Six Tax Benefits For Job Seekers

The IRS recently published their Summertime Tax Tip 2010-04, entitled “Six Tax Benefits for Job Seekers”, with some good tips that you should know as you go about your job hunt.  The text of the actual publication from the IRS follows, and at the end of the article I have added a few additional job-related tax breaks that could be useful to you.

Six Tax Benefits for Job Seekers

Many taxpayers spend time during the summer months updating their resume and attending career fairs.  If you are searching for a job this summer, you may be able to deduct some of your expenses on your tax return.  Here are six things the IRS wants you to know about deducting costs related to your job search.

  1. To qualify for a deduction, the expenses must be spent on a job search in your current occupation.  You may not deduct expenses incurred while looking for a job in a new occupation.
  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.
  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 an area to look for a new job in your present occupation, you may be able to deduct 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.
  5. 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.
  6. You cannot deduct job search expenses if you are looking for a job for the first time, or if you are looking for a job in an entirely new occupation or career.

In addition to all that…

It’s important to know that you have some other job-related tax breaks which you can take advantage of…

Moving Expenses – if you move to a new home for your employment, either a new job or just being transferred in your current job, you might be able to deduct your moving expenses if:

  • the move is closely related to your start of work in the new location
  • your new work location is more than 50 miles farther away from your old home than the distance from your old home to the old work location.  In other words, if your old workplace was 7 miles away from your old home, your new workplace must be at least 57 miles away from your old home.
  • you must continue to work in the new location for at least 39 weeks during the 12 months after the move.  If you’re self-employed you must also work in the new job for 78 weeks during the 24 months following the move. (There are exceptions for disability, layoff, transfers, and other situations.)

You may include the cost of transportation and storage of your household goods for up to 30 days, as well as travel and lodging from the old home to the new home (only one trip per person).

Unreimbursed Employee Business Expenses – certain expenses related to your job that are not reimbursed by your employer can be deducted.  Some examples are:

  • Dues to professional associations and chambers of commerce if work related and entertainment is not one of the main purposes of the organization.  Any part of the dues that is related to lobbying or political activities is not deductible.
  • Educational expenses related to your work.  These expenses must be required to maintain your current job, serving a business purpose of your employer, and not part of a program that will qualify the taxpayer for a new trade or business.
  • Licenses and regulatory fees.
  • Malpractice insurance premiums.
  • Office-in-home expenses (subject to quite a few qualifications)
  • Phone charges for business use (but not the cost of basic service for the first phone in a home)
  • Physical exams required by the employer
  • Protective clothing and safety equipment required for work, as well as tools and supplies required for your job
  • Uniforms required by your employer that are not suitable for ordinary wear
  • Union dues and expenses

This is not an exhaustive list – you can find more information by going to the IRS website at www.IRS.gov.

About the author

Jim Blankenship, CFP®, EA

Jim Blankenship is the founder and principal of Blankenship Financial Planning, Ltd., a financial planning firm providing hourly, as-needed financial planning and advice. A financial services professional for over 25 years, Jim is a CFP professional and has earned the Enrolled Agent designation, a designation that qualifies him as enrolled to practice before the IRS. Jim is also a NAPFA-registered financial advisor, which designates him as a Fee-Only Financial Advisor.

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