Your Job Search Expenses May Be Tax-Deductible
Since we’re looking for jobs right now, I wanted to find any way to save some money in that department. It turns out that many job-search expenses may be tax-deductible, but as you might expect from the IRS, there are plenty of hoops to jump through:
- You have to be looking for a new job in your present occupation, even if you don’t ever get one.
- There cannot be a “substantial break” between the ending of your last job and your looking for a new one. Vague? Yep.
- You cannot be looking for a job for the first time. Sorry, recent graduates.
- Job search expenses are lumped in with many other “miscellaneous deductions”, such as the home-office deduction, union dues, work-related education expenses, bad business debt, tax prep fees. These are only deductible from your income if you itemize deductions and only to the extent that taken together they exceed 2% of your adjusted gross income.
- If you get reimbursed for any your expenses, then it’s not deductible.
What might qualify as an expense?
- Employment and outplacement agency fees. I wouldn’t pay too much of these, but they can be deducted.
- Resume preparation costs.. You can deduct amounts you spend for preparing and mailing copies of your resume to prospective employers. These include paper, postage, envelopes, and printing/copying costs.
- Travel and transportation expenses. If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area if the trip is “primarily” to look for a new job. Airfare is what we’d really like to deduct. It will be tough for us though, as we may stay a few extra days to visit friends, thus possibly violating the “primarily” clause.
- Phone and fax expenses. Long distance phone calls and faxes to prospective employers are also deductible.
This is all taken from the notoriously vague IRS Publication 529 - Miscellaneous Deductions. Look under Unreimbursed Employee Expenses > Job Search Expenses. Keeping great records for everything is key. If you have an accountant, be sure to ask them how to best take advantage of this area.
February 2nd, 2007 at 11:19 am
If you just quit/lost a job, don’t forget to file for unemployment. Although not specifically on your topic, but people simply do not want to collect unemployment. Depending on your State, you can claim unemployment for quite some time (my friend got his checks for over 6 months) and live off of it rather than your emergency savings. I only know of one friend out of several who claimed unemployment. Most cited either pride or hassle reasons for not doing so, despite the latter being no hassle in reality.
February 2nd, 2007 at 12:19 pm
I don’t know about all areas, but when I looked into it you couldn’t have quit voluntarily and claim unemployment. Makes sense, I suppose.
The ironic thing is that I am the owner/employee of my own S-Corp and I have to pay unemployment insurance somehow based on how it is set up. So technically I could fire myself and claim unemployment.
February 3rd, 2007 at 12:48 am
yes, unemployment rules differ. I know that my friends have quit voluntarily and claimed unemployment.
April 9th, 2008 at 8:45 am
I’m not sure about unemployment benefits and your S-Corp. I guess it depends on the state in which you file a claim, but some states exclude beneficial owners from collecting unemployment benefits. The threshold is typically around 10% ownership.