It’s a tough job market out there. Unemployment claims keep rising, and there are concerns that many companies just aren’t hiring. (This economy has seen the rise of temporary jobs and freelance jobs, but many people are still looking for regular work). You probably know that you have to pay taxes on unemployment income. It’s a bummer, but you can offset some of that expense with some help from tax breaks received for the job hunt.
Tax Deductions for Job Hunting Expenses
As you look for a job, you probably realize that there are expenses associated with the job hunt — especially if you want to put your best foot forward. Resume preparation services, outplacement agency help, and travel to interviews all cost money. If you want to present yourself in the best light, it can help to have a professional review your resume, and help you tweak it so that you stand out. Employment agencies can also be a big help in providing you with leads for your job hunt, and arranging interviews. Keep track of what you spend on these services, and you can deduct them from your taxes when you fill out your Schedule A.
Luckily, these are all expenses that that are tax deductible if you incur them while looking for a new job. You can even deduct postage expenses related to mailing your resume to prospective employers, and expenses related to preparing and printing copies of your resume. This can be helpful if you are out of work and trying to become employed.
However, it is important to note that there are some caveats to taking the deductions for your job hunting expenses:
- Your job search has to be for positions in your current occupation/industry. So, if you are looking to completely reinvent your career, you can’t take a tax deduction for it.
- If it is your first job, you can’t take the tax deduction. Sorry college grads, no deduction for you.
- Also, make sure that you start looking for a job soon after you lose your current job. If you wait too long to start your job search, the IRS won’t allow you to take deductions.
- When you take the deduction for travel, make sure that the purpose of the trip is primarily to look for a job. The IRS doesn’t look kindly on those who deduct travel expenses for trips that consist mainly of pleasure — and only very little business.
- You can only deduct costs that are beyond 2% of your adjusted gross income.
Keep Good Records
As with all things related to taking tax deductions, you need to make sure that you keep records. Whenever you claim a tax deduction, it is a good idea to have supporting documentation. In this case, it’s a good idea to make sure that you keep receipts related to job hunt expenses. While you don’t have to file your receipts along with your tax return, you should keep them with your tax return in your records. That way, if you are audited, you can quickly access the documentation you need to show the IRS what you were doing, and why it was justified.