"Side" trip to family doesn't negate business expense, sometimes...

I’m planning to travel to Philadelphia where I plan to interview for some jobs. While I’m there I’ll visit my relatives who live in the area. Is this trip a deductible expense? J.C., Indianapolis

If the main reason for taking the trip is to interview for work, then the cost of the travel to and from Philadelphia may be deductible, along with the costs of getting to and from the interview (taxis or gas mileage), and the cost of meals and hotel on the days when you are interviewing. Visiting friends or family doesn’t negate the opportunity to deduct the costs unless the family visit is the main reason for the trip and the interview is merely incidental.

These costs are considered to be job-hunting costs and are deductible as a miscellaneous deduction on Schedule A of your federal tax return. You must itemize deductions in order to claim these expenses. Even if you itemize, you may not get the full benefit of this deduction. Miscellaneous deductions must exceed 2% of your adjusted gross income before the IRS lets you use the expenses to reduce the income on which you pay tax.

For example, if your adjusted gross income is $50,000, 2% of that amount is $1,000. Only the miscellaneous deductions that exceed $1,000 are allowed as itemized deductions.

Other deductible job-hunting costs include the cost of preparing and reproducing a résumé, employment agency fees, postage, and telephone costs.

Job-hunting costs are not allowed as a deduction if you are looking for a job for the first time, are trying to find a job in a new occupation, or if a substantial amount of time has passed since you last had a job.

I am buying company stock through payroll deductions. I sold some shares in 1999 and my tax preparer calculated the capital gain. I was not sure how to calculate this correctly. I will be selling again this year. Can you tell me how to calculate the gain on these sales? J.M., Indianapolis

The gain (or loss) on the stock you sell is determined by subtracting your purchase price from the sales price. If you paid a commission to sell the stock, that commission is also deducted from the sales price.

The confusion probably occurs because you have many shares of stock that you purchased over a long period of time, all at different costs. I recommend keeping a worksheet, showing each share or group of shares you purchased, and the cost of those shares, and the date on which you purchased them. Then keep track as you sell the shares.

Typically, when you sell shares of stock that have been acquired over a period of time, the IRS assumes you are selling the stock in the order in which you acquired it. This method is called first-in-first-out, and it means that the first shares you bought are the ones you sold first, the second shares you bought were sold next, and so on.

You have the right to choose which shares you want to sell; you don’t have to sell them in the order in which you purchased them. If you want to have some control over how much gain is taxed and in which years the gain is taxed, you can choose to sell shares that will generate the amount of income on which you want to pay tax. For example, if you purchased some shares at $20 and others at $25 and the market value is now $30, you can choose to sell the $25 shares and thus pay tax on a gain of $5 per share instead of the $10 gain on which you would pay tax if you sold the shares you purchased at $20.

There are other things to consider when you decide which shares to sell. If the stock is going to continue to rise in value, you may want to sell the least expensive shares first so that you won’t have a huge gain when you eventually sell those shares. Also, keep in mind that the tax rates are lower if you sell stock that you have owned for at least one year than are the rates on stock you’ve owned for less than a year.

At the very least, if you keep a nice worksheet showing all the stock shares you acquired, the date on which you acquired them, and the cost of each of the shares, it will be easy for you and your tax advisor to examine the worksheet together and determine the most tax advantageous method for selling shares. I recommend that you discuss which shares to sell with your tax advisor before you make future sales, instead of making the sale and then trying to calculate the gain.