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:
- Resume – You can deduct the costs of preparing your resume. This includes the use of a resume consultant, paper, printing and mailing.
- Travel Expenses – If you take a trip to look for a new job, you may be able to deduct the expenses if the primary purpose of the trip is a job search. You may also be able to deduct a portion of a personal trip if you’re able to schedule an interview on it.
- Agency fees – Some job placement agency fees are deductible.
- Internet costs – Wi-Fi charges, fees for online job sites and networking services that charge a fee are deductible.
- Childcare – Hiring a babysitter while looking for job may be deductible.
- Professional fees – Relevant membership dues and subscriptions.
- Moving Expenses – If you accept a job in another state, you can usually deduct the moving expenses. In general, the new job must be at least 50 miles away from your previous one to claim this.
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
Q&A: Is there a limit (maximum) on itemized deductions?
Different deduction categories place thresholds and limits on the dollar amount that can be deducted. The maximum deduction for charitable contributions comes to 50% of your adjusted gross income for most types of organizations. Some donations, though, are limited to 30% of your AGI. Home mortgage interest is only deductible on the first 750K of the mortgage ($1 million for mortgages taken before 12.17.17).
There are also thresholds that must be met before some deductions can be claimed. Anything in the miscellaneous category, for example, must total more than 2% of your adjusted gross income before you can count it as an itemized deduction. For medical and/or dental expenses, you must have spent at least 7.5% of your adjusted gross income (10% starting in 2019).