Allowable Job-Search Tax Deductible Expenses
Displaced employees or those who lose their jobs due to involuntary termination may include certain job-hunting expenses as deductibles to their gross income for the year, even if the employee is still out of job as of tax-return filing. Job-search expenses incurred by first-time job seekers or by those seeking a new line of work are not deductible expenses.
This may include (1) Online services of job agencies, (2) Cost of Resumes, (3) Subscriptions to job Information sources, (4) Telephone bills incurred in relation to arrangements for interviews and postage to mail the letters of application and resume, and (5) Travel expenses related to job-hunting and interview appointments.
Fees Paid to Job Agencies – paid by the employee are allowable deductions. On the other hand, if the job agency fees form part of the "Outplacement Services" availed by the employee, the related amount is not taxable.
Relocation Costs – relocation expenses incurred by the displaced worker to the place where a new employment awaits the unemployed person are allowed as deductible expenses during the tax year he was considered as a displaced worker. The IRS provides a test of time and distance to determine if the amount is allowed as a deductible.
If the displaced worker sold his house as part of his relocation process, any loss resulting from the sale of the property is not considered as an allowable deduction.
Educational Expenses – Displaced employees who meet the requirements of a job or profession may include as deductible expenses the costs of additional education taken up to enhance or improve their skills, thus increasing their chances for employment. IRS provides a one-year timeframe for this purpose, although there have been tax court rulings that supported instances where the timeframe went beyond one year.