If you’re searching for a job within the same occupation as the last job you held – or in the one you’re still working – then you might be able to take tax deductions. Job seekers looking to change careers are out in the cold, sorry. The “same occupation rule” rules you out.
The same occupation rule is determined by the nature of the work, not by the job title or industry. For example, if the last job you held was general manager for a small manufacturing company, then division manager in a larger manufacturing company may qualify. However, marketing manager will probably not, even if it’s in the same industry. If you take a temporary interim job as a waiter or grocery clerk to pay the bills while you’re job hunting, you should still be able to deduct expenses.
If you’re fresh out of school, then you can’t deduct any tax expenses, since by definition you’re starting a new career…even if you worked in your chosen field during your graduate studies, you’re probably looking for a job with more responsibilities now that you have a degree.
Expenses That Can Be Written Off
Not all expenses qualify, but there are plenty of tax deductions you can claim. If you enlist help with your job hunt, you can deduct fees charged by employment agencies or headhunters. You can also deduct the cost of your resume, including copying, postage, and preparation if you hire a service. Other job hunt tax deductions include things like career coaching and long distance calls to prospective employers.
If you have to go out of town, you can deduct all travel expenses including half the cost of your meals, and you can deduct standard mileage ($0.55 per mile in 2009) for local travel related to your job hunt. Just remember that the primary reason for the trip must be the job hunt. You can’t take a two-week vacation and go on one interview between tennis and the beach, and still expect to deduct everything.
What Cannot Be Deducted
If you were hoping to see internet access and cell phone expenses on the list of deductibles, you’re out of luck. Ditto expenses related to your appearance. The IRS isn’t buying haircuts, new suits, and gym memberships as job hunting expenses; those are all considered personal expenses, even if you really need to spiff up before a job interview. You also can’t double-dip by deducting expenses that are reimbursed by the company you’re interviewing for.
Here’s the Catch
In order to claim job hunting expenses, you have to itemize your deductions. If you itemize, tax write-offs must exceed 2% of your AGI (adjusted gross income). Of course this includes other itemized deductions, like tax-preparation fees. The good news, if you want to call it that, is that a 2% threshold is much easier to clear if you have no income.