Looking for a new job can land you a new employer, but it can also land you a tax break — even if you bomb the interview. Here’s what you need to know about getting a tax deduction for job-hunting expenses.
You can deduct expenses you cover when the job search is within your current line of work, such as:
- Having your resume prepared
- Mailing your resume
- Travel, including transportation, meals and hotels, to look for a job
- Job placement or employment agency fees
Typically, you can take these deductions even if you don’t get the job. IRS Publication 529 has the details.
You can deduct only expenses associated with looking for a job in a field you’re already in.
What’s not deductible
The IRS doesn’t allow a deduction for expenses associated with:
- Job-search expenses that someone reimbursed you for
- Looking for a job in a new occupation
- Looking for a job if you’ve had a “substantial break” since your last job
- Looking for a job for the first time
How to get the most out of this deduction
- Stay in your lane. You can deduct only expenses associated with looking for a job in a field you’re already in. “If you’re job hunting and you decide you want to change fields, not deductible,” warns David Neidhart, a CPA in Houston. That means zookeepers who decide to look for nursing jobs or circus clowns who want to work at law firms are out of luck (and probably need to go back to school; by the way, there are tax breaks for that, too).
- Keep good records. Hanging onto receipts and recording your mileage to and from interviews can help you remember deductible expenses when it’s time to do your taxes, Neidhart says.
- Remember the 2% rule. You can deduct only the portion of your job hunting expenses that exceed 2% of your adjusted gross income (AGI). So if your AGI is $100,000 and you have $3,000 of job-hunting expenses, $1,000 of it could be deductible. This rule significantly limits the size of the deduction for many people, but Neidhart says he has seen clients shave a few hundred bucks off their taxable income.
- Use Schedule A when you file your return. That’s where you figure your deduction. Note: This means you’ll need to itemize your taxes instead of taking the standard deduction. It’ll probably take more time to do your taxes if you itemize, but you could end up with a lower tax bill. (Go here for help deciding whether to itemize.)
- Don’t overdo it. Stick to expenses that are closely related to your job search: Trying to deduct a ton of dry cleaning bills or a new laptop will probably get you the wrong kind of interview with the IRS, Neidhart says.