How to Use Your Job Hunting Costs To Your Tax Advantage
Searching for your next gig can be incredibly difficult, frustrating and expensive. Whether you are currently in the job market or are preparing for your next professional endeavor, you may be able to save some money on your next tax bill. Thankfully, deducting the costs of printing a hundred resumes is a whole lot easier than preparing for that dreaded behavioral-based interview. Here is what you need to know about deductible job hunting costs.
The Basic Rules:
In order to deduct the expenses associated with your job hunt, there are a few requirements that must be satisfied. Unlike that job you’ve applied to 15 times, once you meet the following basic qualifications, your foot is in the door to determine your deductible amount. The basic rules are as follows:
1. Expenses Must Be Itemized
Instead of taking the standard deduction, you must itemize your deductions on Schedule A (Form 1040). For 2015, the standard deduction is $6,300 for single and married filing separately taxpayers and $12,600 for married filing jointly and qualifying widow(er) taxpayers. If your total itemized expenses exceed your applicable standard deduction then you may benefit from itemizing your deductions.
2. The 2% Threshold Must be Met
This is where you prove that being “detail oriented” is more than a catchphrase on your resume. Keeping track of all of your deductible expenses, job search related and otherwise, with receipts and other documentation, will help you maximize your total deduction.
This is the case not just for substantiation purposes. In order to take the deduction, your total job and miscellaneous deductions must exceed 2% of your adjusted gross income (AGI). The amount in excess of 2% of your AGI is the amount that is deductible from your taxable income.
For example, if 2% of your AGI is $700 and your total job and miscellaneous deductions is $800, you are allowed a $100 deduction.
3. Restrictions on Timing and Job Field
If you’ve recently realized that pharmaceutical sales sounds far more exciting than your current human resources position, you are out of luck on deducting your job search expenses. Unfortunately, the government has chosen not to subsidize professional changes of heart. To be deductible expenses, the positions you are applying for must be in the same field you are currently working or were formerly employed.
This means that new, unemployed graduates are not allowed to deduct the expenses related to their first job because they do not have a present or previous occupation in which they are searching for a job.
Additionally, if you enjoy life without a supervisor and wearing your pajamas till 2 p.m. for too long, the IRS will deny your deduction. The Service has stated that deductions will not be allowed when there is a “substantial break” between your last job and when your search begins.
What Expenses Are Deductible:
As a general rule, your job hunting expenses will be deductible when they are related to your job search. Any costs reimbursed by a third party (e.g., government job placement agency) are not deductible. Here are some common expenses that may be deducted:
- Resume preparation (printing, mailing, professional review)
- Job-wanted advertising
- Travel primarily for job search purposes (Gas, mileage, parking, tolls, lodging)
- Lodging and 50% of meal expenses while traveling primarily for job search purposes
- Job counseling and employment agency fees
- Phone and fax charges related to seeking new employment
- Career fair admission fees
Every taxpayer looking for a job will have a variety of deductible expenses. What may be deductible for one person may not be deductible for another depending on the facts and circumstances of each situation.
For example, expenses for attending networking events may be deductible for someone employed in the sales or legal industry but may not be possible for someone employed as a school teacher. Similarly, headshots may be a deductible expense for an actress but might not for someone employed as an engineer.