Save Tons of Money Deducting Job Search Expenses
Job Seekers Can Claim Agency Fees, Travel, Resume Printing, and More
Oct 6, 2009
April 15 is one of the most dreaded times of the year. Reams of paperwork stacked on the desk, tax schedules, receipts, W-2s, 1040s, 1099s – hours spent pouring over numbers and figures. However, tax time can also mean money in the pocket for job seekers whether or not they are currently employed.
When Can a Job Seeker Deduct Search Expenses?
Those seeking gainful employment in their present line of work can claim expenses related to the hunt for a new position. However, job seekers cannot take the deduction if looking for work in a new occupation, if there was a longer gap between jobs, or if the candidate has just leapt into the labor market for the first time.
What Expenses Can Be Deducted?
According to IRS Publication 529, three main expenses related to the job search can be claimed: employment and recruiter fees, resume expenses, and travel and transportation fees. These are itemized deductions on Schedule A (Form 1040).
- Employment and Recruiter Fees. Fees related to outplacement services are tax-deductible. If an employer pays back this amount at a later date, it must be included in the employee's gross income (see Publication 525). If the employer pays the agency directly, no action is necessary.
- Resume Expenses. Money spent preparing (or having a professional prepare) the resume, mailing, or faxing is deductible.
- Travel and Transportation Fees. Those traveling to another city to look for a new job can claim travel and transportation expenses so long as the primary reason for the trip is to look for work. However, local job seekers can also deduct transportation fees. See Publication 463 for more information on current mileage rates.
If the interview process ends up in a job offer in a new U.S. city, relocation expenses can also be deducted. According to IRS Form 521, eligible costs include lodging and transportation, but meals cannot be claimed. Other moving-related deductions include:
- packing and transporting household goods to new home
- shipping goods from a place other than former home (e.g., from a storage facility)
- fees for disconnecting and connecting utilities
- travel expenses (e.g., mileage, tolls, lodging, airfare – excludes meals)
- shipping car and/or pets to new home
Schedule A and the 2% Rule
Taxpayers can deduct expenses related to the job search as miscellaneous itemized deductions on Schedule A (Form 1040). Claim the amount of expenses that are more than 2% of AGI (adjusted gross income). This is calculated on Schedule A by subtracting 2% of AGI from the total amount of these expenses. The AGI is the amount on Line 38 of Form 1040. Apply the 2% limit after applying other deduction limits (e.g., apply the 50% limit on meals and entertainment before applying the 2% limit).
Tax time can be a real hassle. But for job seekers, even those who are currently employed and looking for another position within their career field, it can be a real boon if one knows where to look and takes advantage of money-saving employment tax deductions.
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