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.
- 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.
- 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:
- 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.
- 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….
- 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:
- First, job search expenses are an itemized deduction. So if you don’t itemize, no deduction.
- Second, the job search expenses must exceed 2% of your income. So if your income is $20,000, your expenses must exceed $400.
- 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).
