Job seekers may be able to deduct some job hunting expenses on their federal income tax return, according to the Internal Revenue Service.
Here are seven tips from the IRS – courtesy of agency spokeswoman Dianne Besunder – on deducting costs involved in the search for a new job.
1. To qualify for a deduction, a job seeker’s expenses must be spent on a search for a position in their current occupation. They would not be able to deduct expenses incurred while seeking a job in a different occupation.
2. Employment and outplacement agency fees paid while searching for a job in a job seeker’s current occupation can also be deducted. But if an employer pays the job seeker back in a later year for employment agency fees, then the reimbursement should be included in the gross income up to the amount of the tax benefit in the earlier year.
3. Deductions are also available for preparing and mailing copies of a resume to prospective employers. Once again, this is only possible if a job seeker is seeking a position in their current line of work.
4. Job seekers who travel to look for a new job in their present occupation would be able to deduct travel expenses to and from and the place they visited, but only if the trip is primarily to search for work. The amount of time spent on personal activity unrelated to the job search will be examined to determine whether the trip was primarily for the purpose of looking for a job.
5. Job search expenses cannot be deducted if there was a substantial break between the end of the job seeker’s previous position and the time they begin searching for a new gig.
6. Those searching for a job for the first time cannot deduct expenses.
7. Finally, the amount of job search-related expenses that can be claimed is limited. Expenses are claimed as a miscellaneous itemized deduction, so the total of all these deductions must be more than two percent of a job seeker’s adjusted gross income. To determine a deduction, consult Schedule A, Itemized Deductions in IRS Publication 529 on the agency’s website.