Deducting job search expenses

It's a tough job market out there and finding a new job right now can take a lot of time and effort. If you are looking for a job, whether you are currently employed or not, some of your expenses may be tax deductible. These expenses fall into the "Miscellaneous Itemized Deductions" category.

The key factor is that you must be looking for a job in the same field as your current work - the costs of a job hunt in a new field do not qualify. A physical therapist looking for another physical therapy job can claim expenses, but if she is looking for a job as a landscaper she cannot claim those same costs. Since you need to be searching in the "same field" this also disqualifies first-time job seekers.

Some of the expenses you can claim include preparing and mailing a resume, travel to and from a job interview, fees paid to employment agencies and executive recruiters, newspaper advertising and phone calls to prospective employers. If you travel to a new location to investigate a job the purpose of the trip must be primarily to look at the job, and you must document and separate the expenses related to the job search from personal expenses.

As soon as you begin your job search create a folder to keep receipts and to track your expenses. An accountant can help you determine which expenses qualify for a deduction.

One more thing - the IRS will not allow you to deduct job search expenses if you have taken a "substantial break" between the end of your last job and the time you begin your search. However the IRS does not define what a "substantial break" is. Obviously taking a year off after leaving a job would fit the definition, but whether or not 3 months also counts as 'substantial' is not clear. You should consult an accountant if you have taken time off and are unsure as to whether or not your expenses are deductible.

Job related expenses are "Miscellaneous Itemized Deductions" and are subject to the 2 percent floor. This means you can deduct the amount of expenses that exceed 2 percent of your Adjusted Gross Income.

More information can be found in Publication 529 at the IRS website, www.irs.gov.