Deduct Job Hunting Expenses
Under current tax laws, you may be able to deduct your job-hunting expenses, even for jobs you don't accept or get. To qualify, your expenses must meet certain guidelines. For example, the IRS will require you to look for jobs in the same field. Keep records of all amounts spent and claim the deduction on Schedule A.
Checking If Your Expenses Qualify
- Search for a job in the same occupation. The IRS won't let you claim a deduction if you're trying to switch up careers. For example, you can't work as a waitress and deduct expenses when hunting for a job as a secretary. Instead, you can only deduct expenses if you're searching for a job in the same occupation.
- You also can't deduct expenses for your first job.
- Check if your costs were reimbursed. You also can't claim a deduction if someone reimbursed you for the costs already. For example, the company you interviewed with might have reimbursed the cost of your airline ticket. In that situation, you can't claim a deduction for the ticket.
- Avoid claiming a deduction if you're unemployed a long time. You can't claim a deduction if there has been a substantial break since your last job. The IRS doesn't define “substantial,” but use your best judgment. For example, if you've been unemployed for a long time, you probably shouldn't try to claim the deduction.
- Identify common expenses. Some job hunting expenses are fairly common, and you can generally deduct for them:
- You can deduct for the costs of preparing and mailing your resume.
- You can deduct employment and placement agency fees.
- You can deduct long distance phone calls and faxes to potential employers.
- You might be able to deduct travel expenses if the primary purpose of the trip is to look for a new job. If so, you can deduct for mileage, gasoline, and tolls.
- Calculate the amount of your expenses. You can't deduct all of your job hunting expenses. Instead, you can only deduct those that, when added up with your other miscellaneous deductions, total more than 2% of your adjusted gross income (AGI).
- For example, your adjusted gross income might be $25,000. Your job hunting expenses are $750 and you have no other miscellaneous expenses. In this situation, your total miscellaneous expenses are 3% of your income. You can't claim the first 2%, but you can claim the remaining 1%, or $250.
- If your AGI was $25,000 but your miscellaneous expenses were only $500, you couldn't claim any of your job hunting expenses.
Documenting Your Expenses
- Save your receipts. The IRS might challenge any itemized deduction, so you want receipts for every deduction that you claim. The IRS won't automatically disallow a deduction without a receipt, but you'll make things easier on yourself if you have one.
- Pay with a credit card. Avoid paying with cash and instead put any expense on your credit card. Save your itemized bills that show how much you spent, the person you paid, and the date. You can use these as proof at tax time.
- Document your travel. If you travel as part of a job hunt, keep detailed notes about how much time you spend on the search versus time you spend on personal interests. Keep a journal and be as detailed as possible.
- You might not be able to claim travel deductions if the primary purpose of your trip was not job related. However, your travel once you reach the destination is deductible.
- For example, you might fly to Florida for a vacation. While there, you take a taxi to a job interview. You can deduct the amount of the taxi.
Claiming the Deduction
- Calculate your adjusted gross income. To see how much you can deduct, you should fill out Form 1040. Your adjusted gross income will appear on line 38.
Adjusted gross income includes income from all sources, including:
- Wages, salary, and tips
- Alimony received
- Ordinary and qualified dividends
- IRA distributions
- Unemployment compensation
- Social Security benefits
- Complete Schedule A. You report your job hunting expenses as a miscellaneous deduction on Schedule A. Complete lines 21 to 27 to see how much you can deduct from your taxes.
- You can find this schedule online at the IRS website. It is updated every year, so make sure to get the most recent version.
- Decide if you want to itemize. In order to deduct job hunting expenses, you'll need to itemize your deductions. However, check whether or not you'll be better off taking the standard deduction. The current standard deduction for single or married filing single is $6,300. This is probably more than you spent on a job search.
- Enter the deduction on the correct line. On Form 1040, you'll enter your miscellaneous deductions on line 40.
- Find tax help, if necessary. You might have questions about whether to itemize or whether you can deduct certain expenses. Meet with a qualified tax professional who can analyze your situation and offer tailored advice.
- The Volunteer Income Tax Assistance (VITA) program might be able to help you. They provide free help to people who make $54,000 or less and to people with disabilities. You can find the nearest VITA site by calling 800-906-9887.
- You can also use the locator tool here: https://irs.treasury.gov/freetaxprep/. Enter your zip code.
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