Are Job Search Expenses Tax-Deductible?
Looking for a new job can be as expensive as it is time-consuming. Thankfully, your job seeking efforts might get you a tax break. The IRS allows you to take a deduction for eligible job search expenses, including travel expenses to and from interviews and the cost of a resume service. Even moving expenses for a job are deductible if certain criteria are met.If you're job hunting, it pays to keep a detailed record of your out-of-pocket costs to see if they'll save you some money on your upcoming tax return.
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Eligible job search costs
Looking for a new job can be costly, but the good news is that you may be eligible to write off certain expenses. Any time you spend money to travel to and from an interview, you're allowed to deduct reasonable costs associated with your trip. These include air or rail fare, mileage, parking expenses, and lodging.
Keep in mind, however, that in order to qualify for tax deduction, a trip's purpose must be to look for a new job. You're not allowed to spend a week exploring your favorite destination city, pop over to a local company to inquire about an opening, and then deduct your travel expenses. This isn't to say that you can't do a little sightseeing on the side, but generally speaking, the amount of time you spend interviewing or looking for work should far exceed the time you spend exploring local attractions.
Furthermore, if you enlist the help of a resume service or career coach, you're typically allowed to deduct those costs as well. Want to print out copies of your resume on fancy paper to hand out? That's deductible, too, as is the cost of postage, should you choose to mail your resume to prospective employers.
How much can you deduct?
While taking a deduction for job search costs can help lower your taxes, you should know that you're only allowed to deduct expenses that exceed 2% of your adjusted gross income (AGI). So if your AGI for the year is $50,000, you'll need to rack up more than $1,000 in eligible expenses to take a deduction. Furthermore, you're only allowed to deduct the costs that exceed that 2% threshold. So in our example, if you incur $1,200 in job search expenses, you get to deduct the last $200, but not the first $1,000.
Other requirements
The IRS doesn't let just anyone deduct job search costs. If you're a recent college grad in search of your first job, then unfortunately, this allowance doesn't apply to you. You're similarly out of luck if you're searching for work after a substantial leave. If, for instance, you took five years off to raise children and are ready to re-enter the workforce, you typically can't write off your job search costs.
Along these lines, you can only take a deduction for job search expenses if you're seeking a position within your current field. If you're an IT professional looking to jump from one tech company to the next, you should be fine. But if you're a lawyer looking for work as a music teacher, you can't take the deduction.
Deducting moving expenses for a job
Under certain circumstances, you may be eligible to deduct your moving costs if you're relocating for the purpose of getting a new job. To do so, you'll need to meet two criteria. First, the distance between your old home and your new job must be at least 50 miles greater than what your previous commute entailed. So if you formerly commuted 30 miles each way, your new job needs to be at least 80 miles away from your old home to qualify for the moving expense deduction. Additionally, you must work for at least 39 weeks during the 52-week period following your move. If you meet these conditions, you can deduct expenses such as hiring movers, renting a moving van, or paying for storage.
If you're hoping to take a deduction for job search expenses, make sure you have detailed records and receipts documenting your activities and the costs associated with them. Guessing at your deduction is a good way to land yourself on the IRS audit list, so make sure whatever expenses you claim are both accurate and legitimate.
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