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Top 5 Tax Deductions for Job Hunting Expenses

Top 5 Tax Deductions for Job Hunting Expenses

Job seekers may have different types of deductions available for the expenses associated with their search. The problem with these deductions is that they are only available to job seekers looking for work in their current field, with related expenses exceeding two percent of their income.


General Job Search Rule

Taxpayers can deduct costs associated with job hunting only if they have looked for a job in their current field. The taxpayer does not need to be unemployed when looking for a new job. People looking for work in a new professional field, looking for a job for the first time, or having a long gap between their last job and their job search cannot deduct their expenses.


The two percent rule

The IRS classifies job search expenses as miscellaneous expenses. As such, they must be itemized and exceed two percent of the taxpayer's adjusted gross income (AGI) before deducting. Even so, only the percentage that exceeds the minimum of two percent is deductible.

To determine if your expenses meet these requirements, multiply your AGI by two percent (0.02). The result is the minimum you need to meet to deduct your job search expenses. Then add up the total amount of your expenses. You can request the difference between the minimum and total costs if they exceed the minimum deductible amount. For example, if your AGI was $ 40,000, you would need more than $800.00 in expenses. If you have spent a total of $1,000 on job search expenses, you can deduct $200.00.


Top 5 Tax Deductions for Job Hunting

Page five of IRS publication 529, titled "Miscellaneous Deductions," contains information on tax deductions available to job seekers. The publication explains the requirements for specific job search deductions, as well as the amount of the deduction available.

  • Childcare Expenses: If you can prove that you have hired a babysitter or paid other childcare expenses to look for work, you can deduct the cost. You can only hire the sitter so as to be able to participate in your job search. For instance, you can deduct the cost of hiring a babysitter, so you can rewrite your resume or attend an interview.

  • Employment agency fees: If you, and not your employer, pay an employment agency for your placement, you can deduct the full amount of these fees. However, if your employer reimburses you later, you must include the amount received as income.

  • Phone Calls: If you use your main or mobile phone to look for work, you can deduct a percentage of the phone's cost. To be able to do this, calculate the amount of time you spend on the phone looking for work versus the time you spend for personal reasons. The result is deductible.

  • Resume Writing, Copying, and Shipping Costs: The costs associated with creating and sending resumes to prospective employers are tax-deductible. This is available regardless of whether the taxpayer has hired a resume writing company for the job. This category includes paper, envelopes, printer ink, photocopy costs, and shipping costs. Although publication 529 is silent on this subject, presumably, the IRS would also allow taxpayers to deduct the costs of any additional paperwork or correspondence required to be filed with a resume would also be tax-deductible. Therefore, the costs of copying reference letters, portfolios, or other similar documents could probably be deducted.

  • Travel and Transportation Expenses: If you are traveling for a job interview or looking for work in another city, you can deduct travel expenses and other expenses associated with your trip. However, these expenses are only deductible if your travel is primarily for the purpose of finding a job. You can combine business with pleasure, which means you can enjoy the view while looking for a job. However, the amount of time you spend doing this shouldn't exceed the amount of time you spend looking for a job. To determine if you are eligible for this deduction, compare the amount of time you spent in your free time and looking for work while away from home.


Claim your deductions

All taxpayers should keep receipts for job search expenses to prove their validity. Of course, keeping receipts helps you determine how much you spent at the end of the year. Consult a CPA if you are unsure whether you are entitled to tax deductions for your job search.


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