Unemployed? The IRS is Here to Help.
ADP issued a report Wednesday morning that, according to their numbers, the country’s private sector hired 114,000 workers. Unfortunately, while this is a positive number, it is too small of a number to reduce our unemployment rate which stands at 9.2 percent. If you are one of the unfortunate people in the 9.2 percent or are currently looking for a new job because it’s time to move on, the IRS is here to help.
The IRS allows you to deduct your job hunting expenses as long as they meet the following criteria:
- The expenses must be for the same line of work that you are currently in (or were in prior to being laid off or quitting)
- These deductions are not for first time job seekers, but are available to taxpayers who are/were currently employed and seeking new employment.
Here is a quick listing of some of the deductible expenses:
- Costs for out-of-town travel for the purpose of seeking new employment
- A 50% deduction for meals while travelling out-of-town for your job search
- The cost of your resume preparation, copying and postage
- Mileage for any travel to/from prospective employers
- Employment agency fees including career counseling and headhunter fees
The following items are not deductible:
- New clothes (yes a suit makes the man or woman and a nice suit certainly won’t hurt your chances of finding a new job, but the IRS does not allow this deduction)
- Haircuts, makeovers and gym memberships
- Internet access and phone (the IRS has determined that these costs are personal and are not deductible for tax purposes, unless there are incremental costs i.e. additional cost for a long distance call made while seeking employment)
It’s important to note that these deductions are subject to a 2-percent floor, meaning that you don’t get a deduction until these expenses reach at least 2 percent of your Adjusted Gross Income (AGI). AGI is the total of all of your taxable income less some minor deductions. This is not your taxable income. This is the income before your itemized or standard deductions, as well as your exemptions. If you’re out of work that threshold gets met much more quickly since you’re not earning any wages.
In addition to job search costs, there are other items that are deductible for tax purposes that will help you reach the 2-percent threshold:
- Tax preparation fees
- Legal fees (as long as they relate to income producing activities)
- Safe deposit box
- Seminar fees (as long as they relate to your profession)
- Dues and subscriptions to professional associations
- Unreimbursed employee expenses like travel, meals and entertainment and home office expenses
So in closing, if you’re seeking new employment (whether you are unemployed or just looking for a new opportunity), it’s important that you keep receipts for all of your job search fees so that you can save some money at tax time.