It is equally important to know what is not deductible:
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- 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.
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- You cannot deduct job search expenses if you are looking for a job for the first time.
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- You cannot deduct job search expenses if you look for a job in a different field.
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In order to be deductible, the amount that you spend for job search expenses, combined with other miscellaneous expenses, must exceed the 2% threshold of your AGI. To determine your deduction, use Schedule A, Itemized Deductions. Job search expenses are claimed as a miscellaneous itemized deduction and the amount of your miscellaneous deduction that exceeds two percent of your adjusted gross income is deductible. |
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Even if you are self-employed, your job searching efforts may count at tax-filing time. The costs associated with investigating or attempting to start your own business, as long as it's in the same field as your current profession, may be tax-deductible. |
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If you have to relocate to take a new job, moving expenses are also tax deductible. In order to deduct moving expenses on your tax return you must meet three tests:
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- Your move must be closely related to the start of work. According to the IRS, this condition is met when incurred within 1 year from the date you first reported to work at the new location.
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- Time test: if you are an employee, you must work full time for at least 39 weeks during the first 12 months after moving to the new location. The requirement for self-employed persons is 78 weeks.
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- Distance test: this test is met if the new location is at least 50 miles farther from your former home than your old main job location was from your former home. For example, if you lived 10 miles from your old job, you will have to move at least 60 miles from your current home in order for the cost of the move to be deductible.
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Moving expenses are figured on Form 3903, Moving Expenses, and deducted as an adjustment to income on Form 1040. You cannot deduct any moving expenses covered by reimbursements from your employer that are excluded from income. |
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If, for any reason, you lose your job, do not forget about the Premium Tax Credit.
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If you receive advance payment of the premium tax credit in 2014 it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace. Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance. |
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With all this in mind, we wish you a productive job search and, as always, advise you to enroll help from a tax professional for all your dealings with the IRS. |
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