July 11, 2013

With many people getting laid off and unable to secure employment, some job-seekers may be able to deduct job hunting expenses from their federal tax obligations. While consulting with legal and tax professionals, the following information should give you some insight into what tax write-offs you may be able to take advantage of.

Deduction Guidelines

Contributor for Monster.com, John Rossheim, gives four guidelines to see if your job search expenses might reduce your year-end tax obligations:

  • Stay on a similar career path. Job seekers that stay within their same career path, such as teaching, accounting are more likely to be able to deduct job hunting expenses. However, if your last position was in accounting, but now you are looking to become a teacher, it’s virtually impossible to write of your job-hunting expenses.
  • Don’t wait too long. While the IRS doesn’t have a defined time-frame for workers who stop looking for a job, waiting too long can disqualify you entirely. If you decide to homeschool your children or go back to school for a different career path, the IRS is less likely to look sign off on deductions. You need to be actively engaged in your career and job search.
  • First-time job seekers are ineligible. If you are looking for your first professional job in your desired career path, the IRS does not allow deductions for job-hunting expenses. Only individuals who have held a job in their respective career, and are now actively looking for one, may be able to deduct such expenses. If you held a full time job while in school that relates to your first post-grad job search, though, you should be able to take the deduction.
  • Expenses must top 2 percent of your adjusted gross income. Along with other miscellaneous deductions, job-hunting expenses must top 2% or more of the tax year’s gross adjusted income. The good news here is that even if you don’t land a new job within the tax year, if you have allowable tax expenses you can still take advantage of the tax benefits.

Understanding the theory behind the deductions is essential to keeping track of your eligibility. The following list will give you a list of real-world examples the IRS permits:

  • Staffing Expenses: The IRS permits job-hunters who pay staffing agencies fees to help them find a job.
  • Stationary & Postage: Cost related to preparing and sending out copies of your resume may be deductible.
  • Travel: If you have to take a plane, drive your car, hop on a train or otherwise travel to search for a new position, it may be tax deductible. However, IRS regulations stipulate the trip’s primary reason is your job search. For example, you cannot go on a family vacation and sneak in a interview and expect the trip to be tax deductible.
  • Continuing Education: If you take a course to brush up on existing skills or want to learn a new one during your job search, the cost of the software or the course may be tax deductible.
  • Learning how to market yourself: Taking courses, seminars and other educational resources that help you market yourself and help you develop your career may be used as a job-hunting
  • Job-hunting marketing expenses: If you have to make phone calls or place wanted advertisements looking for work, you may be able to deduct these costs. Any expenses related to actively selling yourself (business cards, etc.) to potential employers may be able to be written off during tax time.

Since everyone’s tax situation is different, certain deductions may or may not apply to your individual situation. Speaking with a certified public account and competent legal professionals is your only way to determine what deductions you may be entitled to.

Photo: Dick Thomas Johnson