How to Deduct Your Job Hunting Expenses
Job Search Expenses Can Be Tax-Deductible
If you have been looking for work this past year, you might be in luck come tax time. Certain job hunting expenses are eligible for a tax deduction. You can deduct these expenses whether or not you are currently employed, and whether or not you actually find a job. However, there are some limitations.
Where Do I Claim the Deduction for Job Search Expenses?
Job hunting expenses are categorized as a “miscellaneous deduction” and should be reported on Schedule A (Itemized Deductions) of Form 1040. This means you will have to itemize your deductions in order to deduct your job search expenses. It also means that you can only benefit from this deduction if the sum of your miscellaneous deductions exceeds 2% of your Adjusted Gross Income (AGI).
What Kind of Job Hunting Expenses Can I Deduct?
Most likely, the two biggest expenses you will incur are: 1) the costs of constructing and mailing out your résumé, and 2) fees charged by job placement agencies. Fortunately, both of these expenses qualify for a tax deduction.
Nearly all expenses that are related to your résumé are eligible for a deduction. This includes hiring a professional to edit and format your résumé, as well as the cost of paper, printing, and postage. Make sure to keep all of your receipts and maintain records of where you send you résumé.
Job placement agencies typically provide career counseling and can help match you with potential employers. The money that you pay these agencies directly is generally eligible for a tax deduction.
If you are traveling to another city to look for work, then you may be able to deduct your travel expenses. However, you must be careful about combining personal travel with job search travel.
As with all tax deductions, you need to maintain thorough records and documentation of your expenses. This is especially important for travel and job placement expenses because it is possible that your future employer will reimburse you for some of these costs. Keep in mind, this could conceivably be in a different tax year than when you took the deduction.
For example, suppose you traveled from Baltimore to St. Louis for a job interview in December 2014, and the company reimbursed you for your travel in 2015. You could likely deduct the cost of travel as a job hunting expense on your 2014 tax return, but you would have to claim the reimbursement as income on your 2015 return.
Can I Deduct Job Search Expenses If I’m Looking for a New Career?
No. In fact, the IRS is very clear that you can only deduct job hunting expenses if you are looking for a job in the same line of work as your current occupation. (However, if you’re taking college courses to prepare for a new career, you may be able to deduct certain costs as education expenses.)
You also cannot claim the job hunting expense deduction if you are looking for your first job.
Finally, you cannot deduct your job search expenses if there is a large gap in between the time you left your previous job and the time you began searching for a new job. The IRS does not clearly specify how long this gap can be — but, for example, if you took a year off work to spend time with your children, you will not qualify for a tax deduction.
Despite these limitations, the deduction for job hunting expenses is something to keep in mind, both during your job hunt and while preparing your taxes.
For more information, please see Page 5 of IRS Publication 529 (Miscellaneous Deductions).