Many taxpayers spend time during the summer months polishing their resume and attending career fairs. If you are searching for a job this summer, you may be able to deduct some of your expenses on your tax return. However, there are specific rules that you must follow or job search tax deductions will be disallowed. The Internal Revenue Service offers some relief on your income taxes to offset upfront job-hunting expenditure if you itemize your deductions. The IRS categorizes these as miscellaneous expenses.
Top 6 Tax Benefits for Job Seekers
First, you must itemize deductions on Schedule A to count your job-hunting expenses. That task is further limited by a threshold amount you must meet. Your job search costs are considered miscellaneous expenses. As such, they are deductible when they, and all other allowable expenses in this category, are more than 2 percent of your adjusted gross income
What Job Hunting Expenses You Cannot Deduct
You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. You cannot deduct these expenses if:
- You are looking for a job in a new occupation
- There was a substantial break between the ending of your last job and your looking for a new one
- You are looking for a job for the first time
Here are the top six things to know about deducting costs related to your job search.
- In order to deduct job search costs, the expenses must be spent on a job search in your current occupation. You may not deduct expenses incurred while looking for a job in a new occupation.
- You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year.
- You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers as long as you are looking for a new job in your present occupation.
- If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
- You cannot deduct job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.
- You cannot deduct job search expenses if you are looking for a job for the first time.
As with all tax deductions, there are three important words to remember: document, document, document. Keep track of your expenses, and back them up with receipts. For more information about job search expenses, see IRS Publication 529 -Miscellaneous Deductions. This publication is available below, on the IRS Web site or by calling 800-TAX-FORM (800-829-3676).
Additional IRS Resources of Deducting Job Hunting Expenses:
- Publication 529, Miscellaneous Deductions
- The “What Ifs” for Struggling Taxpayers
- Publication 4128, Tax Impact of Job Loss
- Schedule A, Itemized Deductions