CARL WATTS & ASSOCIATES

September 12, 2016

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Looking for Work
Expenses and Deductions
This year may have been a very favorable time for job hunting, and if your search proved to be fruitful, there’s one more piece of good news for you: you may be able to deduct some of your job hunting expenses on your tax return for the year.

Even if you’re not searching for a new job yet, it will certainly be useful to find out some key tax facts you should know about when searching for a new job.

To qualify for a deduction, your expenses must be spent on a job search in your current occupation. You may not deduct expenses you incur while looking for a job in a new occupation.


If you are currently working but seeking a new job in the same line of work, you can deduct eligible job hunting expenses that exceed 2% of your adjusted gross income.


It is important to note that your job hunting expenses will be deductible whether or not you actually get a job as a result of your efforts.


You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you received in your gross income, up to the amount of your tax benefit in the earlier year.


You can deduct amounts you spend for preparing and mailing copies of your résumé to prospective employers as long as you are looking for a new job in your present occupation.


Hold onto all receipts for postage purchased to mail resumes. The costs of printing resumes and cover letters is also deductible. These would include paper, ink and envelopes.


Keep detailed records of any toll calls that you make in your job search. Save the phone bills that substantiate the charges.

Deduct any money you spend to learn job hunting skills. This can include the costs of seminars or books that teach resume writing, job hunting tips, interview skills and career building strategies.


Pay for services when needed such as resume preparation, job placement and career counseling, and then deduct the cost of the services.

If you travel to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area to which you travelled. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity unrelated to your job search compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.

You can choose to use the standard mileage rate to figure your car expenses. The 2016 rate for business use of a vehicle is 54 cents per mile. For 2015, the rate was 57.5 cents per mile for business miles driven.

Obviously, job hunting related travel can easily be the largest part of your job hunting deduction, so make sure you record everything you do related to travel. If you are using your car for the job search, deduct a standard mileage allowance for each mile you drive. Record the beginning and ending mileage every time you drive on a search. If you travel by other means of transportation, those costs are also deductible.

Remember other travel expenses that are also deductible. These may include lodging, meals, parking and taxi fees.


It is equally important to know what expenses are not deductible:


  • 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
  • You cannot deduct job search expenses if you are looking for a job for the first time.
  • You cannot deduct job search expenses if you look for a job in a different field.

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. To determine your deduction, use Schedule A, Itemized Deductions.

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.

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:

  • 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.
  • 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.
  • 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.

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.

If you receive advance payment of the premium tax credit, 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.

All this having been written, 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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