Tax Tips: In Search of a Job? Your Job Search Expenses May Be Deductible

Looking for a job in any economy can be challenging. Looking for a job in today’s economy can be downright miserable.  Whether you’re currently out of work or just testing the waters, every dollar counts.  Fortunately, many job search expenses are tax deductible.

Who Can Deduct Job Search Expenses?

Job search expenses are considered a miscellaneous itemized deduction subject to a 2% AGI limit. In English, this means only those people who itemize can potentially benefit from deducting their job search expenses. So if you are among the millions who take the standard deduction, your job search expenses will neither increase your refund nor decrease the amount you owe when it’s time to file your taxes.

Although many itemizers may lower their tax liabilty due to their job search expenses, most high-income earners who itemize will not.  Instead, they will find themselves unable to deduct their job search expenses because of the two percent of AGI limitation. This two percent floor means their job search expenses are only tax deductible if they, combined with all of their other miscellaneous itemized deductions, exceed two percent of their adjusted gross income (AGI).  Adjusted gross income or AGI is gross income minus adjustments.  Adjustments are in the form of alimony paid, penalties on early withdraw of savings, payments to an IRA or Keogh retirement plan, self-employment health insurance payments, and moving expenses.  Examples of other miscellaneous itemized deductions subject to the two percent floor include tax preparation expenses (including tax software like TurboTax!), unreimbursed business expenses incurred as an employee, and costs such as union dues or certain work-related education. The higher your income, the higher your total  expenses must be in order for you to nab any resulting tax benefit.  For instance, if your adjusted gross income is $100,000 then you will only be able to deduct job search expenses in excess of $2000.

What Kind of Job Search Expenses Are Tax Deductible?

Only expenses incurred while looking for a new job in the same profession as your old job are tax deductible.   Career-switchers take note: although the IRS will tax your income no matter how different your new job is from your old one, the agency will not allow you to deduct expenses you pay in your pursuit of that new career.  You also will not be allowed to deduct job search expenses if there was a substantial break between your last job and the time you began looking for a new job in the same profession.

Ironically, your job search does not have to be successful for you to be eligible to deduct your job search expenses.  Even if you fail to land a new job, you may save on your taxes as a result of your search as long as you were trying to land a job similar to the one you last worked. Similarly, you do not have to be unemployed to deduct your job search expenses.  If you are unsatisfied with your present job, you can still write off your job search expenses if the dream job you pursue is in the same field as your current occupation.

What Types of Job Search Expenses Are Tax Deductible?

All those copies of your resume are deductible.  (Postage spent sending it out is too.)  Employment, outplacement agency fees, and career seminars may be deducted as well.  One type of deductible job search expense is perhaps best of all: if you travel specifically to try to land a new job, the back and forth travel expenses may be deductible.   Perhaps it’s time to try to land that new job in Hawaii?  If the prospective new job is in the same field as the one in which you work today, you just might benefit from a tropical income tax deduction.