This Is How Changing Jobs Affects Your Tax Return

This new year, you may have come up with several resolutions to be able to live a better life and achieve your long time goals. Changing jobs may be one of the things you’re planning to do but just like so many aspects of our lives, there are tax benefits and consequences that come with it and you must educate yourself about before you caught off guard.

A change in your tax rate when changing your job is the most obvious implication if you change your job and the good news is, it will shoot you into a higher bracket. However, there are several other tax effects that may not be too obvious.

Job Search Expenses Deduction

It’s highly possible for you to spend a lot of money if you’ve been looking for a new job for a long time. You may have had to spend for a recruiter or outplacement agency, traveling for interviews, or even preparing and mailing your resumes. Fortunately, you are allowed to claim these job search expenses as deductions on your tax return if you are searching for a job in your present trade or business.

Here are the following job search expenses that you are allowed to deduct on your Schedule A:

• Employment, career development, and outplacement agency fees
• Cost of resumé preparation, including development (such as fees charged by professional resumé specialists), printing, and mailing
• If the main purpose of the travel is to search for a job, you can deduct your travel and transportation expenses.

You are not allowed to deduct job search expenses if:

• You are searching for a job in a new occupation even if you get the job.
• After the ending of your job in the past, a substantial break exists.
• It’s your first time looking for a job. This means there is no deduction for college graduates who are searching for their first job.

Moving Expenses Deduction

If you are lucky enough to find a job and that moving is required for that job, the moving expenses may be deducted from your taxes. In order for the move to be deductible, it must meet certain distance and time requirements.

To qualify for the moving expenses tax deduction, you must meet these three requirements:

• The start of your new job location must be closely related in time and place to your move. Within one year of the start date of y our new job, you must have already moved. The distance between the new job and your new home cannot exceed the distance between your new job and your former home. You do need to remember that there is an exception if your new employer requires you to move into your new home or you won’t be spending too much time or money community to your new job.
• Your new job There must be at least 50 miles distance from your former home than your old job was from your previous home.
• You must also meet the time test. You must work full-time for at least 39 weeks during the first 12 months after you move if you are a new employee. For those who are self-employed, at least 39 weeks of working full-time must be met during the first 12 months and at least 78 weeks during the first 24 months after you move.

Reconsider Your Withholding

You will have the chance to fill up a new Form W-4 to show your withholdings for your new employer when you begin your new job. You can, therefore, reconsider changing your withholding amounts at this time. If you want to avoid having to pay estimated taxes, you may want to think about increasing your withholding amounts, that’s if you have been earning any self-employment income.

Are you planning to change your job for a year? If you do, it’s best to consult an experienced tax professional before doing so. A tax will help you find out how a job change could affect your tax return and will help you explore the records needed to keep track of and what things you should rethink when you move to the new position. You will be able to take advantage of the deductions as well if you’re still looking for a job.