Federal Tax Deductions for Job Searches

Tom Streissguth for Demand Media writes: If you're in the market for a new job, you'll likely have some expenses to deal with. Travel to interviews, preparation of resumes and employment agency fees can place a heavy burden on a job seeker who lacks income. In an effort to ease the financial pain for the unemployed, federal tax law allows the deduction of job-search expenses, with some rules and conditions.

DEDUCTIBLE EXPENSES

To be deductible, job-search expenses must be reasonable, ordinary and necessary. If you must travel to a job interview, the IRS allows you to deduct transportation costs, either by the actual expenses or by using the standard mileage rate for vehicle use, which is 55.5 cents per mile for tax year 2012. If the trip is primarily for personal reasons, however, you may not take the deduction for the job search. You may deduct the costs of preparing and mailing resumes and the amount of fees charged to you by employment agencies.

CURRENT OCCUPATION

The IRS does not allow the deduction if you are changing professions. You must be hunting for a new job in the same field as your former job. But the IRS does allow a bit of leeway; you don't have to be applying for the exact same position, as long as it is in the same occupation, such as medical, legal, retail sales or accounting. The IRS does not allow the deduction for first-time job seekers because they have not yet established an occupation, and you cannot deduct your job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.

MISCELLANEOUS DEDUCTIONS

The IRS classifies job-search deductions as a miscellaneous itemized deduction. You can only deduct that portion of all miscellaneous deductions that exceeds 2 percent of your adjusted gross income. You take the deduction on Form 1040, Schedule A -- you may not take both the standard IRS deduction and itemized job-search expenses. The total amount of your Schedule A deductions are subtracted from your adjusted gross income to calculate taxable income.

PERSONAL EXPENSES

Your job search may entail more than simply printing out resumes and going to interviews. For the sake of making a quality presentation, you may need to buy new clothes, and to communicate with prospective new employers, a cellphone and high-speed Internet access come in handy. The IRS considers these personal expenses, however, and not deductible as job-search costs. Unreimbursed expenses for work tools, clothing, books, office supplies and tech gear are not deductible as job-search items, only as items used to produce income, either as an employee or as an independent contractor.