Investopedia writes: The numbers come with many variables, but the Bureau of Labor Statistics
estimates that as of February 2013, 12 million people were without
jobs. Many of them are actively looking to replace the jobs they lost.
Ironically, looking for a job can be expensive.
The time and effort required for a job search
can easily equate to the work of a full-time job. On top of that, there
are the costs involved with travel, placement services, resume writing
and other expenses that add up fast. When there is little or no money
coming in, those expenses seem crushing.
Fortunately, the IRS wants to help (yes, you read that correctly). You can deduct a portion of your job search expenses
on your taxes. Of course, the IRS isn’t going to blindly sign off on
anything you submit, so it is more accurate to say that you can deduct a
portion of your “qualified” expenses. Here’s the rundown on what you
can deduct and how to do it.
Where to Look
As with most things, when you want the truth, you need to head to the source. In this case, you need to visit the IRS website and look up Publication 529.
Job search deductions are miscellaneous deductions in the eyes of the
IRS, which means you will want to go to page five of the 2012
publication.
The Rules
First, your job search has to be in the same field as your previous job.
If you used to be a plumber but went back to school and are now looking
for a job as a paramedic, none of your job search expenses are
deductible. Still want to be a plumber? Then all of your qualified
expenses are deductible.
If you’re just out of college or looking for your first career, the expenses aren’t deductible.
What if you lost your job and took some time off to travel, raise
children or get an education? The IRS will not allow you to deduct job
search expenses if “there was a substantial break between the end of
your last job and the search for a new one.” The IRS does not define
“substantial” but if you didn’t start looking for a job within a short
period after leaving your last place of employment, your expenses might
be disallowed.
If you’re not looking for a job full time but would take a position if
it were offered, continue sending out applications so you can claim
deductions when you do put a large-scale effort into your search.
What is deductible?
Provided you meet the above criteria, your qualified expenses are deductible. So what is“qualified”?
Resume Services
If you paid somebody to polish up your resume, that’s deductible. Higher quality paper, mailing costs or any other expense related to your resume is likely deductible.
Employment Agencies
Are you paying an employment agency
to help you find a job? How about an online job search site that
charges a membership fee? Both are deductible. If your past employer
paid for the service or you’re later reimbursed for those expenses,
you’re required to claim it as income, provided you wrote it off on a
previous return.
Travel Expenses
Traveling all over your community, state or country for job interviews?
Write it off, but be careful. If you set up an interview that happens to
be close to one of the beautiful Florida beaches, you can only write
off the expenses if the primary reason for the trip was for the job
search. If the majority of your trip involved spending time with a certain mouse at a certain theme park, you’re probably out of luck.
Tim Parker / Investopedia for SF Gate writes: If the trip does qualify, standard IRS mileage rates apply or you can write off the cost of the plane ticket. For more about travel expenses, read IRS Publication 463.
What isn’t deductible?
Just about everything else. You can’t deduct the value of your time or
the new suit you purchased for the interview. You might be able to
deduct the cost of training or education but that would fall under
education deductions found in IRS Publication 970.
The 2% Rule
Here’s where you find out why the job search deduction probably isn’t
that substantial for most people. First, since it’s a deduction, only a
portion of the total expenses equal to your tax bracket are subtracted
from your income. Next, only expenses that exceed 2% of your
adjusted gross income
qualify. So let’s assume that you made $35,000 in 2012 and had job
search expenses of $800. The first $700 isn’t deductible because of the
2% rule. The final $100 is subject to your 15% tax bracket, so your
deduction is a not-so-impressive $15 (still better than nothing, of
course).
Naturally, some people will find a much larger benefit from this
deduction, so it’s worth the time to keep track of all expenses. The
main point is, when you’re spending money to help land a job, don’t rent
a limo and a tuxedo for an interview with the expectation that you’ll
be largely reimbursed when you file your taxes.
The Bottom Line
Remember the first rule when dealing with the IRS: If you can’t document it, it didn’t happen.
If you plan to deduct job expenses, then detailed, meticulous
documentation is necessary. If you’re deducting travel, have a log.
Resume expenses? Make sure you get receipts. Job-search website fees?
Again, get that receipt. It’s likely that the IRS isn’t going to accept
your credit card statement as proof. Regardless of how small the
expense, while you’re searching for a job, plan for the year-end tax
deductions as the expenses add up.Original story - How To Deduct Your Job Search Expenses
Thursday, April 11, 2013
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