Tax Insights

Your Guide to State, Local, Federal, Estate + International Taxation

Tax Benefits for Job Seekers

With the recent surprising drop in the U.S. unemployment rate, now may be the time for you to polish up your resume and begin looking for a new job!  But wait, there’s more good news.  You may also be able to deduct some of your job search expenses on your tax return, even if you ultimately don’t find a new job!

In order to deduct job search costs, the expenses must be spent on a job search in your current occupation.  You cannot deduct expenses incurred while looking for a job in a new occupation.

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

You can deduct amounts you spend for preparing and mailing copies of your resume to prospective employers, career counseling fees, advertising, long distance telephone calls to prospective employers, newspaper and business publications bought for employment advertisements, and 50% of meals and entertainment expenses directly related to your job search, as long as you are looking for a new job in your present occupation.

If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area, as well as your meals, lodging, and local transportation.  You can only deduct the travel expenses if the trip is primarily to look for a new job, however, out-of-pocket job-hunting expenses at the destination are still deductible if the purpose of your trip is personal.  The amount of time you spend on personal activities 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 cannot deduct 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 job.  Additionally, you cannot deduct job search expenses if you are looking for a job for the first time. Which means, all of you new college grads looking to jump into your first job with your new degree, your expenses are not deductible.

So, if you are ready to take advantage of the improved employment market and begin your search for a new job in your current occupation, be sure to save your receipts and keep a detailed record of all expenses related to your job search efforts.

By Pamela Wheeler, EA