Tax Tips for Your Job Search
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Job seekers are facing a tough market that doesn’t appear to be getting any better. In September, the U.S. unemployment rate was 9.1 percent, per the Bureau of Labor Statistics. Dig deeper. The real unemployment rate (U-6) is closer to 16.5 percent. About one in six people are unemployed or underemployed.
For job seekers, here are some tax tips that can help take the sting out of the job search.
The bad news for job seekers
The longer you spend searching for a job, the longer you will spend dipping into your savings. If your savings run out, you may be forced to rely on credit cards or rack up more debt.
All the tax benefits available to you are on Schedule A—Miscellaneous Itemized Deductions. Without enough expenses to itemize, you will get no benefits from these deductions. Even if you can itemize, your deductible unemployment benefits will be reduced by 2 percent of your adjusted gross income (AGI), the number at the bottom of page one of Form 1040. For example, if your AGI is $25,000 (including taxable unemployment income), your expenses will be reduced by $500.
The good news for job seekers
For those lucky job hunters who can itemize, there are several qualifying expenses.
Resume writing: Have someone update and rewrite your resume. A professional knows the current market tricks to get an employer’s attention. Remember, you are competing in a world filled with highly skilled workers and professionals.
Job search counseling and career counseling: It takes creativity and boldness to find a job today. Connections and contacts are critically important to get your foot in the door.
Social media training: Mining the social media data stream can yield job-hunting gold. The cost to learn how to do this is deductible.
Mileage and travel: Track your miles when going to interviews, and definitely save all the receipts for your interview travel expenses. Document that the trip was only—or primarily—for the interview, though you may certainly play tourist or visit friends before or after the interview.
Postage and fees: You’ll be spending money on postage, printing, copying, supplies, access to certain websites, and so on. All those costs are deductible.
Additionally, your state may have special deductions or credits for job seekers. Scour your state’s tax forms or website to find them.
Non-deductible job-seeking expenses
You may not deduct the costs of hunting for a job in a new career or training for a new career. In addition, the following kinds of expenses are also not deductible:
Career counseling: This is a service that evaluates your skills and experience and helps you redefine your career path. However, if the service simply helps you find a better way to get hired in your current career, the costs would be deductible.
Classes to get licensed—for anything: For example, an accountant might take courses to help pass the CPA exam. Though the accountant is working for the same firm before and after the exam, performing the same tasks, the IRS considers being a CPA a new career. If a construction worker studies for the contractor exam, that equals a new career to the IRS and, again, is not deductible. This concept translates into every other area of work or business as well.
Don’t give up on job seeking
Regardless of whether or not your expenses are deductible, you must move forward. If your career has gone the way of the buggy whip, get retrained, or direct your energies into a career area where demand is growing. Don’t wait. Your funds are running out.
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Eva Rosenberg, EA is the publisher of TaxMama.com , where your tax questions are answered. Eva is the author of several books and ebooks, including the new edition of Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.
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