For many people, summertime is the season that often leads to major life decisions, such as moving, buying a home, or a job change. If you are one of the many people 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. While the amount and scope of the deduction is limited, this could be a helpful benefit for a taxpayer that otherwise must spend money on job search expenses. The key to getting a deduction for such expenses is keeping good, contemporaneous records. The expenses generally are deductible whether or not you get the job. Following are seven things the IRS recently reminded taxpayers to remember about deducting costs related to a job search:
1. To qualify for a deduction, the expense must be spent on a job search in the taxpayer’s current occupation. Taxpayers may not deduct expenses incurred while looking for a job in a new occupation.
2. Taxpayers can deduct employment and outplacement agency fees paid while looking for a job in the taxpayer’s present occupation. If a taxpayer’s employer pays the taxpayer back in a later year for employment agency fees, then the taxpayer must include the amount received in the taxpayer’s gross income, up to the amount of the tax benefit received in the earlier year.
3. Taxpayers can deduct amounts spent for preparing and mailing copies of résumés to prospective employers, as long as the taxpayer is looking for a new job in the taxpayer’s present occupation. This would inlcude the costs of typing, printing, copying and postage.
4. If a taxpayer travels to look for a new job in the taxpayer’s present occupation, then the taxpayer may be able to deduct travel expenses to and from the area to which the taxpayer travelled. This includes any local transportation and travel away from home. A taxpayer only can deduct the travel expenses if the trip is primarily to look for a new job. The amount of time a taxpayer spends on personal activity unrelated to the job search compared to the amount of time spent looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. The taxpayer should keep a mileage log for vehicle transportation or other appropriate receipts to substantiate the cost of the travel and the primary purpose as being for a job search.
5. A key restriction on the deduction for job search expenses is that a taxpayer cannot deduct such expenses if there was a substantial break—e.g., several years—between the end of the taxpayer’s last job and the time the taxpayer begins looking for a new one.
6. Unfortunately, a taxpayer also cannot deduct job search expenses if the taxpayer is looking for a job for the first time.
7. The amount of job search expenses that a taxpayer can claim also is limited. To determine the available deduction amount, a taxpayer needs to use Schedule A, Itemized Deductions (see link below). Job search expenses should be claimed as a miscellaneous itemized deduction and the total of all miscellaneous deductions must be more than two percent of the taxpayer’s adjusted gross income.
For more information about the deduction for job search expenses, contact your professional tax advisor or tax preparer, or call Hertsel Shadian, Attorney at Law, LLC at (503) 352-6985, or see IRS Publication 529, Miscellaneous Deductions (link below). This publication also is available on www.IRS.gov or by calling 800-TAX-FORM (800-829-3676). Please also feel free to share this article with others you know that might benefit from this information.