Tuesday Tips is a series of articles from local experts to help you save money, make better decisions and plan for a better future.
Believe it or not, the IRS wants you to know that you may be able to deduct some of your job search expenses on your tax return!
Many taxpayers spent time over the summer months updating their résumé and attending career fairs. If you are one of them, you may be able to deduct some of your expenses on your tax return.
First, the no-nos. You cannot deduct job search expenses if:
- You are looking for a job in a new occupation, or
- If there was a substantial break between the end of your last job and the time you begin looking for a new one, or
- If you are looking for a job for the first time. However, if you held a college internship or valid job while in college and your search is for a job in the same trade or business, you will be able to deduct job search expenses.
If you pass the no-nos, then you can deduct:
- You can deduct employment agency and recruiters’ fees you pay while looking for a job in your present occupation. (If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year.)
- You can deduct amounts you spend for résumé preparation as long as you are looking for a new job in your present occupation. These expenses include the cost of drafting, typing, printing, mailing, and faxing.
- If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. For example, an unemployed electrician was permitted to deduct the cost of traveling to a union hall to seek job opportunities within the trade union. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
- Looking to start a business as a self-employed individual is also deductible. These must be in the same field as your current employment.
- If you land a job, the cost for child and dependent care in order to go on job interviews is allowed as a credit on the ‘Child and Dependent Care Expenses’ form.
- Other deductions include:
- Portfolio preparation costs.
- Career counseling.
- Legal and accounting fees for employment negotiations and contracts.
- Local transportation to job interviews.
- Phone calls to prospective employers.
- Newspapers, etc for employment ads.
- Half the cost of meals which are directly related to job searching.
- Books to help you prepare a better resume, etc.
I cannot stress strongly enough, that you must save all your substantiation, including receipts, interview letters, transportation costs, etc.
These expenses are not an automatic deduction from your income. You have to be able to itemize. To do this, for 2010 returns, you have to exceed the standard amounts of $5,700 for single filers; $8,400 for heads of households; and $11,400 for married couples filing jointly. Included in these amounts is the two percent miscellaneous expense hurdle. If you don’t itemize, these tax breaks won’t work for you.
Please note that going to the Bahamas to read employment ads in the Times while on the beach will not pass an audit.
Joseph Reisman, of Joseph S. Reisman & Associates, has been serving tax prep and business accounting expertise from his Coney Island Avenue office for more than 25 years. Check out the firm’s website.