How Taxes Are Handled
- When you work as a firefighter, you are considered as an employee. This means that part of your income will be subject to income tax withholding. Your employer will withhold a certain amount of your paycheck to cover federal income taxes and to pay Social Security and Medicare taxes. The amount of income withheld from your paycheck will depend on the number of exemptions you claim. To maximize the amount of money you get with each paycheck, claim a higher number of exemptions.
State and Local Tax Credits
- In some smaller areas, fire departments rely on volunteer workers to fight fires. If you work in this capacity, the local government may give you some tax credits in return for your service. These tax credits lower the amount of tax that you have to pay on the local or state level. While these reduce your tax liability for local taxes, they can increase your federal tax liability. The federal government counts this as income, and you must pay taxes on it.
- When you incur expenses out of your own pocket to be a firefighter, the IRS may allow you to deduct some of these expenses. For example, if you have to pay professional dues out of your pocket, this is a deductible expense. When you pay for your own uniforms and equipment, this can also be deducted from your taxable income. If you pay for a private phone line so that the fire department can contact you, this is also deductible.
- If you want to be able to deduct these expenses from your taxable income at the end of the year, you must keep track of them accurately. This involves keeping receipts for all of the expenses that you incur. If you do not have a receipt for an expense, keep a logbook with detailed transaction information. Then if you are audited, you will be able to prove that the expense was legitimate and that you actually paid it.