If you are looking for a job in the same line of work, you may be able to deduct some of your job search costs. Here are some key tax facts you should know about when searching for a new job:
- Same Occupation. Your expenses must be for a job search in your current line of work. You may still take the deduction, however, if you are unsuccessful finding employment, said Jenny Kim, a tax manager with White Nelson Diehl Evans. You cannot deduct expenses for a job search in a new occupation. Kim noted that most new graduates won’t be able to use this deduction since they will be looking for their first job. She continued, “However, if you realize that the new job you found wasn’t right for you, and you go right back into the job market, this time around you will be allowed to claim these deductions.”
- Résumé Costs. You can deduct the cost of preparing and mailing your résumé, including if you hire a professional to edit your résumé, Kim said.
- Placement Agency. You can deduct some job placement agency fees you pay to look for a job.
- Travel Expenses. If you travel to look for a new job, you may be able to deduct the cost of the trip. To deduct the cost of the travel to and from the area, the trip must be mainly to look for a new job. You may still be able to deduct some costs if looking for a job is not the main purpose of the trip. Expenses would include gas/mileage and food and lodging.
- Time Between Jobs. You can’t deduct job search expenses if there was a long break between the end of your last job and the time you began looking for a new one, such as if you took time off to travel or care for an ailing family member.
- Reimbursed Costs. Reimbursed expenses are not deductible.
- Schedule A. You normally deduct your job search expenses on Schedule A, Itemized Deductions. Claim them as a miscellaneous deduction. You can deduct the total miscellaneous deductions that are more than two percent of your adjusted gross income.
- Premium Tax Credit. If you receive advance payments of the premium tax credit, it is important that you report changes in circumstances – such as changes in your income, a change in eligibility for other coverage, or a change of address – to your Health Insurance Marketplace. Advance payments are paid directly to your insurance company and lower the out-of-pocket cost for your health insurance premiums. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.
Kim noted that other deductible expenses included printing costs, cost of advertising and phone expenses. Home office expenses don’t qualify. She said, “Be sure to keep all the receipts related to the expenses that you are claiming as deductions on the tax returns. Also keep a mileage log for each trip, including the date and purpose of the trip.”
Kim added that it is also important to remember that all job search-related expenses are subject to the 2% AGI limit. You can only deduct expenses that exceed 2% of your AGI. For example, if your AGI is $30,000, and you incur $700 in job searching expenses, 2% of $30,000 is $600. In this scenario only $100 is deductible ($700 less $600).
For more on job hunting refer to Publication 529, Miscellaneous Deductions. You can get IRS tax forms and publications on IRS.gov/forms at any time.
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