Update: Job-search expenses are no longer deductible for tax years 2018 through 2025 due to the Tax Cuts and Jobs Act (TCJA) that Congress signed into law on December 22, 2017 – as the 2% miscellaneous deduction was removed. See IRS publication 529 for more details. What follows is for the tax years prior to 2018 (and potentially post-2025) for historical reference.
Before I started tactically itemizing taxes, I had no clue that you could deduct job search expenses on your tax return.The IRS does allow you to deduct job search expenses – as they are considered “unreimbursed employee expenses”. There are restrictions, however – more on that later.
Deductible job search expenses include qualified travel expenses for interviewing (mileage, food, hotel, etc.), unreimbursed job agency placement fees, and even resume preparation and postage (does anyone mail resumes any more these days?).
Earlier this year, when my wife was interviewing for a new job, after a change to a nursing career (and going back to school) – I suggested that she keep track of her interview related expenses so that we could deduct them on our married filing jointly tax return. She had driven about 50 miles for interviews and I think grabbed a lunch afterward. It would equate to a small tax deduction, for sure, but it all adds up, right?
The reality, as I’ve since discovered, is that we won’t be able to claim the deduction for a variety of reasons.
1. You cannot deduct job search expenses unless you are looking for a job within your current occupation. As my wife was changing careers altogether from a landscape architect to a nurse, she would not be eligible. Goofy rule, for sure. Why incentivize job-hopping within the same career field, but dis-incentivize the often tougher changing of careers, finding a job after graduation, or re-joining the workforce? Something about that rubs me the wrong way.
2. You cannot deduct expenses if you are seeking your first job or if there was a “substantial break” between the end of your last job and when you start looking for a new job. I couldn’t find what equates to “substantial break”, but I’m guessing it would disqualify students who went back to school, even if they were finding a job that was in the same occupation. I would also assume those who have been laid off for significant periods and those on long medical/parental leaves would also not be eligible for the deduction because they have not been working for a while.
3. Finally – non-reimbursable employee expenses are subject to the rather random 2% limit on the combination of job related expenses, tax prep fees, and miscellaneous expenses. In other words, you can only deduct expenses that exceed 2% of your adjusted gross income. For example, lets say you have an adjusted gross income of $50,000 – your threshold for the 2% limit is $1,000. Only job-related and miscellaneous expenses exceeding this can be deducted. If your total expenses were $1,500, in this scenario, your deductible amount would be $500 ($1,500-$1,000).
When you factor in these three rules, it seems like a very small percentage of people with job search related expenses will actually be able to quality for the deduction.
I’m guessing many readers out there have had a similar misunderstanding about this deduction, so I thought this worthy to bring up, so you don’t qualify for a deduction that you are not eligible for – raising red flags and a possible IRS audit.
For more on the job search deduction, check out IRS publication 529.
Job Search Tax Deduction Discussion:
- Did you think that any job search expense was tax deductible prior to reading this article? Have you deducted when you shouldn’t have?
- Have you been able to deduct job search expenses? How much?
- Do you think it is unfair that new grads, those re-joining the workforce, and those changing careers cannot deduct job search expenses, while those moving to a new job in the same career can?
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Can I deduct if I am currently employed?
Yes, if you meet the other conditions I highlighted.
Wow, never really knew this. This is another excellent way to reduce tax bill, thanks for sharing & great post.
TaxAct will ask about job search expenses during the online filing process, as I expect the other online tax prep services do. I included mileage on my return last year, but since it wasn’t more than 2% of my gross, TaxAct probably ignored it.
The problem in the U.K is that although the unemployed get JSA (Job Seekers Allowance) to cover all food and travel expenses, it’s rarely enough to cover everything.
Food is more expensive than ever, even poor quality stuff has gone up in price. The bus charges varied amounts that could cost you £1.20 to go on way (less than 2 miles) but £2.00 to get back home. And there are different bus companies so it’s impossible to get a bus pass to get everywhere you want in Manchester (for job interviews etc.)
It’s all a con since the Job Centre here in England are notoriously useless, yet expect you to work tirelessly to get any job even if that job does not fulfill employee rights and health and safety policies and procedures. It’s a jungle of corrupt madness.
It is very unlikely that I (or most others) will hit the 2% threshold. Very frustrating.