Deduction Limitations
Job-hunting expenses are only deductible when a person is looking for work in the same employment field where he or she is currently working or has most recently worked. For example, someone who is working as a nurse can deduct expenses looking for another nursing position. However, he or she could not deduct expenses looking for a job as a chef.
The amount of the deduction that a taxpayer can claim for job hunting is limited. The IRS only allows you to deduct expenses that are in excess of two percent of your annual income for expenses related to job hunting. So if you are making $30,000/yr. the first $600 in expenses is not deductible. For this reason, it is important to keep meticulous records of every job-hunting expenses in order to get above the threshold.
Unfortunately, you can’t take a long break and then start looking for work again. Deductions aren’t allowed for employment-search costs when there’s been a “substantial break” between your last job and when you begin looking for a new one.
Also, recent grads don’t qualify since you aren’t looking for the same job this should be obvious but the IRS spells it out anyway. Costs for getting your first job out of college aren’t deductible.
What you can write off
Mileage
Mileage expenses can add up quickly but are often overlooked. Travel costs can be a significant expense when looking for a job. With high gas prices, simply driving around town can dent the budget. For this reason, it is important for a job seeker to keep a notebook in the car to document job-hunting trips. This includes driving to locations to fill out applications, to complete interviews and meeting with employment agencies. Even better than a notebook is a Smartphone. There are loads of apps for tracking mileage and since you always have your phone with you, you have all you need to track mileage and generate reports when it comes time to do your taxes.
Keeping track of all related job expenses is important. While not every expense will result in a deduction, simply tracking the expenses will help a job seeker to reduce the cost of the job search. Though tax deductions are nice, it is more financially prudent to avoid spending money than it is to rack up unneeded expenses simply for the deduction.
Other Deductible Expenses:
- The cost of printing and distributing your resume (and if you pay a service to write it for you).
- Employment agency fees.
- Advertising fees.
- Telephone calls.
- Travel expenses, including out-of-town job-hunting trips.
The most important tax tip is that the tax code is complicated. In order to be certain to qualify for every possible deduction, a job seeker should use the services of a trained and competent tax professional. In the event of a tax problem, such as a disputed deduction or overzealous collection methods, a person should consult with a tax attorney as the best way to resolve a conflict with the IRS or other taxing authority.
See Also:
- 10 Awesome Jobs You Can Do From Home
- The Difference a Degree Makes in Unemployment Levels
- Networking to Find a Better Job
- The Fastest Growing Careers of 2012
- Job Hunting Success: How to Make Yourself More Employable
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