Can You Deduct Your Job Hunting Expenses?

October 19, 2016

Editor’s note: Please note that all miscellaneous deductions were eliminated with the passing of the Tax Cuts and Jobs Act of 2018, but would still apply for tax year 2017 and prior.

Did you know you might be able to deduct your job search? If you itemize deductions on Schedule A of your tax return and incurred significant expenses while searching for a new job in your field, you may be able to reduce your taxable income by keeping track of them. Here are the rules and caveats:

1. Most importantly, job search expenses are considered to be miscellaneous deductions, which means they need to exceed 2% of your adjusted gross income (“AGI”) before you can even include them as deductions. To roughly calculate AGI, add up your total income (including interest, dividends, capital gains, alimony received, wages and self-employment earnings), then subtract any pre-tax IRA or 401(k) contributions, HSA contributions, moving expenses, alimony paid and student loan interest¹. Multiply that by .02. If your job search expenses are in the ballpark of the result, then it’s worth tracking.
2. It’s also important to realize that this does not apply if you’re actually switching careers. If you’re thinking of leaving your corporate job to be a yoga teacher, you won’t be able to write off the cost of your teacher training. Only expenses incurred while searching within your current field from one job to another qualify. This also means you can’t write off expenses associated with your first job or even after long breaks away from working unless you were searching the whole time. In that case, keep as much data as possible to prove you were actively seeking work during that stretch to prove it – things like calendars, cover letters submitted, receipts for travel, etc.
3. Here’s what you can deduct, according to the IRS:
   Resume costs – anything you spent preparing and mailing your resume (if you actually mailed it to anyone!)
   Travel expenses – if you take a trip primarily to interview or seek a job
   Meals – if you happen to have lunch with someone to discuss a job while you’re on vacation, you can only deduct 50% of the cost of the lunch plus any transportation costs directly related to getting to lunch like parking or a cab
   Agency fees – the cost of using a placement agency to help you land interviews
   Networking events – attending events to meet prospective employers or even people who can help you meet prospective employers as long as that’s what you’re there to do – aka you’re actually asking people for help with landing a job
4. Make sure you keep a solid record of any expenses you plan to deduct. The best way to remember what you need to note is to think of it like an invitation. You need a record of:
   Who was there
   What were you doing
   When you incurred the expense
   Where the expense was incurred (like the name of a restaurant)
   Why it would qualify as a job-search expense

Don’t forget that if you do land a new job in your field that requires a move, you may be able to deduct those expenses too! Searching for a new job can be a tedious and expensive process. Make sure you track the expenses to avoid paying more taxes than you need to.

¹ Disclaimer: Not an exhaustive list of “above the line” deductions, but the most common

 

Did you know you can sign up to receive my blog posts every week, delivered straight to your inbox? Just head over to our blog main page, enter your email address and select which topics or bloggers’ posts you’d like to receive. You may also follow me on Twitter and Facebook as well.