Good news for U.S. income tax filers: The money you spent on your job search may be deductible on your federal taxes. (Pongo members, that includes the cost of your Pongo membership!). Of course, nothing is simple when it comes to the tax code. Here's an overview of what you need to know about the tax deductibility of job search expenses for that annual dance with the IRS.
Job search deductions fall under the category of "Unreimbursed Employee Expenses," which includes money you spent preparing and sending resumes as part of your job search. Unreimbursed Employee Expenses include money you spent that was necessary to perform your work for which your employer did not reimburse you. For example, if you had to wear a uniform while doing your work but had to buy it yourself, that expense is deductible.
In general, you can deduct some of your job search expenses if:
- You itemize deductions on Schedule A of your Form 1040; and
- Your Unreimbursed Employee Expenses exceed 2% of your adjusted gross income (AGI); and
- Your AGI is less than $261,500 (or $313,800 if you’re "married filing jointly").
If you meet these three criteria, you can deduct the expenses that exceed the 2% threshold.
If your AGI is $50,000, your expenses must exceed $1,000 to get a tax deduction (2% of $50,000 = $1,000). Anything you spent over $1,000 is deductible. So if you have $1,500 in expenses, you can deduct $500.
Job search expenses include the following:
- Resume preparation and distribution costs
- Fees for outplacement services
- Fees paid to employment service agencies
- Telephone expenses
- Travel expenses, including lodging, for job interviews.
Other "Unreimbursed Employee Expenses" include the following:
- Travel, baggage charges, meals and lodging, or cleaning and laundry expenses
- Dues to chambers of commerce and professional organizations
- Legal fees related to doing or keeping your job
- Licenses and regulatory fees for your trade, business, or profession
- Tax preparation fees.
For complete information from the Internal Revenue Service, look at IRS Publication 529 (page 5 lists tax-deductible job search expenses).
Of course, since we're referring to the tax code, there are exceptions. You cannot deduct job search expenses if:
- You're looking for a job in a new field (e.g., you’re an accountant and you want a job as an engineer)
- You had a substantial break between the end of your last job and the start of your job search; or
- You're looking for a job for the first time.
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