Looking for a job can be expensive, especially if you’ve been at it for awhile. Driving to interviews, mailing resumes, buying the right interview clothes, manicures, hair stylists, job coaching—all these cost money without a guarantee of results. Well, good news. Some of those expenses may be tax deductible come tax time next year.
If you haven’t been keeping records of your job search expenses, it’s time to start. I have a habit of never throwing away receipts. I stuff them in a folder marked “20—Taxes” and sort them out as I go. There are a number of items that qualify as job search deductions, but not everything. According to the IRS, the main factor is the type of job you are looking for. Tax deductions may be taken on some expenses only if you are looking for a job in the same occupation that you had. You can’t take deductions if you are changing occupations. So if you’re a nurse, and want to find another nursing job, you are OK. But if you decide you’d really like to be an interior designer, those expenses aren’t deductible. That hardly sounds fair, especially since some jobs just aren’t there anymore. But that’s the rule.
Here are some other guidelines:
1. No tax deductions for first-time job seekers. Sorry, but tax deductions are only for those who were already working. So, if you lost your job for any reason, some items may be deductible.
2. Employment agency or placement fees may be deductible if you are looking for a job in your current occupation. If your previous company reimburses you for some of those charges, you have to list the reimbursement as part of your gross adjustable income. No “double-dipping.”
3. Resume preparation, paper, envelopes, stamps, phone charges—all may be deductible if used exclusively for the job search. Don’t expect to take off your entire monthly cell phone bill or a ream of paper if you only sent out a few resumes. Save your receipts and record your job search activity, just in case the IRS auditor drops by.
4. Travel expenses for job interviews may also be deductible. Now, if you take a two-week vacation to Hawaii and have a two-hour job interview, you probably can’t claim your airfare and hotel expenses. The length of time you are gone and the percentage of time devoted to the job search factor into whether or not the expenses are deductible.
5. Uncle Sam is not going to pay for your new Armani interview suit or trip to the spa for a manicure and highlights. Sorry, but personal expenses are not deductible.
6. If you lost your job and just decided to take some time off to see the world or “find yourself,” don’t expect to get job search deductions when you finally start looking for a job again. The length of time between jobs also factors into whether or not you’re eligible. And, when you do start looking, it has to be in your current or last occupation.
7. You can’t deduct the total expense amount. If the deductions meet the other qualifications, you can deduct the amount greater than two percent of your adjusted gross income. Depending on your past salary and when you lost your job, you may do well or come up empty.
Now is the time to start saving receipts so you’ll be ready to itemize your expenses next April. Who knows, you may have landed that perfect job by then.