Searching for a job can be a frustrating and time-consuming experience – and worse yet, it can be extremely expensive. But if you’re tax-savvy, you may be able to recoup some of your job search expenses in the form of tax deductions. Follow the rules regarding what you can write off, and save all documentation related to every write-off you take. And don’t make the mistake of overlooking the deductions you’re due – ultimately, it can add up to a great amount, and every bit you save may go a long way in helping you get through a rough patch.
Eligible Job Search Expenses
1. Expenses Within Your Field
Job search deductions apply only if you’re seeking an occupation within your field. For example, you wouldn’t be able to go from a job in finance to one in education and write off those job search expenses. But if you need to take a part-time job to support yourself while you look for a job in your field, you can take deductions related to the part-time job search.
Unfortunately, if it’s your first time looking for a job, you’re out of luck. You can only claim job search deductions after you’ve been employed.
2. Resume Preparation
The costs to prepare your resume are deductible expenses. For example:
- Did you hire someone to professionally rewrite your resume? That’s a tax-deductible expense.
- Are you sending resumes via snail-mail? You can write off the cost of postage and envelopes.
- Did you fax you resume? Keep the receipt, because the cost to fax is deductible too.
3. Phone Calls
The cost of speaking to a potential employer over the phone is deductible. If you spend 45 minutes speaking with an HR representative, Uncle Sam can reimburse you for a portion of the cost, whether you get the job or not.
4. Employment and Outplacement Agency Fees
If you decide to utilize the services of an employment agency, it is considered a job-seeking service and is tax-deductible. However, be cautious: If your employer pays you back for employment agency fees, then you have to claim that on your taxes as part of your adjusted gross income (AGI), and it is no longer tax-deductible. However, if your employer does not reimburse you, those expenses are yours to claim.
This is particularly important if you must travel a substantial amount for interviews. A friend of mine drove from Mississippi to Louisiana (a round trip of approximately 200 miles) to interview for a position. He did not land the job; however, he was able to deduct the mileage for those trips.
In 2013, the standard mileage rate is 56.5 cents per mile for business-related purposes. For my friend, that equaled $113 in deductions. Even if you’re not traveling very far per trip, keep a log of how much you’re driving to interviews, job fairs, or employment-related training seminars. You may be surprised at how much the mileage adds up.
6. Other Traveling Expenses
Let’s say you’re a video game developer who lives in New York, and you book a flight to California to attend the Game Developer’s Conference where you hope to get a lead on a job. Since your reason for travel is primarily to look for a job, you can write off airfare and lodging expenses. Just be sure that the amount of time you spend looking for a job is more than the time you spend on leisure, or the trip may not be deductible.
7. Moving Costs
If you live in an area that doesn’t offer substantial paying jobs in your field, you may find it necessary to move to a region with more opportunities. According to the IRS, you can deduct moving costs, provided that your new workplace is at least 50 miles farther from your old home than your old job location was from your old home. You also must work for at least 39 weeks during the first year following your move if you’re an employee. If you’re self-employed, you must work that amount, as well as a total of 78 weeks during the first two years.
So what can you deduct? You can claim 24 cents to the mile for moving purposes in a car. You can also deduct plane tickets and lodging expenses, and the cost of packing and shipping items to your new home, plus up to 30 days of storing them. Furthermore, costs incurred for shipping a car and pets to your new home are also deductible. Just be sure to begin looking for a job immediately after you move if you don’t already have one.
The 2% AGI Limit
It is important to understand that, unfortunately, you may not be able to deduct all of your job search expenses. In fact, you can only deduct job search expenses and other miscellaneous costs that exceed 2% of your AGI. Other miscellaneous expenses include, but are not limited to, non-reimbursed employee expenses, tax prep fees, and investment fees and expenses (see Publication 529 for more details).
For example, if you made $40,000 and spent $900 on eligible job search expenses, and had no other miscellaneous deductions, you could deduct $100 from your income because the nondeductible 2% of $40,000 equals $800. However, if you had other miscellaneous expenses that total at least $800, in this case, you could deduct all your eligible job search expenses because you’ve already satisfied the 2% AGI requirement.
If you suffer job loss, start looking for new employment as soon as possible, so the IRS doesn’t think you’ve taken “substantial” time off and denies your deductions. Keep a log of every expense and of all of your job search activities – for instance, resume preparation, job fairs attended, travel costs and mileage – and keep all receipts and notes in an organized folder or filing cabinet. It is crucial to have such records to prove that you’ve been hunting for a job in case the IRS comes knocking. Additionally, familiarize yourself with other miscellaneous expenses that are subject to the 2% AGI limit in order to meet this requirement and claim all deductions you’re entitled to.
Have you claimed job-hunting expenses on your taxes before? What other ways to save money on taxes can you suggest?