If you have been out of work and jumping through some hoops in order to find new work, there may be tax deductions you can take to offset some of the expenses you might be taking on. The IRS has a tip sheet on how to know whether you qualify. One of the most important things to remember is that you cannot take a deduction if you are looking for a job for the first time. Sorry new college graduates – this does not apply to you.
• Your expenses are only eligible if you are looking for a job in the same field. So, if you are a nurse, your travel costs to find work in the next state can only be deducted if you are interviewing for nursing jobs. A nurse cannot take a deduction if he is looking for work in sales instead.
• Agency fees are deductible. If you pay a headhunter or a placement agency a fee to help you find work, you can deduct that cost on your taxes. Again, the work has to be in your chosen field. Also, if you get reimbursed by an employer later on for those fees, you will have to declare it as income.
• If you are still mailing copies of your resume to prospective employers, you can deduct the amount you spend on postage as well as things like resume paper and envelopes. However, I will give you this tip: if you are still sending resumes through the mail, you should probably stop. You will find a job faster by using email.
• Watch those travel expenses. While you are permitted to deduct the amount of money you use to travel when looking for a job, you are going to have to demonstrate to the IRS that the real purpose of that trip was to job hunt. It might seem suspicious if you write off your two weeks in Hawaii and try to explain that you were looking for work as a teacher. Document everything, just in case you get audited or there are questions.
• Think about your timing. If you have been out of work for 10 years to write a novel, the IRS is not going to let you deduct any job hunting expenses now. They will say something like, “you had your chance.” There cannot be a significant amount of time between your last job and your current job hunt, especially if you cannot document you have been looking for work.
• Check your income and deduction level. In order to qualify for any of these tax deductions, they will have to exceed a certain amount, and that will depend on the tax bracket you fall into. Check out irs.gov for specific information.
Hiring a financial planner while you are out of work and looking might seem to be an unlikely expense that you do not need. However, a little professional advice can go a long way, particularly when it comes to positioning you better at tax time. Plus, your accountant or tax expert might be another contact towards finding your dream job.
