While the job search costs incurred by a new college graduates are not usually deducted, they can be deducted if you worked enough in school to definitively establish an occupation. That information was recently presented in a recent MarketWatch article. According to the report, you have to show you have established an occupation in order to deduct expenses. Therefore, the costs involved in looking for first-time work are usually not considered deductible.
You can also deduct the costs to look for a new job in the same industry when you are working temporarily in another job to meet your bills. For instance, maybe you lost your job as a software engineer but have taken a temporary job as a waiter. You can deduct the costs you incur while looking for employment in the software engineering field.
Common examples of job search expenses, considered deductible, include –
- Employment agency fees
- Employment counseling charges
- Travel expenses (including 50% of meals when out of town)
- Resume preparation fees
Also, if you drive your car locally in connection with a job search (or for job interviews), you can deduct the mileage allowed by the IRS, which is 54 cents per mile, as of 2016. The same holds true if you drive out of town when seeking employment.
However, keep one thing in mind – out-of-town transportation costs (whether by plane, auto or train) can only be deducted if the main reason for the trip is to search for a job. For example, if you fly out of town to stay at your sister’s house in Denver for a month and throw in some random employment searches, you cannot deduct the airfare to and from Denver.
Also, you cannot deduct the cost of a makeover, gym membership, haircut or new clothes, claiming they are related to searching for a ob. The same holds true for Internet access fees and mobile device services charges. Even if you use these serves to look for a job, the IRS will still say they are personal expenses that cannot be deducted. According to the IRS, you would have incurred these charges even if you had not been looking for a job.
Here is the major catch when it comes to employment search expenses – you must treat the entire amount of the costs as a miscellaneous itemized deduction. In other words, you receive no tax-saving advantages unless you itemize. Even when you do this, miscellaneous itemized deductions are only permitted when they exceed 2% of your AGI (adjusted gross income). They also have to be included with other specific miscellaneous deductions, such as fees for tax preparation and investment costs.
Jeff Stein August 6, 2016
Posted In: Personal Finance