Looking for a new job can seem like a job in itself. And after a while, the expenses associated with finding a new gig start to add up. Even if you put effort into writing a resume and going on interviews, there’s no guarantee that you’ll be able to lock down the position that you want. But at the very least, some of your job hunting expenses may be deductible. Let’s take a look at some of the costs that you may be able to write off on your income tax return. Consider working with a financial advisor as you seek employment in the most tax-efficient way.
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Which Job Hunting Expenses Are Deductible?
Depending on your situation, many types of job hunting expenses may be deductible. For example, if you pay a career counselor for editing your resume or purchase stamps in order to mail out your resume, you may qualify for a deduction that minimizes your tax liability. If you use a placement agency or a headhunter to find a job, the fees you pay may be deductible, too.
Other deductible expenses that relate to the job-hunting process include the costs associated with hiring someone to care for your child while you hunt for a new job. If you travel to another city for an interview, you may be able to deduct the cost of your flight, hotel room and meals.
If you’re hired and you have to move to a new town, you may be able to deduct the cost of packing up your personal belongings, transporting them to your new home and keeping some items in a temporary storage unit. But certain rules apply. At the very least, the distance between your old home and your new office must be 50 miles farther than the distance between your old home and your former workplace. Once you begin your new job, you’re required to work full time for at least 39 weeks (non-consecutively) within a year if you want to claim the moving expense deduction.
IRS Rules to Consider
There are other guidelines that you’ll have to follow if you want to deduct your job hunting expenses. One important rule states that your job-related expenses are only deductible if you’re looking for a job within the same industry that you’re already in. If you’re trying to switch careers, none of your expenses will score you a tax break.
You can’t get a deduction for your job hunting expenses if it’s been awhile since you had a job either. If you took a sabbatical for two years to travel the world, you won’t be able to deduct any expenses when you’re ready to begin looking for full-time work. And if you’re a young adult starting your very first job, none of your job search expenses will be deductible.
Related Article: What Can You Deduct at Tax Time?
As you consider whether you’re eligible for a deduction, you’ll need to remember that you can’t get a tax break for reimbursed expenses. So if your new boss agrees to cover the cost of the money you spent during the interviewing process, you won’t be able to deduct those expenses.
Writing Off Your Job Hunting Expenses
In order to claim your job hunting expenses on your tax return, you’ll need to itemize your deductions. That means you’ll need to complete Schedule A and attach the form when you’re ready to file your taxes.
Job hunting expenses fall under the category of miscellaneous expenses. According to IRS rules, you can only get a tax deduction for certain kinds of miscellaneous expenses (including unreimbursed costs and tax preparation fees) when the total amount is equal to more than 2% of your adjusted gross income. If your adjusted gross income is $45,000, for example, and you have $995 worth of job hunting expenses and other miscellaneous costs, you can only get a deduction for spending $95.
With any kind of tax deduction that you want to claim, you’ll need proper documentation. Without a record of making certain purchases – such as a receipt proving that you purchased special paper to print your resume on – you could find yourself in hot water if the government decides to audit you or wants additional information before giving you a tax refund.
Related Article: How to File Taxes
The Bottom Line
Trying to find a new job often requires a lot of time and effort. Regardless of what happens, you may be able to lower your taxable income by deducting various job search expenses. Just remember to be careful. You may incur a penalty if you get caught claiming a deduction you’re not eligible for.
Tips on Taxes
- Figuring out what is and what is not deductible can be confusing. A financial advisor can offer valuable help. If you don’t have a financial advisor yet, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Check out our free income tax calculator.
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