Searching for a new job can be full-time work, except with no pay and lots of expenses. Fortunately, many of those job-hunting costs are tax-deductible, as long as you aren’t just starting out or looking for a job in a new field.
I know, it sounds weird and perhaps a little cruel. But if you’re a new graduate looking for your first job, or somebody who wants to make a career change, you’re on your own. At least as far as the IRS is concerned.
The IRS also won’t allow your deductions if you’ve taken a long break since your last job – for instance, if you took a year off to travel or care for a newborn.
For everyone else looking for a new job, there are some important things to keep in mind if you want to make back some of your expenses.
Be Aware of What’s Permissible
You can deduct expenses incurred during your job search, whether or not you get the job. Examples include:
1. The costs of preparing and sending your resume, cover letter and portfolio. These include copy services, scanning, shipping and fees for professional help in drafting or polishing your resume.
2. Internet service charges, membership fees and phone calls related to your job search.
3. Employment and outplacement agency fees (unless you’re reimbursed for these fees by your employer once you’re hired).
4. Magazines, periodicals and/or online subscriptions purchased in service of your job search.
5. Car mileage to and from job interviews. (Create a mileage log with start/finish odometer readings, date, and destination.) Check www.IRS.gov for the latest per-mile rates.
6. Any travel expenses related to finding a job, as long as the prospective job was the primary purpose of your trip. In other words, you can’t deduct a trip to Hawaii if all you did was drop off your resume at the Dole Pineapple Plantation. You need credible evidence to demonstrate that your job search was the main objective of travel.
7. Career counseling or classes to improve your chances of finding work.
Save Your Receipts
Remember to keep track of all of your expenses. No matter how many deductions you’ll ultimately end up with, they won’t count unless you can show receipts for your expenses. (Your monthly credit card statement is not good enough.)
File your receipts or organize them online so you aren’t scrambling during tax time, or worse, left without a record of your purchases.
Costs Must Reach a Certain Amount
According to the IRS: “In order to be deductible, the amount that you spend for job search expenses, combined with other miscellaneous expenses, must exceed a certain threshold.”
In other words, the IRS considers your job search costs as “miscellaneous expenses.” When your job search expenses, combined with other “miscellaneous expenses” reaches two percent of your adjusted gross income, then you can start deducting those expenses.
This means that if your adjusted gross income was $100,000, you must have expenses that add up to more than two percent of that income, or $2000. So if you have $2,500 in miscellaneous expenses, you can deduct only $500.
Unfortunately, many people aren’t even aware or don’t take advantage of job search deductions. But they exist to encourage you to move ahead and prosper. Perhaps it’s time to take the bait.
