With today’s economy in the state that it is, more and more individuals have found themselves in the unemployment lines. While many are not finding the jobs they seek, some are being successful. There are others who are employed but for one reason or another need to seek different employment. For all of the above, it is important to realize that the IRS does provide some degree of help when it comes to income tax time. Limited by your total taxable gross income for the year, some job seekers may be able to deduct a portion of the expenses they incur during the job search.
The first item of importance is that this deduction is limited to individuals who are able to itemize deductions. It is available as a miscellaneous expense on Schedule A. If you can use Schedule A, this deduction is limited to the expenses that exceed 2% of your gross taxable income. Assuming that you qualify to be able to use this deduction, the IRS provides tips you should consider during your job search so that you may have the proper information available at tax time.
Here are things you should know to get the best out of your job search deductions:
- You can deduct amounts you spend in preparing your resume and providing it to prospective employers. This includes paper and ink used in printing, copier fees paid and postage used to mail the documents to the employer.
- To qualify for a deduction the expenses must be incurred during a job search in your current occupation. If you are looking for a job in a new occupation, the expenses do not qualify.
- If you pay fees to an employment or outplacement agency while looking for a job in your present occupation, they are deductible.
- If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. It is important to note that the amount of time you spend on personal activity compared to the amount of time you spend looking for work is the determining factor in whether a trip is primarily personal or is primarily to look for a new job. You can only deduct the travel expenses if the trip is primarily to look for a new job. If your travel was by automobile, you can choose to use the standard mileage rates, which for 2011 are 51 cents per mile for travel between January 1 and June 30th and 55.5 cents per mile from July 1 to December 31st.
- Even if you cannot deduct the travel expenses to and from the area because the travel was primarily personal in nature, the IRS does allow you to deduct the expenses of looking for a new job in your present occupation while in the area. So, for example, if your primary reason for being in city X is to visit your sister, you cannot take the travel expenses to and from X as a deduction. However, if you use public transportation, etc. to search for a job while you are there, any of those job-search expenses are deductible. Be sure to keep documentation.
- If there was a substantial break between the end of your last job and the time you begin looking for a new one you cannot deduct job search expenses.
- If you are looking for a job for the first time you cannot deduct job search expenses.
A final note: If your new employer pays you back in a later year for job search expenses or agency fees that you paid, you must include the amount you receive in your gross income for that year up to the amount that you deducted in the prior period.