Job Hunting Tax Deductions

Job Hunting

Job hunting related tax deductions are expenses incurred from looking for a new job that can reduce the amount of income before you calculate the tax you owe, saving you money. This can come in handy if you’ve recently been laid off, are dissatisfied with your current role, or a plethora of other reasons you would be looking for a new job. With proper planning and research, tax deductions can help make a usually stress-inducing time in your life easier.

It’s important to note that not every expense qualifies as a tax deduction.

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Are job hunting expenses tax deductible?

Yes, some of these expenses are tax deductible because the IRS considers job hunting “unreimbursed employee expenses.” These expenses are allowed as a deduction as “miscellaneous deductions” when you itemize your deductions. In order to be deducted, your miscellaneous deductions must exceed 2% of your income (often called the “2% floor”). Job hunting expense deductions can save you money if they’re sought out and applied correctly.

There are, however, some expenses that do not qualify for tax deductions, like if

You’re looking for a job for the first time;

A substantial amount of time has passed after the termination of your last job. It is important to point out that a “substantial amount of time” is undefined, but if you quit a job to travel the world or to care for your child(ren), the IRS will likely deny your deduction;

You’re looking for a job in a new occupation (e.g. if you were working as an architect and decided to become a teacher); or

Less than 2% of your adjusted gross income is spent on your total miscellaneous expenses, including those for your job search. If your adjusted gross income is ,000, your threshold for the 2% limit is ,200. If your total expenses were $1,600, your deductible amount would be $400.

Although this leaves a relatively small percentage of people who can claim job hunting expense deductions, it can present a great opportunity for those who qualify.

What job hunting expenses are tax deductible?

While there are quite a few expenses or circumstances that do not qualify for a tax deduction, there are several job hunting expenses that are tax deductible:

The cost of resume preparation, including printing, mailing, and enlisting the help of a professional resume specialist;

Travel expenses for out-of-town interviews or career fairs such as food, car mileage, hotel(s), etc.; and

Employment and placement agency fees.

In most cases you may qualify for tax deductions while looking for employment even if you didn’t get the job or jobs you were aiming for. For example, if you worked as an engineer at Company A, lost the job, then started looking for a job as an engineer at Company B and did not get it, you could still qualify for tax deductions.

Other Tax Deductions and Tax Strategies

While the deductions for job hunting have been temporarily suspended, there are other tax deductions and tax strategies you can employ after getting a job. If you work from home there are certain tax deductions you may qualify for like the Home Office Deduction or Mileage Deduction – just remember to itemize deductions for items needed to work from home!

It may also be helpful to use accountable plans for expense reimbursements. Accountable plans can be beneficial to employers, since they’ll have to pay less payroll taxes, and employees because they’re paid back for business expenses, they don’t have to report unreimbursed business expenses on their tax returns, and they won’t be taxed on those reimbursements as W-2 income. Bonus: they are easy to implement and have little ongoing compliance needs.

Other states have legislation that has been introduced or is pending, including: Iowa, Mississippi, Ohio, New Mexico, Pennsylvania, Utah, and Virginia.

Implementing Deductions

How do you note job hunting expenses on your taxes for the deduction? Use Form 1040 to list your itemized deductions on Schedule A, in the section called “Job Expenses and Certain Miscellaneous Deductions.” You will calculate if the deductions exceed 2% in this section. (You may need to attach receipts or proof of the expenses when you file.). Total your itemized deductions on Schedule A then enter the total deductions on Form 1040.

Avoid claiming a tax deduction you’re not legally qualified for because you will likely raise red flags and may prompt an IRS audit. Be sure to plan and research carefully, or reach out to Corvee to ensure that you are taking advantage of all possible tax deductions.