People often ask me about deducting job search expenses on their tax returns. Every year I hear stories on the news, “Don’t forget, your job search expenses are tax deductible!” While this is true that job search expenses can be deductible—many times, they really aren’t.
For one thing, if you’re job hunting, you can only deduct your job search expenses if you’re looking for a job in your current occupation. I do taxes; I’m in the accounting field. If I decide to chuck it all and become a belly dancer—I couldn’t deduct those job search costs since belly dancing is not related to accounting. (Tap dancing—maybe: http://www.youtube.com/watch?v=fNKRm6H-qOU)
But say you truly are looking for a new job in your field, what can you deduct? Here’s a pretty good list:
- Employment and job placement agency fees
- Cost of preparing and mailing copies of your resume
- Travel expenses to look for a new job, but only if the trip is primarily to look for a job. (If you’re a professional snow remover and you’re job hunting in Honolulu it’s really not going to fly with the IRS.)
- You can deduct your job search expenses even if you do not find a new job
After you figure out what your qualified job search expenses are, it goes as a miscellaneous itemized deduction on your Schedule A. That means that your job hunt expenses will have to be more than 2% of your adjusted gross income before they even start to count. And remember that even then, you’ll need enough other items on your Schedule A form to make it worth your while—also known as itemizing deductions.
Here’s an example: Christie is an office manager for a small law firm and makes $50,000 a year. She paid $500 to a professional resume service, and $2,000 to a placement agency to help her find a new job. Although most of the out of state companies that interviewed her paid for her travel, she did have $100 of out of pocket travel expenses. In this case, Christies total job search expenses were $2,600.
Now 2% of Christies adjusted gross income is $1,000 ($50,000 times .02 = $1,000.) So in this case, Christie would have a miscellaneous deduction of $1,600. ($2,600 expenses – $1,000 threshold = $1,600.) So if Christie had other deductions to go along with it, great, then she could benefit from claiming her job search expenses. If she didn’t have any other deductions, then she’d still be better of claiming her standard deduction.
You cannot deduct your job search expenses if you are looking for a job for the first time. This rule keeps most recent grads from claiming job search expenses.
Don’t let not being able to claim a deduction keep you from spending money that you need to spend to look for a job. If your resume needs help, hire a resume writer. If a placement agency can help you, use one. Be sure to put your best foot forward.
For some good free advice about job hunting, check out this website from BestCollegesOnline.com. Although the article is written specifically for online students, there’s so much good and basic job hunt information in there it’s worth checking out. Face it, when you don’t have a job, free is a pretty good price. Here’s a link: http://www.bestcollegesonline.com/career-skills-learn-school/