rate of 10.8%. Fortunately, our area has not been hit as hard as other areas in the state such as Miami-Dade County, with an unemployment rate of 13.7%. Nevertheless, according to the Bureau of Labor Statistics, we have 759 unemployed individuals in Madison County alone.
Many factors and criteria go into the makeup of the published rate, but the truth of the matter is the rate is actually higher than that released through government statistics. For instance, unemployed individuals are no longer considered “unemployed” at the point in which they become discouraged and actually stop looking for work.
Additionally, those marginally attached to the labor force and the “underemployed,” such as those who have accepted part-time jobs when they are really looking for full-time employment, are excluded from the rate as well. The true unemployment rate in the state of Florida is considered to be as high as 19.0%. That’s nearly one in every five Floridians that are out of work.
Obviously, the unemployed in our area continue to suffer and, unfortunately, a quick reversal doesn’t seem to be on the horizon in the immediate future. To make matters worse, for those who are unemployed and are receiving unemployment benefits, a surprise awaits at tax filing time. Unemployment compensation benefits are taxable.
However, if you or someone you know is unemployed, here are a few thoughts on how the tax bite might be reduced. First, remember that job-search expenses may be deductible. They are deductible to the extent that they exceed 2% of adjusted gross income. Resume preparation, long-distance phone calls, internet charges, and travel expenses related to job interviews are some expenses that may qualify as job-hunting costs.
Moving expenses may also be deductible if you move to take a new job. The move must be at least 50 miles more than the distance between your old job and your former home in order to take the deduction.
If you sell your home to take a new job, remember that the law now generally makes selling your home a nontaxable event. Unless the profit from the sale is more than $250,000 ($500,000 if you’re married), you won’t have to pay taxes on the gain. The general rule is that you must have owned and lived in the home for two of the last five years. If you haven’t met this two-year requirement, you may still be able to exclude some of the gain if you sell your home because of a change in employment.
If you need to withdraw money from an IRA to pay for health insurance premiums while you’re out of work, you will pay income tax on the withdrawals, but you won’t have to pay the 10% early withdrawal penalty. (Certain requirements apply.)
Saving tax dollars while you may be out of work obviously isn’t the cure for being unemployed, but it certainly helps. The unemployment rate remains high, but it is improving. The employment picture in North Florida will see brighter days soon.Mark Buescher, CPA is owner and principal of Buescher and Ruff, LLC, a local full service accounting firm in Madison, specializing in tax preparation, business consulting and tax planning. Tax laws contain varying effective dates and numerous limitations and exemptions that cannot be summarized easily. For details and guidance for your specific situation, contact your tax advisor.