Are My Job Search Expenses Tax Deductible?
December 05, 2013
Did you know you could deduct your expenses from a job search on your federal taxes? It's not something that's hidden or obscured in tax code, but it can be easy to overlook, especially when you're filling out and filing your taxes on your own. One reason it's easy to miss is how it's categorized, in addition to the information that may be required. Qualifying for these deductions isn't necessarily easy, but with a little diligence, you and most job hunters may be able to take advantage of what may be much-needed relief.
Are My Job Search Expenses Tax Deductible?Before pursuing these deductions, there are a few things you'll want to consider.
Keep records of everything.This point cannot be emphasized enough. You need to keep every receipt over the course of your job hunt. The biggest reason for this has due to the “2% limit." This means if your overall job hunt expenses fall below 2% of your income (specifically “adjusted gross income") you will not qualify for the deductions. It's important to be aware of all the expenses you accrue during this time, which we'll look in greater detail below.
You must be actively seeking employment.If you encountered a dry spell during your job search and took time off from said search, the IRS may disqualify you from receiving the deductions. They term it as a “substantial break" from whenever your previous job ended to when you begin your search. That's the extent of the IRS's definition and it's vague. It's something you'll have to use your best judgment on if there are gaps in your search.
You cannot change careers.Well, you can, of course, but if you change or plan to change careers and enter a different field, you won't be able to qualify for the deductions. Again, it's one of those things that's left ambiguous by the IRS. They don't explicitly define what sets apart one field from another, but again, you'll have to use your best judgment. If it's blatantly obvious (such as moving from a “sales consultant" to an “app developer") chances are you will get denied, but if it seems reasonable (such as moving from a “copywriter" to “editor") you're safe.
No first-timers.Never had a job before? No deductions. It's as simple as that. In order to qualify, you must be moving from one job to another. Now that you know whether or not you qualify for the deductions, what expenses can you deduct?
FeesSpecifically fees associated directly with your job search. These include “employment and outplacement agency" fees. These can include job placement services, employment or workforce counseling, and related agencies – basically any service you were charged for during your job search that offered assistance in that search. However, if at any point you are reimbursed for these fees by a current or previous employer, you are required to report it the next year.
RésuméAny money you spent on creating, printing, or mailing your résumé is tax deductible. It doesn't matter if you printed out one résumé and mailed it or 200. What does matter is that you keep record of your résumé expenses. If you create and print of a few résumés from your home computer, you might not qualify. In this case—and if you want to qualify for this deduction you may want to use a professional service as well as purchasing postage at a post office so you have complete a complete record.
TravelIf looking for a new job requires you to accumulate some mileage, you may qualify for this deduction. One major consideration: the travel must be explicitly related to your job hunt (and guess what, the IRS is yet again vague on what qualifies in this case, so beware). You can deduct fuel costs, vehicle maintenance, transportation expenses (airline, bus, or train tickets), and whatever else you deem as a job hunt-related travel expense. More information is available at IRS.gov.
Did you know that CareerHMO is tax deductible for unemployed job seekers?
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