Editor’s note: This is a guest post from Michael Raanan, MBA, EA. Michael is a former IRS revenue officer and current owner of Landmark Tax Group, a professional tax firm specializing in tax preparation and assisting taxpayers with their IRS and state tax disputes.
If you're searching for a job, you may be able to deduct some of your expenses on your tax return as long as you are looking for a new job in your current occupation. These expenses include the cost of attending career fairs, moving and submitting resumes. Here are a few things to keep in mind:
1) Job search expenses fall into the category of miscellaneous itemized deductions on Form 1040 Schedule A, Itemized Deductions. If your total of itemized deductions is higher than the standard deduction, it's generally better to choose to include your itemized deductions. In most cases, these expenses must exceed your adjusted gross income by 2 percent to provide a tax benefit.
2) Expenses incurred while searching for a job in your current occupation can be deductible. However, you may not deduct expenses incurred while looking for a job in a new occupation.
3) Fees paid to employment and outplacement agencies are deductible. However, if your employer reimburses you for these fees in a later year, you must include the amount in your gross income up to the amount of your tax benefit in the earlier year.
4) Costs for resume preparation and postage for mailing your resume to prospective employers are deductible.
5) Travel expenses may be deductible if the primary purpose for the trip is to look for a new job. The amount of time you spend on personal activity, compared to the amount of time you spend looking for work, is important in determining whether or not the trip is primarily personal or primarily to look for a new job.
6) Moving costs to a new job location may be deductible. However, you must meet certain criteria relating to distance moved and timing of the move. See IRS Publication 521, Moving Expenses, for more information.
7) Job search expenses cannot be deducted if there was a substantial break between the end of your last job and the time you began looking for a new one.
For more information about job search expenses, see IRS Publication 529, Miscellaneous Deductions or contact a tax professional.