If you spent a significant amount of time last year looking for another job, you probably didn’t realize that the IRS is on your side.
Many of your job search expenses are actually tax deductible—not all of them, because this is the federal government—but many of your job hunt expenses can be claimed as deductions. Here are the basics:
Job hunting deductions are considered “miscellaneous deductions” by the IRS and all the information you need to determine what’s deductible and what isn’t is included in IRS Publication 529, but we’ll boil it down for you.
Job search expenses generally fall into one of three categories:
- Outplacement and employee agency fees: If you pay to have an agency match you with potential employers or give you guidance or counseling in your job search, those fees are deductible.
- Resume preparation and mailing expenses: You can deduct the money you spend to prepare and mail your resume to prospective employers, and that includes paper, envelopes, portfolios if you require them, even phone calls you make to help you prepare or mail out your resume. (If your employer later pays you back for those expenses, you may need to declare some of that repayment money as income).
- Travel and transportation expenses: You can deduct travel expenses if you made the trip primarily to search for a new job. If you made trip for other reasons too—like a family vacation—the amount of time you spend looking for a job will determine whether the expenses are deductible or not. But even if you can’t deduct the travel expenses for getting to and from a particular area, you can deduct the expenses of looking for a new job while you were there. The IRS allows you to deduct 57.5 cents per mile, for the business use of your car, and that includes job hunting.
There are other expenses related to these categories that count as tax deductions too.
If you need to use a babysitter or other type of paid childcare while you’re out looking for a new job, or if your job search leads you to a job that requires a move of at least 50 miles, you can usually deduct all costs associated with moving, from boxes to tape to shipping.
An effective job search usually involves lots of networking and could also include training and seminars to sharpen or enhance your skills (and also provide opportunities for networking). As long as it’s really related to your job search the costs of those events can be deducted.
Phone calls can also be deducted, but only ones related to your job search (which means unless you have a mobile phone used specifically for those calls, the cost of calls made from mobile phones usually aren’t deductible because the minutes are bought in bulk.)
If you advertised your services in print or online, or if you bought different publications to check their help wanted ads, you can deduct that. Once you are offered a job, if you need to hire an attorney to look over the employment contract the legal fees associated with that are likely deductible.
There are, of course, some restrictions on what you can deduct.
First, the IRS says only job search expenses that are more than two percent of your adjusted gross income for the year are deductible.
You can only deduct job seeking expenses if you are looking for a job in the same occupation in which you’re currently working. Career changers, unfortunately, cannot deduct their job hunting expenses.
The IRS won’t subsidize your job search if you take what it calls a “substantial break” in between ending your old job and looking for a new one, so if you take six months off to travel across Europe or spend more time with your kids before starting your job search, you won’t be able to take advantage of the tax breaks. And if this is the first time you’ve ever looked for a job, the IRS won’t let you deduct your search expenses.
A final note: remember to keep track of every receipt and document on what the money was spent and how it related to your job search so that if you’re ever audited, you have a clear record of what you spent and why it was a legitimate deduction.