Most of the jobs lost in the Great Recession are back, but there are always people looking for work. In fact, it’s healthy to have an unemployment rate of roughly 4.5 percent to 6 percent, as it represents a normal number of people seeking new employment opportunities. Currently, the unemployment rate in the U.S. is hovering at about 5 percent, according to the Bureau of Labor Statistics.
Many of you who currently have jobs spent time last year looking for one. If you were on the job market at all in 2015, you probably qualify for a number of tax deductions for your job search. Even if you looked for a job in 2015, but never found one, these deductions are still available to you.
IRS Publication 529 Guidelines for Job Search Deductions
The Internal Revenue Service (IRS) provides some basic guidelines when it comes to tax deductions for job seekers. You should look at these guidelines before you attempt to claim any deductions related to a job search.
- Tax deductions only apply if you’re looking for a new job in your current profession. You cannot use the tax deductions to look for a job in a different profession.
- First-time job seekers cannot use any of the deductions.
- The IRS does not allow deductions after a “substantial break” between your last job and your current job. The IRS does not say specifically what constitutes a “substantial break,” however.
- Only amounts over 2 percent of your adjusted gross income (AGI) are deductible.
8 Job Search Tax Deductions
There are a number of things you can begin adding up to reach the required 2 percent of your AGI. Income tax deductions are allowed for the following on your itemized deductions worksheet.
- Resume and application costs: Whether it’s printing out your resume, buying special paper to print it on or sending it through the mail — all of these costs are deductible.
- Agency and ad fees: If you get a job through a placement agency, you can deduct the associated fees. However, if you are reimbursed by your employer for the cost of a placement agency, you must report this as regular income. If you placed an ad to try to find a job, that ad expense is also tax deductible.
- Travel: You can deduct a number of costs associated with travel. However, the travel must be directly related to looking for a job. This includes the mileage you put on your car during your job search (up to 57.5 cents per mile) as well as the cost of a flight and booking a hotel to look for work in another city.
- Childcare: If you need someone to look after your kids while you’re out job hunting, that’s deductible as well. Your babysitting fees qualify as deductions, provided that you are legitimately hiring a babysitter to look after the little ones while you look for your next job.
- Moving expenses: If your job search lands you a gig on the other side of the country, you’re in luck: You can deduct all costs associated with your move, from packing tape to shipping. There are some stipulations, including that you must move more than 50 miles from where you currently live to qualify.
- Training: Looking for a new job can often include job training and heading off to seminars to keep your skills fresh and your foot in the networking pond. The cost of such events is deductible, provided that it is legitimately related to your job search.
- Phone calls: You can deduct the cost of phone calls made from a landline or a mobile account used only for your job search. Therefore, you cannot deduct the cost of phone calls made from most mobile accounts, as minutes are bought in bulk.
- Internet fees: WiFi charges directly used for your job search, online job-seeking site fees and networking services like LinkedIn’s fee for upgrading to a premium account are all tax deductible during your job search.
Job Search Expenses That Can’t Be Deducted
If it isn’t covered in the list above, chances are you can’t deduct it. For example, your time spent interviewing is a not job search expense that is covered; the new suit and tie you bought for your interview or the hair cut you got to look more professional while interviewing is not deductible either.
When filing your 2015 taxes you should take all legally available deductions. Don’t try to play “audit roulette,” but don’t be afraid to to take every deduction you’re allowed. Just don’t forget to save your receipts and document everything to ensure you have proof for all your tax deductions this year and the next.
Nicholas Pell contributed to the reporting for this article.