Monday, March 30, 2009

Cornering the Job-Hunting Expenses Deduction

With economy in a tailspin, many people are finding themselves looking for a new job—or a more secure one. Luckily, the federal government encourages the practice by providing a deduction for the costs associated with job-hunting. While not perfect, it does provide some tax relief to those who expend a lot of money finding that perfect job.

First of all, what are the rules?

Well, in order to be a deductible job-hunting expense, you’ve got to be looking for a job within the same occupational field. So, sorry, but if you are an attorney dreaming of being a movie director, your job hunting expenses in Tinseltown will not be deductible.

Additionally, you can not deduct your expenses if your job search follows a long absence (a year or more) from the work force. So, if you take a year off to travel, then get back to looking for work, you will not be allowed to deduct those job-hunting expenses.

Finally, you can not deduct expenses you incur if you are looking for your first job.

Second, qualified job-hunting expenses are miscellaneous itemized deductions, claimed on Schedule A. This means you only get to claim the amount of the expenses that exceeds 2% of your Adjusted Gross Income (AGI). Your AGI is found on line 38 of the IRS Form 1040. This means, if your AGI is $25,000, you are only going to be able to deduct the expenses that exceed $500.

So, if you meet the eligibility requirements and are not completely discouraged by the 2% of AGI floor, then you will find the following list pretty helpful. These are some items that may rack-up deductible job-hunting related expenses:

  • Employment or Outplacement Agency Fees
  • Résumé Costs – e.g. paper, ink, typing, envelopes, postage, résumé preparation services, online posting costs
  • Portfolio Costs – e.g. portfolio or work sample preparation services
  • “Want-Ad” Placement Fees
  • Newspapers/Magazines – e.g. purchased to read want-ads
  • Executive Recruiter Fees
  • Job-Hunting Education – e.g. seminars and books on improving interviews, your résumé
  • Career Counseling
  • Attending Job Fairs or Networking Events
  • Communication Expenses – e.g. telephone/cell phone, long distance, facsimile
  • Travel Expenses – i.e. you can deduct the travel expenses if the trip is primarily to look for a new job; includes airfare, lodging, meals
  • Transportation Expenses – i.e. you can choose to use the standard mileage rate to figure your mileage expenses (as of today’s date, $0.55 per mile)
  • Legal Fees – e.g. to review an employment contract
  • Research Costs for Starting Own Business – i.e. only if you are researching starting your own business in the same field you are currently employed in