Deducting Job Search Expenses On Your Tax Return
Searching for a job can get expensive. These days, let’s face it, if it’s not you, someone you know is on the hunt for a new job. Did you realize that at least some of those expenses can be deducted on your income tax return?
Recently the IRS distributed their Summertime Tax Tip 2012-06, which discusses some of the important facts you need to know about tax-deductible job search expenses. I’ve added a few explanatory comments to help you get more out of the Tip. The text of the Tip can be found below:
Job Search Expenses Can Be Tax Deductible
Summertime is the season that often leads to major life decisions, such as buying a home, moving or a job change. If you are looking for a new job that is in the same line of work, you may be able to deduct some of your job hunting expenses on your federal income tax return.
Here are seven thing the IRS wants you to know about deducting costs related to your job search:
1. To qualify for a deduction, your 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. (jb note: It is generally expected that by occupation, the real meaning is “field” – so a waitress could look for work as a restaurant manager, for example.)
2. 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. (jb note: they mean up to the amount that you deducted in an earlier year, not the tax benefit)
3. You can deduct amounts you spend for preparing and mailing copies of your resume to prospective employers as long as you are looking for a new job in your present occupation.
4. If you travel to look for a job in your present occupation, you may be able to deduct travel expenses to and from the area to which you travelled. 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 unrelated to your job search compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primariliy to look for a new job.
5. You cannot deduct your 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. (jb note: Nowhere in the Code are you going to find a definition of “substantial”. These cases are apparently each taken one-by-one and the situations considered individually, so there is no official guidance on what constitutes “substantial”.)
6. You cannot deduct job search expenses if you are looking for a job for the first time.
7. The amount of job search expenses that you can claim is limited. To determine your deduction, use Schedule A, Itemized Deductions. Job search expenses are claimed as a miscellaneous itemized deduction and the total of all miscellaneous deductions must be more than two percent of your adjusted gross income.