Deductions for Job Search Expenses

If you have recently been or are currently searching for new employment, it’s important to understand that many job-search related expenses can be tax deductible if they exceed 2% of your income. However, only the portion which exceeds 2% is deductible.

This deduction is available to taxpayers who itemize and searched for new employment during the tax year in which they are filing. There is also some criteria for qualified expenses. For example, the job search must have been for work that the taxpayer has performed in the past. Expenses related to employment in a new field are not deductible. Search expenses are also not deductible for those who are entering the labor force for the first time.

The following are examples of expenses that may qualify for possible deductions:

Severance Pay

If you accepted a severance package from a former employer, or were paid for unused vacation and sick leave, that’s considered taxable income. Taxes should have been withheld from these, but if not or you suspect not enough was withheld, you will need to make estimated payments.

Not Everything Is Deductible

A new suit or haircut may improve the odds of receiving a job offer, but these items are not tax deductible. Looking for new employment can be both challenging and exciting. Keep records and receipts to recoup as much as you can from your search.

For more information on other life-events that can equal big tax savings click here