Job Search Tax Deductions

With so many Americans out of work or looking for a better job to make it these days, it’s important to note that some job search costs are tax deductible. In the IRS Publication 529, there is an entire section devoted to “Job Search Expenses”. Even if your job search doesn’t yield results, you can still claim the expenses on your taxes.

As with most things in life, there is a catch. The IRS has three major exclusions – so don’t go saving all those receipts quite yet.
1. You must be looking for a job in your current occupation. If you are looking to shift careers you will not be able to deduct your expenses.
2. Another deal breaker – if it’s there has been a “substantial” break since the end of your last job and the current search. The IRS doesn’t define substantial, so be sure to check out this detail with a tax advisor.
3. If you are looking for a first job, say fresh out of college, you do not qualify for this deduction.

If you are looking for a new position in your current field and there hasn’t been a substantial time lapse since your last job you’ll want to track all your expenses. You will be able to itemize your expenses on Schedule A on your next tax return. Here are some examples of job search related expenses:

• Resumes. If you are looking for a new job in your present occupation, all the money you spend on preparing and mailing out your resume is deductible. This includes if you pay to for a professional resume writing service or resume distribution service. Even though most applications are done online, if you choose to mail in your resume you can deduct the paper, envelopes, and even postage.
• Employment and outplacement agency fees. Again, if you are looking in your present occupation, you can deduct employment and outplacement agency fees – if you pay them yourself. If your employers reimburses you for these fees, you’ll have to add that to your gross income.
• Travel and transportation expenses. Be careful on this one, but if your job search, again in your present occupation, requires you to travel you may be able to deduct your expenses to and from the area. You need to be able to demonstrate that primary reason for the travel is to look for a new job and not personal. Even if you are looking for a new job in your present area you may be able to the mileage incurred during your search.

When in doubt, just save the receipt for every job search related expense. When you are ready to file your taxes, be sure to read the details regarding the deductions on Schedule A. You can find details on these deductions in Publication 529. If you have financially contributed quite a bit to your job search, it is probably worth consulting with a tax advisor regarding your qualifying deductions. Keep in mind the fees incurred in the cost of tax preparation software programs, tax publications, or tax advisors are deductible as well.