Job Search Expenses Can be Tax Deductible
Taxpayers who are looking for a new job that is in the same line of work may be able to deduct some job-hunting expenses on their federal income tax return, even if they don’t get a new job.
Here are some important facts to know about deducting costs related to job searches:
- Same Occupation. Expenses are tax deductible when the job search is in a taxpayer’s current line of work.
- Résumé Costs. Costs associated in preparing and mailing a résumé are tax deductible.
- Travel Expenses. Travel costs to look for a new job are deductible. Expenses including transportation, meals and lodging are deductible if the trip is mainly to look for a new job. Some costs are still deductible even if looking for a job is not the main purpose of the trip.
- Placement Agency. Job placement or employment agency fees are deductible.
- Reimbursed Costs. If an employer or other party reimburses search related expenses, like agency fees, they are not deductible.
- Schedule A. Report job search expenses on Schedule A of a 1040 tax return and claim them as miscellaneous deductions. The total miscellaneous deductions cannot be more than two percent of adjusted gross income.
Taxpayers can’t deduct these expenses if they:
- Are looking for a job in a new occupation,
- Had a substantial break between the ending of their last job and looking for a new one, or are looking for a job for the first time.
Moving Expenses May Be Deductible
Eligible taxpayers can deduct the reasonable expenses of moving household goods and personal effects and of traveling from the former home to the new home.
Reasonable expenses may include the cost of lodging while traveling to the new home. The unreimbursed cost of packing, shipping, storing and insuring household goods in transit may also be deductible.
Who Can Deduct Moving Expenses?
- The move must closely relate to the start of work. Generally, taxpayers can consider moving expenses within one year of the date they start work at a new job location.
- The distance test. A new main job location must be at least 50 miles farther from the employee’s former home than the previous job location. For example, if the old job was three miles from the old home, the new job must be at least 53 miles from the old home. A first job must be at least 50 miles from the employee’s former home.
- The time test. After the move, the employee must work full-time at the new job for at least 39 weeks in the first year. Those self-employed must work full-time at least 78 weeks during the first two years at the new job site.
Here are a few more moving expense tips:
- Reimbursed expenses. If an employer reimburses the employee for the cost of a move, that payment may need to be included as income. The employee would report any taxable amount on their tax return in the year of the payment.
- Nondeductible expenses. Any part of the purchase price of a new home, the cost of selling a home, the cost of entering into or breaking a lease, meals while in transit, car tags and driver’s license costs are some of the items not deductible.
- Recordkeeping. It is important that taxpayers maintain an accurate record of expenses paid to move. Save items such as receipts, bills, canceled checks, credit card statements, and mileage logs. Also, taxpayers should save statements of reimbursement from their employer.