- Tax Tips for Job Hunters
- 1. You may still need to file taxes, even if you’re unemployed
- 2. Understand the tax implications if you’re withdrawing money from retirement accounts
- 3. Claim certain childcare expenses
- 4. Track income from your side gigs
- 5. Rules can change if you go to school
- 6. Claim job-hunting expenses
- Let TurboTax Help
- 10 Common Job-Search Tax Deductions
- 10. Them’s the Rules
- 9. Resume
- 8. Employment Placement or Interview Prep
- 7. Advertising
- 6. Telephone and Legal Services
- 5. Computer Costs
- 4. Mileage
- 3. Traveling to a Job Interview
- 2. Moving for a New Job
- 1. Don’t Go Nuts
- Job-Related & Job Search Expenses That Are Tax-Deductible
- Who Can Claim Work-Related Expenses?
- Deducting Work-Related Expenses
- 1. Travel & Mileage Deductions
- 2. Work-Related Education & Licensing
- 3. Other Job-Related Expenses
- Deducting Job Search Expenses
- Final Word
- Are Job Search Expenses Tax-Deductible?
- Eligible job search costs
- How much can you deduct?
- Other requirements
- Deducting moving expenses for a job
Tax Tips for Job Hunters
Looking for a new job can feel a job in itself. It takes a lot of time and energy, but there are certain tax implications you should be aware of as you conduct your search. Here are six tax tips to keep in mind while you’re looking for that new job.
1. You may still need to file taxes, even if you’re unemployed
Even if you aren’t currently earning wages from a job, you might still have to file taxes. If you lost your job during the year, you'll have to file for 2020 if you earned more than:
- $12,400 as a single filer under the age of 65, or
- $24,800 and are a joint filer under the age of 65.
Filing early can help; you may get a tax refund if you moved into a lower tax bracket after losing your job. Remember, severance pay and unemployment income must be reported on your taxes.
2. Understand the tax implications if you’re withdrawing money from retirement accounts
If you're looking to supplement your income, you may decide to take an early withdrawal from your 401(k), IRA or other retirement account. While you can usually withdraw money as needed, be aware that early withdrawals from 401(k) and traditional IRAs typically have a 10% tax penalty in addition to being subject to income taxes.
- Roth IRAs generally have a 10% tax penalty for early distributions, but only on the investment earnings, which means you can usually withdraw any amount of your original contributions tax-free before the age of 59½.
- Before you withdraw money from any retirement account, make sure you understand what the tax implications for that particular type of account will be.
3. Claim certain childcare expenses
You may be familiar with the Child and Dependent Care Credit as a working parent, but did you know that you can claim it if you're looking for a job, too? This credit allows you to claim the costs of qualifying child and dependent care that you paid while actively looking for a new job.
To claim the Child and Dependent Care Credit, use Form W-10 to request the necessary information from your care provider(s), and then complete Form 2441. Check the guidelines on who qualifies as a care provider; it can’t be:
- Your spouse
- The child’s other parent, if different than your spouse
- Any dependent whom you or your spouse claims on your tax returns
4. Track income from your side gigs
Looking to bridge your income with freelance work or a side gig as a rideshare driver? Keep in mind that all of the money you earn counts as income and is potentially taxable.
- If you earn more than $600 from a company, they should provide you and the IRS with Form 1099-NEC (1099-MISC in prior years), which you use to report your income. If you earn less than $600, you are still required to report the income, even if you do not receive a 1099.
- The IRS may consider your side-gig income as self-employment income, in which case you'll file a Schedule C and Schedule SE with your tax return.
If you're earning self-employment income, consider taking advantage of the business deductions available to you, such as:
- Business portion of your home
- Business mileage on your car
- Dues and subscriptions paid to business-related organizations
- Necessary tools and equipment
- Tuition for related education
5. Rules can change if you go to school
If you decide that you'd rather take classes instead of look for a job, there are some tax credits available that you should be aware of:
- American Opportunity Tax Credit (AOTC) – You can receive a credit of up to $2,500 for qualified undergraduate education expenses paid in a year for the first four years in school. That includes money spent on tuition, books, supplies and school fees, but doesn't apply to living expenses or transportation.
- Lifetime Learning Credit – This credit applies to undergraduate, graduate, non-degree and vocational education students. Un the AOTC, there's no cap on how many years you can claim it. It allows you to claim 20% of the first $10,000 you paid toward tuition and fees, up to $2,000. If you earned more than $59,000 ($118,000 if you file jointly) in 2020, however, your credit is reduced.
- Student Loan Interest Deduction — This deduction allows you to subtract up to $2,500 of the interest you paid on a qualified loan for higher education. If you file as single and have earned more than $65,000 ($135,000 if married filing jointly) in the same year that you’re claiming the deduction, the deductible amount is reduced.
6. Claim job-hunting expenses
The job-hunting expenses you can claim have changed, with many of the deductions ending after the 2017 tax year. If you file an amended return for a tax year in which you looked for employment prior to 2018, you may be able to claim job-hunting deductions, including:
- Cost of resume preparation
- Travel expenses for out-of-town interviews or career fairs
- Postage and other mailing fees
- Employment and placement agency fees
To qualify for these deductions, there are certain stipulations. You must:
- Itemize your deductions
- Search for a job in the same field as you were previously employed
- Not be a first-time job seeker
Let TurboTax Help
While you’re out there searching for a job, make sure that you're keeping the correct records so you can claim expenses and deductions you’re eligible for. Then, use TurboTax to get all the credits that are due to you so you can keep more money in your bank account.
10 Common Job-Search Tax Deductions
Looking for a job is work in itself. There’s the hustling for interviews, the following up on leads — and the constant polite smiling and genial small talk as you meet potential employers. That’s no easy job.
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But you can be rewarded quite nicely for your toil. Sure, there’s the long-term rewarding career, but the IRS will also give you some decent deductions if you’re spending your hard-earned money looking for work.
If you choose to itemize deductions rather than take the standard exemption, you can write off the costs of your job search.
Since it’s a miscellaneous deduction, it’s subject to the 2 percent limit, which means that you have to have combined miscellaneous deductions greater than 2 percent of your adjusted gross income to begin writing them off. But if you qualify, it could pay off.
Let’s not get ahead of ourselves though. First, we’ll review a few rules about our common job-search deductions.
10. Them’s the Rules
Although the IRS has some downright generous deductions for your job search, they do come with strict rules. So let’s make sure your job-search expenses qualify before we carry on.
First, your job search can’t be in a new occupation. That means two things: It can’t be your first job, and it must be in the profession in which you already work. So if you’re looking for deductions, now is not the time to abandon your massage therapy career to explore the world of artisan plumbing. (Frankly, there may not ever be a good time for that.)
You also can’t have a “substantial” break in employment between your last job and the new one you’re searching for. Note that the IRS doesn’t provide a definition of “substantial,” but better not go running off for a French sabbatical to recharge the batteries if you want to grab those write-offs.
Now that we know you qualify for job-search expenses, let’s dive into what you can write off. You should be delighted to know that — despite being everyone’s least favorite job-search task — your resume is a perfectly acceptable deduction.
No, not the cost it took to build your experience and qualifications — you can’t write off the summer you worked the drive-through window at your local fast-food joint. But the usual costs you probably associate with resume preparation are all included in the deductions.
Printing, mailing — heck, if you hire someone to spell-check it — you can write it off.
Unfortunately, that doesn’t mean you can pay someone to agree to pad your resume with fake references and try to deduct the cost. But if someone helps you develop or prepare your resume, by all means mark it down.
8. Employment Placement or Interview Prep
Getting a new job has never been a walk in the park, and finding yourself in an especially turbulent market can be even more daunting.
You might realize that simply standing on a street corner and asking for work just isn’t going to cut it and decide to hire an employment or temp agency to help place you in a suitable field.
These services don’t come free, so it can be a difficult decision for some. Accept a leg up for a fee, or risk it — cheap and alone?
Don’t fuss for too long. When you realize that any fees you pay to a person or organization to help you find a job are write-offs, you might be even more excited to get some career help.
It doesn’t just stop there: Do you fear the moment a potential employer asks you to list your weaknesses? You can also deduct the cost of any interview prep you pay for to learn how to dazzle your interviewers with your spot-on replies.
Even if you do hire some outside help to find new work, that doesn’t necessarily mean you get to kick back and let the job offers roll in. You still might find it useful to advertise your services and get your name out there.
While it’s probably not wise to take this tax write-off if you hire an airplane to trail your resume and references on a banner in the sky, you can deduct the costs of advertising or marketing yourself for a new job.
And now is as good a time as ever to remind you that the IRS isn’t crazy; the agency will want to make sure you’re spending reasonable amounts on all these job-search costs.
(Think more along the lines of “putting an ad in the local weekly,” less “paying for a gigantic billboard you can see from the freeway.”)
6. Telephone and Legal Services
Even in this digital day and age, a lot of employers will ask you to do a phone interview before they’re ready to commit to a day of shaking hands and introducing you around the office. And even that phone call is a write-off, as long as you have some way of keeping track of how much it cost you.
Keep in mind that any calls you make to look for jobs or interview can be included in the job-search deduction. So if you’re calling around all over town to see if anyone can use a worker, you can write off the cost. And remember, that might mean phone consultations with a job agency or headhunter, too.
And while it comes after a job offer, don’t forget that you can also deduct the cost of a lawyer you hire to look over a job contract — even if you’re just doing an over-the-phone consultation.
5. Computer Costs
As we’ve noted, there are a lot of online activities you might be taking part in to improve, widen — or just plain start — your job search. Although we can’t tell you that the brand-new tablet you bought to browse Craigslist ads is entirely tax deductible, there is some good news about the cost of online searching.
If you bought any online software ( JibberJobber) to help organize or advance your job search, you can write it off. wise, other computer expenses — say, if you had to use an Internet café to search online or apply for jobs — can probably be written off.
Of course, join with us in the chorus: You better have records and proof.
The IRS won’t just take your word that you spent 12 hours in a coffee shop working your fingers to the bone on leads, especially if you’re trying to write off four croissants, three mochas and one iced coffee as job-search expenses.
So, you’re driving around three counties trying to get your name out there. Maybe you’re doing interviews, maybe you’re dropping in to employers to ask if they have an opening — maybe you’re just meeting up with folks you know to ask for references for your resume. No matter the case, any gas you spend on job searches can be written off.
Of course, you do need to be pretty strict about your itinerary if you’re trying to write off the cost.
If you make a detour for frozen yogurt (and you should always assume you will), then you can’t include it in the mileage. But otherwise, you can take the standard mileage rate from the IRS.
In 2014, that’s 56 cents per mile — not a bad deal, if you’re hauling yourself around town [source: Fishman].
3. Traveling to a Job Interview
Here’s a great plan: You’ll find some job in Hawaii (that you may or may not have any intention of taking) and fly out there for a week-long trip to Waikiki. Sure, the interview is only a 30-minute appointment, but what the heck? It’s deductible! Piña coladas for everyone!
Unsurprisingly, the IRS is on to you. While you absolutely can deduct travel expenses for a job search, it’s limited to that: the actual searching you do.
Now, there may actually be a good reason for you to deduct the transportation or lodging on your trip if it’s strictly related to an interview or the . But you’ll need to be very careful about how you’re spending your time.
Personal time should be at a minimum compared to the time that you’re spending traveling or conducting job-search duties.
2. Moving for a New Job
While this is contingent on actually having a job offer in hand, we would be remiss if we didn’t bring up one big tax deduction for those with a new job. You can actually deduct the cost of moving for a new work opportunity. Just job-search write-offs, there are some pretty inflexible requirements, but the payoff will be worth it if you meet them.
One, you have to prove your new job is far away. The rules say it has to be 50 miles (80 kilometers) farther from your old home than the old job was from the place you lived. You also have to work at the new job for 39 weeks during the year after your move [source: IRS 455].
But if you meet those, you can deduct pretty much any of the costs of the move minus food. If you drive or fly, if you have to pay for storage, if you need lodging along the way — it’s all possible. Not only can you deduct your own expense, but you can also include anyone else in your household that moves with you.
And yes, that totally includes pets [source: IRS 521].
1. Don’t Go Nuts
We’ve learned about a lot of common — and possibly substantial — deductions you can take while you’re in the process of looking for work.
However, there might be some questions left unanswered, , “Can I write off the cost of these amazing highlights I got before my important job interview?” or, “Does this super luxurious Italian suit get a write-off because I wore it around town when dropping off resumes?”
Don’t push your luck, people.
While you can probably get away with choosing a pretty salmon-colored paper instead of boring white stock when printing out your resume, that’s probably as far as the IRS is willing to go.
While there are a lot of things you might associate with a job search — the cost of the energy drinks you slam right before a phone interview to sound peppy, perhaps — they aren’t going to cut it, come tax time.
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Job-Related & Job Search Expenses That Are Tax-Deductible
If you paid for a work-related expense your employer didn’t reimburse you for or if you spend money looking for work, you used to be able to deduct those expenses on your taxes.
Starting with 2018 tax returns, those unreimbursed work expenses and job search expenses are no longer deductible. That’s because the Tax Cuts and Jobs Act of 2017 (TCJA) eliminated most miscellaneous itemized deductions taxpayers used to be able to deduct on Schedule A.
Business owners and self-employed people can still deduct their business expenses. The change only impacts employees, and there are a few exceptions to the new law. But how do you know who can still claim these expenses, which expenses qualify, and where to claim them on your tax return?
Pro tip: If you’re unsure how changes to the tax code affect you, using tax preparation software from H&R Block can be a smart move. It will take you step-by-step through filing your taxes, plus they have live CPAs available should you have any questions.
Who Can Claim Work-Related Expenses?
If you’re filing an income tax return for 2017 or earlier, you can deduct unreimbursed expenses that exceed 2% of your adjusted gross income (AGI). You claim these as miscellaneous itemized deductions on Schedule A.
For the 2018 to 2025 tax years, you can only deduct certain unreimbursed job expenses if you fall into one of the following categories:
- Armed Forces reservists
- Fee-based state or local government officials
- Qualified performing artists
- Employees with impairment-related work expenses
If you fall into one of these categories and have work-related expenses, you must fill out Form 2106 to deduct your expenses.
Teachers can also deduct some work-related expenses. However, their deduction is limited to $250, and it goes on Line 10 of Schedule 1.
Deducting Work-Related Expenses
Unreimbursed job expenses are costs necessary for your line of work that aren’t paid for or reimbursed by your employer. Some examples of unreimbursed job expenses include:
1. Travel & Mileage Deductions
If you use your car as part of your job, you can deduct your actual expenses or use the standard mileage deduction. In either case, you must maintain accurate records to document the expense. Actual expenses include the following:
- Gas and oil
- Registration fees
- Auto licenses
- Depreciation (or lease payments)
You can deduct the portion of those expenses that are attributable to your job. To calculate the amount, multiply your actual annual expenses by a fraction:
Actual Expense x (Work Miles/Total Miles) = Deductible Amount
For example, let’s assume:
- Actual Costs: $5,000
- Total Miles: 12,000
- Work Miles: 2,000
Plugging these numbers into the above formula, we get:
$5,000 x (2,000/12,000) = $833.33
As an alternative, you can use the standard mileage rate. For 2020 tax returns, that rate is $0.575 per mile. So, if you drove 2,000 miles for work, the deduction would be:
2,000 x $0.575 = $1,150
In this case, the standard mileage rate is better, which is a common result. But can’t you just calculate it both ways and take the better option at tax time? According to IRS Tax Topic 510, if you want to be able to use the standard mileage rate, you must use it in the first year you use the vehicle for business.
After that, you can choose to use either the standard mileage rate or the actual expense method each year, whichever gives you a larger deduction. However, if you use the actual expense method in year one, you’re stuck using that method.
Note that the IRS literature refers to miles you drive for work as “business-use” miles. Even if you’re an employee and don’t own a business, the unreimbursed miles you drive for your employer benefits your employer’s business, so they are still called “business-use” miles.
For example, let’s say you’re a military reservist who must travel to attend a reserve meeting at a base 120 miles away from your home. The miles from your home to the base are considered business miles.
If you want to deduct business miles, be sure to keep good records. You can do this using a mileage tracking app or keeping a paper log noting your mileage and reason for the trip.
2. Work-Related Education & Licensing
Some professions require you to take a certain number of continuing education credits per year to maintain your certification or employment eligibility.
If you’re an armed forces reservist, fee-based state or local government official, qualified performing artist, employee with impairment-related work expenses, or teacher, you may be able to deduct your expenses on Form 2106 or Schedule 1. But even employees who don’t qualify for one of the excepted profession types may be able to deduct these expenses using the lifetime learning credit.
The lifetime learning credit is worth up to $2,000, and you can use it to help offset the cost of undergraduate, graduate, and professional degree courses, including courses to acquire or improve your job skills.
The main requirement is that you must pay the tuition to an eligible educational institution. According to the IRS, that can include “any college, university, trade school, or other post-secondary educational institution eligible to participate in a student aid program run by the U.S. Department of Education.”
To claim the lifetime learning credit, complete Form 8863 and file it with your Form 1040.
3. Other Job-Related Expenses
There are a few miscellaneous expenses that can qualify as unreimbursed job expenses as long as you fit into one of the excepted job categories. These can include:
- Tools or supplies used for your work
- Dues paid to professional societies or other organizations that help you perform your job
- Clothing, uniforms, and safety gear that aren’t suitable to be worn outside work
- Business travel expenses
- Malpractice and business liability premiums
- Home office expenses
All these job-related expenses go on Form 2106.
Deducting Job Search Expenses
Before the TCJA, taxpayers could deduct job search expenses as a miscellaneous itemized deduction if they were looking for a new job in the same line of work.
Since the TCJA eliminated most miscellaneous deductions, job search expenses are no longer deductible for tax years 2018 through 2025. If you still need to file a tax return for 2017 or earlier, you can deduct job expenses on Schedule A.
Deductible job search expenses include things :
- Preparing, printing, and mailing your resume
- The cost of hiring a resume service or placement service
- Traveling to look for a new job
These costs aren’t deductible for people seeking their first job, seeking a job in a new field, or if there was a substantial break between a previous job and the new one. The IRS doesn’t define “substantial break,” but if you take a year off between jobs to backpack through Europe or care for a child, the IRS might deny your deduction.
Remember, if you receive a 1099-NEC as a business owner or independent contractor, job-related costs are deductible as business expenses on Schedule C. The TCJA only eliminated the deduction for employees.
That’s cold comfort for employees who routinely pay for work-related expenses pocket. Those expenses can really add up throughout the year, so losing the ability to deduct them could be a real hit to your wallet.
If that’s the case, consider talking to your employer about reimbursing these out-of-pocket expenses. Your employer will ly require you to submit an expense report and detailed receipts, and you might have to get preapproval for each expense. But the extra effort is probably worth it if your costs are significant.
Are Job Search Expenses Tax-Deductible?
Looking for a new job can be as expensive as it is time-consuming. Thankfully, your job seeking efforts might get you a tax break.
The IRS allows you to take a deduction for eligible job search expenses, including travel expenses to and from interviews and the cost of a resume service. Even moving expenses for a job are deductible if certain criteria are met.
If you're job hunting, it pays to keep a detailed record of your out-of-pocket costs to see if they'll save you some money on your upcoming tax return.
IMAGE SOURCE: GETTY IMAGES.
Eligible job search costs
Looking for a new job can be costly, but the good news is that you may be eligible to write off certain expenses. Any time you spend money to travel to and from an interview, you're allowed to deduct reasonable costs associated with your trip. These include air or rail fare, mileage, parking expenses, and lodging.
Keep in mind, however, that in order to qualify for tax deduction, a trip's purpose must be to look for a new job.
You're not allowed to spend a week exploring your favorite destination city, pop over to a local company to inquire about an opening, and then deduct your travel expenses.
This isn't to say that you can't do a little sightseeing on the side, but generally speaking, the amount of time you spend interviewing or looking for work should far exceed the time you spend exploring local attractions.
Furthermore, if you enlist the help of a resume service or career coach, you're typically allowed to deduct those costs as well. Want to print out copies of your resume on fancy paper to hand out? That's deductible, too, as is the cost of postage, should you choose to mail your resume to prospective employers.
How much can you deduct?
While taking a deduction for job search costs can help lower your taxes, you should know that you're only allowed to deduct expenses that exceed 2% of your adjusted gross income (AGI).
So if your AGI for the year is $50,000, you'll need to rack up more than $1,000 in eligible expenses to take a deduction. Furthermore, you're only allowed to deduct the costs that exceed that 2% threshold.
So in our example, if you incur $1,200 in job search expenses, you get to deduct the last $200, but not the first $1,000.
The IRS doesn't let just anyone deduct job search costs. If you're a recent college grad in search of your first job, then unfortunately, this allowance doesn't apply to you.
You're similarly luck if you're searching for work after a substantial leave.
If, for instance, you took five years off to raise children and are ready to re-enter the workforce, you typically can't write off your job search costs.
Along these lines, you can only take a deduction for job search expenses if you're seeking a position within your current field. If you're an IT professional looking to jump from one tech company to the next, you should be fine. But if you're a lawyer looking for work as a music teacher, you can't take the deduction.
Deducting moving expenses for a job
Under certain circumstances, you may be eligible to deduct your moving costs if you're relocating for the purpose of getting a new job. To do so, you'll need to meet two criteria. First, the distance between your old home and your new job must be at least 50 miles greater than what your previous commute entailed.
So if you formerly commuted 30 miles each way, your new job needs to be at least 80 miles away from your old home to qualify for the moving expense deduction. Additionally, you must work for at least 39 weeks during the 52-week period following your move.
If you meet these conditions, you can deduct expenses such as hiring movers, renting a moving van, or paying for storage.
If you're hoping to take a deduction for job search expenses, make sure you have detailed records and receipts documenting your activities and the costs associated with them. Guessing at your deduction is a good way to land yourself on the IRS audit list, so make sure whatever expenses you claim are both accurate and legitimate.
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