How to Deduct Job Search Expenses on Your Tax Return
If it didn’t hurt enough to be on the hunt for a new job, then you realize you’re on the hook for all of the expenses that come with the process: traveling to the job, picking up copies of your resume and even new clothes so you give your best impression.
We have some good news: some of these expenses can be deducted on next year’s taxes! Or, if you are preparing your tax return for last year and you were on the job hunt then, you might be able to slip in some extra deductions to help you get a bigger return. Here’s how to approach your own deductions:
1. If you want to deduct your job search expenses you have to itemize your deductions on a Schedule A, and they must meet a minimum threshold.
Since your job hunt expenses are considered a miscellaneous expense, they are deductible when they (and all your other allowable expenses) exceed 2 percent of your adjusted gross income.
For example, if your adjusted gross income is $60,000 you must have miscellaneous expenses that add up to more than $1,200. If you have $1,300 worth of expenses you can only deduct $100.
2. You can only deduct expenses if you’re looking for a consecutive placement at a job in the same occupation.
If you’re switching jobs in the same field from one company to another, you’re covered, but if you’re switching careers from one thing to an unrelated thing (such as electrician to writer), you’re not.
The switch must also be consecutive, which means you’re moving from one job to another. If you took an extended leave of absence or stayed home with children for several years you can’t deduct expenses for re-entry into the job market. You also are not covered for expenses when looking for your first job.
3. If you hire an employment or outplacement agency, you can deduct those fees.
If you’re later reimbursed for those fees, you file it as income.
4. If you travel to look for a new job, you might be able to deduct those expenses.
It will depend on what percentage of the trip was personal and whether or not the primary reason was to consider a new position in your current occupation.
5. If you don’t get the job you can still take the deduction.
As long as you’re trying to move from one job to another in the same field, you can take the deductions even if you didn’t receive an offer or take the job.
6. If you land the job make sure you keep your receipts for your moving expenses, too.
As with any discussion about taxes, you’ll want to check with your tax professional before acting on any of the tips below. However, now you have a good sense of when and how it would be appropriate to deduct job search expenses on your tax return based on the IRS’s instructions.