Preparing your tax return? Some job search expenses are deductible . . . and some aren’t. We’ll tell you what you need to know to stay on the good side of the IRS.
A typical job search takes more than time and effort. Even the most frugal job seekers can’t avoid investing at least some cash in their quest for employment.
The good news is that the IRS allows job seekers to take tax deductions for certain types of expenses. But you might be surprised to learn that not all job search expenses are tax deductible.
In fact, some job search costs are clearly not eligible for a tax deduction – and you could find yourself in trouble with the IRS if you attempt to claim a non-qualified deduction.
Here’s our disclaimer: We advise every job seeker to consult a tax professional before claiming a job search tax deduction.
However, IRS regulations around job search tax deductions are fairly straightforward and include the following (taken word-for-word from the IRS.gov website):
To qualify for a deduction, the expenses must be spent on a job search in your current occupation. You may not deduct expenses you incur 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 your 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.
- The amount of job search expenses that you can claim on your tax return is limited. You can claim the amount that is more than 2 percent of your adjusted gross income. You figure your deduction on Schedule A.
For more information about job search expenses, see IRS Publication 529, Miscellaneous Deductions. This publication is available on www.irs.gov or by calling 800-TAX-FORM (800-829-3676).