Deducting Job Search Expenses — 8 Considerations

If you’ve been laid off or are otherwise out of work in this economy, your job search expenses may qualify for a tax deduction.  Here are some considerations.

  1. The cost of preparing your resume, such as the cost of paper, ink, copying and mailing, are deductible.  So are phone calls and employment agency fees.
  2. Travel expenses to job interviews might be deductible — but only if the primary purpose of the travel is for the interview.  If you turn the trip into a personal vacation, no deduction is allowed.
Unfortunately, not everyone will qualify for a deduction.  There are restrictions:
  1. The expenses must relate to a search within the same field you are currently working in.  So if someone working in engineering would not be able to deduct the cost of looking for a job in accounting.
  2. Sorry college recent college grads:  costs associated with looking for your first job are not deductible.  This may come as bad news for the nearly 1/4 of college grads under age 25 who are out of work….
  3. You can’t take a deduction if “there was a substantial break between the ending of your last job and your looking for a new one.”  That quote comes from IRS Publication 529.  The term “substantial break” is not defined.  For people who have been unemployed for a long time, I think the key part is “looking for a new one.”  If you are out of work for a long time but have been trying to find a job the whole time, your deduction should be okay.  But if you left the workforce to be a stay-at-home parent for several years, and now you’re trying to find a new job, your expenses are probably not allowed.
And even if you do qualify for a deduction, you may find that the deduction doesn’t amount to much:
  1. First, job search expenses are an itemized deduction.  So if you don’t itemize, no deduction.
  2. Second, the job search expenses must exceed 2% of your income.  So if your income is $20,000, your expenses must exceed $400.
  3. Third, only the portion of the expenses that exceed 2% of your income can be deducted.  So if you have $20,000 of income and $500 of expenses, you could deduct $100 as an itemized deduction on your tax return ($500 – $400 = $100).