Can you get a tax deduction for job search expenses?
Yes — assuming you're eligible.
Looking for a job costs money — and the bills can add up fast. The good news is you can sometimes get a tax deduction for certain job search expenses.
Here’s how it works.
Hit the threshold
Itemizing your deductions is the process of taking approved expenses off the taxes you owe to reduce your tax burden. Job expenses are claimed a miscellaneous deduction on IRS Schedule A, Itemized Deductions. All miscellaneous deductions combined must total at least 2 percent of your adjusted gross income; expenses above the 2 percent threshold are deductible. If you take the standard deduction, you are not eligible to deduct any job expenses.
In addition to the income threshold, there are several other requirements to meet to deduct job search expenses. One of the main things to remember is that you can do so only if you are looking for a job within your current profession says David Hryck, a tax lawyer at ReedSmith. Switching professions makes you ineligible for the deduction. If you’re unsure of whether your job search involves a career switch, check with a tax professional.
First-time job seekers aren’t eligible for the deduction either, Hryck says. In addition, he and others recommend not trying to deduct job search expenses if you’ve been unemployed for a long time. IRS publications say to avoid doing so if there was a “substantial break” between the end of your last job and this search, but “substantial” is not defined.
What can you deduct?
Keep track of these expenses during your job search, and as with all deductions, be sure to save and file receipts and other proof of purchase.
- Resume preparation, costs and postage. You can deduct amounts you spend for preparing and mailing copies of your resume to prospective employers as long as you meet the other requirements, says Anil Melwani, founder of 212 Tax & Accounting Services.
- Travel expenses. “If you travel to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area to which you travelled,” Melwani says. The catch is you can deduct the travel expenses only if the trip was primarily to look for a new job. “The amount of time you spend on personal activity unrelated to your job search compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job,” she says. Food and lodging costs are included in travel as well.
- Fees paid to a search firm. Employment and outplacement agency fees are deductible, Melwani says, unless your new employer reimburses you for them. “If your employer pays you back in a later year for employment agency fees, you must include the amount you received in your gross income, up to the amount of your tax benefit in the earlier year.”
- Relocation. If you relocate to a new position, you can deduct the moving costs, says Vanessa Borges, enrolled agent for Tax Defense Network LLC. “If the new job is at least 50 miles farther from your old home than your old job was, you can deduct the cost of the move, even if you don't itemize expenses,” she says.