Looking for a new job can be a very stressful time, filled with unknowns and anxiety. However, if you are looking for a job in the same line of work, there is some good news from the IRS: you may be able to deduct some of your job search costs on your next tax return!
Here are some tax-related items to keep in mind when searching for a new job:
• Same Occupation. Your expenses must be for a job search in your current occupation. You can’t deduct expenses for a job search in a new occupation, or expenses incurred while looking for work for the first time.
• Résumé Costs. You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation.
• Travel Expenses. If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. Even if you can’t deduct the travel expenses to and from an area (because such travel may be personal overall), you can deduct the expenses of looking for a new job in your present occupation while in the area. For travel by personal vehicle, you can choose to use the standard mileage rate to figure your car expenses (54 cents per mile in 2016).
• Placement Agency. You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation.
• First Job. You can’t deduct job search expenses if you’re looking for a job for the first time.
• Time Between Jobs. You can’t deduct job search expenses if there was a long break between the end of your last job and the time you began looking for a new one.
• Reimbursed Costs. Reimbursed expenses are not deductible.
• Schedule A. You normally deduct your job search expenses on Schedule A, Itemized Deductions. Claim them as a miscellaneous deduction. You can deduct the total miscellaneous deductions that are more than two percent of your adjusted gross income.
• Premium Tax Credit. If you receive advance payments of the premium tax credit (the health insurance credit), it is important that you report changes in circumstances – such as changes in your income, a change in eligibility for other coverage, or a change of address – to your Health Insurance Marketplace. Advance payments are paid directly to your insurance company and lower the out-of-pocket cost for your health insurance premiums. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much in advance (which can result in a large balance owed at tax-time)!
If you have questions on this topic – or any tax-related matter – please contact us any time! And if you’re looking for work presently, we wish you the best in your search!