Tax Deductions for Job-Seekers

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If you’re taking looking for a new job in the wake of the recovering economy, you’re in luck: some of your job search expenses are tax deductible. There is one catch: the deductions only apply toward a new position within your current industry. However, you won’t be able to deduct job search expenses if you’re looking for your first job or are changing fields.

Who’s Eligible

In order to take the deduction, you must either:

  • Be seeking a new position within your field while currently employed, or
  • Seeking employment in your regular line of work after a period of unemployment.

In other words, if you’re currently working in customer service and are looking to be the next tech god or goddess, expenses for that job search aren’t eligible in the eyes of the IRS.

Eligible Expenses

A good job search can be expensive over time. Here are the expense the IRS is willing to allow:

  • Resume expenses: Printing, snail mail postage and resume writing service expenses are allowable under IRS tax codes. Just be sure to keep all receipts that are related to your resume expenses in case you will need to substantiate these costs in the future.
  • Travel: If you are traveling out of the area to seek work in that community, keep track of your mileage, meal, and fuel expenses. If you’re traveling out of the area on personal business and decide to seek work at the same time, be sure to document the percentage of time and expense devoted to job search activities. Hold on to any receipts related to your travel expenses.
  • Agency Fees: If you pay an agency or outplacement firm to assist you in finding your next job, keep any and all agency receipts documenting the fee(s) paid to them.
  • Long Distance Phone Calls: If you make long distance calls related to your job search (phone interviews, for example) print out your phone bill and highlight the related phone numbers. Mark them as “long distance phone expense: Bay Area Tech.” By marking your phone bill as soon as you get it, you’ll save yourself the hassle at the end of the year when you may not remember what all those long-distance numbers were for.

How to Report These Expenses

If you’re using the DIY approach to filing your taxes, you’ll need to list these expenses on Schedule A of your 1040 form under “miscellaneous expenses.”

Here’s the catch: You can only deduct job search expenses that exceed 2 percent of your Adjusted Gross Income (AGI). Let’s assume your AGI is $20,000. You can only deduct eligible job search expenses that exceed $400.00, or 2 percent of $20,000.

A job search can be expensive: resumes, travel, long-distance calls and related expenses can add up over time. If you’re looking for a new job within your field, you can deduct some of those job search expenses.

If the thought of calculating these expenses or interpreting IRS tax code makes you uneasy, check in with a qualified tax prep advisor. He or she can answer your questions, help you determine qualifying expenses, and file your tax return on our behalf.

If you need a qualified tax pro to help you sort through the confusion, we’re here to help. Just click on the white “Start Chat” button at the top of the page or give us a call.

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