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Job Hunting Costs Are Tax Deductible

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Careerbuilder Résumé PaperDid you know that you may be able to deduct the cost of looking for a job from your taxes?

You can. They’re considered miscellaneous deductions and governed by IRS Publication 529. You can deduct certain expenses as a miscellaneous itemized deduction on your Schedule A if they exceed 2% of your adjusted gross income. You only deduct the amount that is over that 2% amount.

“Job Search Expenses” is one of the eligible categories and they count as long as:

  • You are looking for a “new job in your present occupation,”
  • There isn’t a “substantial break” between when you ended the last job and when you started looking,
  • And you aren’t looking for your first job.

The costs that you can deduct include:

  • Employment and outplacement agency fees: If you have to pay an employment or outplacement agency any fees, they can be deducted. If your employer pays, you cannot claim the deduction. If you pay and the employer pays you back, you have to claim the payment as income later (to recapture the deduction).
  • Résumé: Any costs associated with preparing and mailing your résumé are eligible.
  • Travel and transportation expenses: If you travel to interviews or job fairs or something similar, then you can deduct the travel expenses. The mileage rate you use will be the business use of a vehicle rate (50.5 cents for 2008).

There are plenty more, such as legal fees, licensing fees, etc. that I haven’t touched on (I wanted to restrict the list to job search related deductions) but the Publication 529 covers them all.

It’s difficult looking for a job, it’s nice that Uncle Sam will give you a little bit of assistance along the way.

(Photo: niallkennedy)

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5 Responses to “Job Hunting Costs Are Tax Deductible”

  1. Kyle says:

    Great article, I am glad I don’t need to worry about it right now but this is the kind of thing they should talk about nationally. I never knew that people could deduct that.

  2. They aren’t real specific about what “first job” means. I read somewhere (on one of the about.com sites) that it doesn’t count as your first job if you’ve had an internship or summer job in that field… anyone know if that’s true? Because if so, I could claim my current job search on next year’s taxes.

  3. Chiko says:

    I noticed this when I was doing my own taxes (using Turbotax). I should have kept those receipts.

  4. kosmo says:

    “You can deduct certain expenses as a miscellaneous itemized deduction on your Schedule A if it is more than 2% of your adjusted gross income.”

    To clarify this a bit – you can deduct only the portion of expenses that exceed 2% of AGI. That is, if your expenses are $2001 and your AGI is $100K, you can only deduct $1, not the full $2001.

    Here is the form 529 verbiage that clarifies this

    “You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses.”

    Good tip, especially with the high unemployment rate right now.

    • Jim says:

      Thank you very much for the clarification, I added a sentence to the text to hopefully make that a little clearer. Thanks!


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