Spending money on a job search is inevitable, but certain expenses could get you some money back from Uncle Sam.
Money spent on job-hunting essentials such as office supplies and fuel to get to interviews can be deducted on your taxes, according to Mark Hanson, an IRS spokesman in Greensboro.
But it’s important to know the exceptions the IRS has in place. Here are some key limitations to keep in mind as you get ready to file:• Deductions can only be taken for money spent while looking for work in your current occupation. • You cannot deduct expenses if you are looking for work for the first time.• You cannot deduct expenses if there has been a substantial break between the end of your last job and the time you start looking for a new job. While the IRS does not provide a specific definition of “substantial,” it is probably acceptable if the time frame is a couple of weeks, but if you have taken several months off after your last job before starting to look for work, it is probably not advisable to try and deduct your expenses.
You also probably won’t be able to deduct clothing expenses because of the versatility of professional attire. “Pay close attention to what deductions you take,” Hanson says. “A suit can be worn for personal and business purposes. The IRS guidelines are pretty clear about that.”
There also is a limit to the amount of deductions you can take. Deductions are classified as “miscellaneous expenses” on your tax return, meaning you can’t claim anything unless your total miscellaneous expenses are more than 2 percent of your Adjusted Gross Income (AGI). For example, if your AGI is $40,000 and your total job-search expenses are $1,000, then you could only deduct $200 (2 percent of $40,000 = $800. $1,000 - $800 = $200).
Once you have looked into the exceptions, you can then pinpoint items that qualify for deductions. Here are some of the most common deductions:• Employment and outplacement service fees. If your employer reimburses you for the fees, however, you must figure that amount into your gross income.• Phone and fax expenses. These are deductible if you are making long-distance phone calls or sending long-distance faxes related to your job search.• Mailed resumes. While it is increasingly uncommon, if a perspective employee insists that you mail a hard copy of your resume, you can deduct the printing and mailing expenses. • Travel expenses. These are another one of those gray areas. The IRS guidelines state that you only can deduct travel expenses if the primary purpose of the trip is to look for a job. The amount of time spent taking part in personal activities compared to time spent looking for work determines whether the cost of the trip can be deducted. If so, mileage can be deducted at the approved IRS per mile rate, which is currently 55.5 cents.• Moving expenses. Again, this isn’t clear cut. To qualify, the move must be a significant distance and the job must be long-term. If your new workplace is at least 50 miles farther from your former home than your previous workplace from that home, then moving expenses qualify.
The job is considered long-term if you work full-time for at least 39 weeks during the 12 months immediately following your move. If you are self-employed, the time test requires you to work full-time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after your move.
You can deduct your moving expenses on your tax return even though you have not met the time test by the date your return is due if you expect to meet the 39-week or the 78-week test as required. If you meet these requirements, deductions can only include the cost of moving your household items — storage and insurance are not included — the cost of travel and the cost of connecting or disconnecting utilities.
Hanson cautions that every person’s situation is different, but that maintaining proper records and keeping receipts is essential.
“For mileage, for example, it’s a good idea to keep a detailed mileage log,” he said. “There is lots of technology out there that can assist you in doing this. If you are using a job placement service, be sure to keep all the paperwork of your payments.”
