Zany IRS Rules For Job Search Deductions
By Barbara Perone
Even if you itemize the deductions on your federal income taxes, you cannot deduct job search costs under miscellaneous deductions unless they relate to your last job or your current position, according to an article by Gregory Taggart, at www.mint.com.
Sounds downright squirrely, doesn’t it? But, that’s what’s known as the Internal Revenue Service’s (IRS’s) “same-occupation rule.”
Here’s how it works: let’s say in your last position you worked as a sales representative and then lost your job due to a layoff. Now you want to look for a job in human resources. If that’s the situation, then you cannot deduct job search expenses on your federal income taxes unless you’re actually looking for a new job as a salesperson.
Confused? Wait, there’s more. If, just to pay the bills, you are temporarily working in another occupation, you can deduct most of your job search expenses if you are looking for a job in your former field, according to Taggart’s article.
For example, let’s say you lost your job as a systems analyst and now you’re working temporarily as a bar tender. In that case, you can deduct most of the expenses you incurred while looking for a new job in Information Technology (IT).
Job Search Expenses the IRS Allows
Another stipulation: to take the miscellaneous expenses deduction your job search costs have to exceed two percent of your adjusted gross income on your federal income taxes. Here’s a short list of some items the IRS will allow you to deduct under the heading of job hunting expenses:
• Training fees/books
• Employment counseling/job coaching fees
• The cost of making photocopies of your résumé
• The cost of faxing your résumé to recruiters/potential employers
• The cost of using an employment agency/recruiter
• Any postage or shipping fees related to your job search
• Travel costs, e.g., mileage or airfare when going to a job interview
• 50 percent of the cost of any meals you ate while traveling away from home to obtain qualifying work-related education
For every job interview you drive to, the IRS gives you a mileage allowance of 56.5 cents-a- mile. If you take a bus, train, or cab to an interview, you can deduct those travel costs, too.
Keep in mind, though, these transportation costs are only deductible if the primary reason for the trip is to find employment. If you’re planning a two-week trip to California to visit your old college roommate and you conduct a teeny bit of job hunting while there, you cannot deduct the cost of airfare or any other expenses related to the trip, according to the article.
Some Expenses You Won’t Be Able to Deduct
• New clothes/shoes
• New wristwatch
• Gym memberships
• Health spa visits
• Monthly cell phone service fees
• Monthly internet access fees, and
• Expenses already reimbursed by a past, or future, employer
These days, since job seekers have to use a computer to find work, you may think that it’s a bit unfair for the IRS not to allow you to deduct the cost of any services necessary to use your computer or your other electronic gadgetry. But, the IRS will point out that you would have had to incur these kinds of expenses even if you weren’t looking for work.
Aye, there’s the rub, matey. That’s what you have to keep in mind when reviewing your job search expenses. Could you attribute the cost to something other than your search for employment?
Moving Expenses & Volunteer Work
If you had move to another state to take a job and you drove your car to your new digs, the IRS will allow you to use the same 24 cents-a-mile deduction under miscellaneous expenses. If you did volunteer work during the 2013 tax year you can deduct 14 cents-a-mile for any services you performed by driving your car to and from a volunteer organization.
Don’t Forget to Deduct Medical, Dental Expenses & Mileage
If you’re paying for monthly health insurance under the Consolidated Omnibus Budget Act (COBRA) or you bought your own medical insurance last year, be sure to add up all your out-of-pocket medical/dental/mileage expenses so you can deduct them from your state income taxes. This year, the IRS allows you to deduct 24 cents-a-mile when driving somewhere for medical purposes.
As with miscellaneous deductions, your medical/dental/mileage expenses have to exceed two percent of your adjusted gross income for New Jersey State income tax purposes. (You could also use the medical/dental deductions on your federal income tax return; but, as of 2013, your out-of-pocket costs would have to exceed ten percent of your adjusted gross income.)
Along with health insurance premiums, be sure to include the cost of your annual deductible, co-insurance, and out-of-pocket prescription/vision expenses.
A General Guide to Job Hunting Tax Expenses, by Gregory Taggert, www.mint.com/blog/how-to/a-general-guide-to-job-hunting-tax-deductions-0213/
Publication 529 (2013), Miscellaneous Expenses, www.irs.gov/publications/p529/index.html
Publication 502 (2013), Medical and Dental Expenses, www.irs.gov/publications/p502
Publication 521, Moving Expenses, www.irs.gov/publications/p521/ar02.html
Publication 526, (2013), Charitable Contributions, www.irs.gov/pub/irs-pdf/p526.pdf