With the U.S. unemployment rate at 8.3%, many Americans are left looking for a new job. You may be able to deduct some of your job hunting expenses like phone calls, career counseling and the costs of preparing and mailing your resume if you are looking for a new job that is in the same line of work. The IRS recently released a list of seven tips to keep in mind when deducting costs related to your job search. Here is what you need to know:
You Must Be Searching For A Job In The Same Line Of Work
This factor is key! In order to qualify for a deduction, your expenses must be spent on a job search in your current occupation. If you are looking to change careers, you may not deduct expenses you incur while looking for a job in a new occupation.
You Can Deduct Employment and Outplacement Agency Fees
Any fees acquired from employment and outplacement agencies while looking for a job in your present profession can be used as a deduction. Furthermore, it is important to note that the IRS correspondingly states, “If your employer pays you back in a later year for employment agency fees, you must include the amount you received in your gross income, up to the amount of your tax benefit in the earlier year”.
Cost Of Preparing And Mailing Your Resume Qualifies As A Deduction
When looking for a job, your resume is often the first thing your potential employer sees. Having a professional resume is very important and paper, envelopes, portfolios and postage add up. As long as you are looking for a new job in your present line of work, you can deduct the amounts you spend on preparing and mailing copies of your resume to prospective employers. Tip: In order to insure you deduct your amount spent properly, keep all receipts and record the purpose of each purchase.
Travel Costs May or May Not Apply
If you travel to look for a new job, you may be able to deduct travel expenses to and from the area to which you traveled as long as:
The job is in the same line of work.
The trip is primarily to look for a new job. Tip: To determine if the trip is primarily to look for a job or personal, compare the amount of time you spent on personal activity to the amount of time you spent looking for work.
There Cannot Be A Substantial Break Between Jobs
If there is a substantial break between the end of your last job and the time you begin looking for a new one, you cannot deduct your job search expenses. Therefore it is important to start looking for a new job as soon as possible!
Looking For Your First Job? No Deductions Apply
Sorry recent high school and college grads, you cannot deduct job search expenses if you are looking for a job for the first time!
MOST IMPORTANTLY: Your Job Search and Other Miscellaneous Deductions Must Exceed 2 Percent of Adjusted Gross income
The IRS states, “In order to be deductible, the amount that you spend for job search expenses, combined with other miscellaneous expenses, must exceed a certain threshold. To determine your deduction, use Schedule A, Itemized Deductions. Job search expenses are claimed as a miscellaneous itemized deduction. The amount of your miscellaneous deduction that exceeds two percent of your adjusted gross income is deductible”. For instructions on how to properly fill out the Schedule A, Itemized Deductions form click here.