Deduct expenses looking for a new job
By WORLDLawDirect [January 6th, 2012]
Looking for work takes a toll. Often, a search can last three to six months and carry considerable expense.
Continue in a career track
You can deduct expenditures made to look for a new job as long as you're seeking a job in your present line of work (i.e., you're not changing professions). You can't deduct job-search expenses if there was a substantial break between the end of your last job and the beginning of your new one, or if you're looking for your first job.
There is some room to be creative. A certified public accountant employed by a national firm was entitled to deduct the expenses incurred while investigating whether he could practice his profession as a self-employed individual.
A corporate executive was allowed to deduct his expenses in seeking an executive position with another company. An unemployed electrician was permitted to deduct the cost of traveling to a union hall to seek job opportunities within the trade union.
Here are some examples of expenses you could deduct while searching for a new job:
- Resume preparation (drafting, typing, printing, mailing, faxing)
- Employment agency and recruiters' fees
- Portfolio preparation costs
- Career counseling to assist in improving your position
- Legal and accounting fees paid in connection with employment contract negotiations and preparation
- Transportation costs to job interviews
- Long-distance and cell-phone calls to prospective employers
- Newspapers and publications bought for the employment ads
- Half the cost of meals directly related to your job search
- Travel and lodging expenses if you take a trip to look for a new job and that was the trip's primary purpose (sorry, going to Cancun to read employment adds in the Chicago Tribune in a beach chair isn't allowed)
What to file
Use IRS Form 2106 to report and total your job-search expenses. Meals and entertainment expenses related to a job search are reduced by 50 percent while all others are unreduced.
Report the total of the allowable expenses on Line 20 of your Schedule A - Itemized Deductions. Those expenses, combined with other miscellaneous expenses, must exceed 2 percent of adjusted gross income before any are deductible. That threshold is more likely reachable given a loss of income for a period of time during the year in which the expenses were incurred.
Records to keep
In case the IRS selects your return for audit and challenges your deductions for job-search expenses, you should keep the following to support your claims for deducting such expenses:
- Evidence of your occupation at the time that the expenses were paid.
- Evidence of your search for employment such as a letter from a prospective employer or an employment-agency contract.
- All receipts, credit-card slips and cancelled checks that offer evidence of your payment of the expenses.
- Detailed records of dates of travel and mileage logs for expenses for which payment wasn't made.
If you have to bear these costs, get Uncle Sam to pick up some of the tab. After all, he's going to be hitting you up again for income taxes once you're back in action.