Can You Get a Tax Deduction for Job Search Expenses? It can take a lot of time and effort to find a new job. It can also be costly, including travel, shipping mail, transportation, communication, phone calls, and other fees. Thankfully, some of those expenses aren’t total losses. They can be claimed as a deduction on your tax return, thus saving you money on your taxes. Continue reading to learn how.
Basics of Tax Deductions
Job-search costs are included in the category of job-related costs. The IRS recognizes these costs as allowable deductions from one’s total taxable income. It’s critical to comprehend what this means. Adjustments and deductions are allowed to be deducted from a person’s gross income when they are taxed. If a person does not claim a standard deduction, itemized deductions might include job-search expenditures.
However, when it comes to deductions, certain thresholds must be met first, such as 10% of earned income, otherwise, only a portion of the deduction amount can be used. Unlike a tax credit, which reduces taxes owing dollar-for-dollar when used, qualified deductions only reduce a fraction of a tax dollar for each deduction dollar claimed. Nonetheless, every dollar saved from taxes translates into a dollar saved for personal use. So it doesn’t make a difference.
When a person itemizes his deductions rather than taking the standard deduction, and when the costs, along with all other miscellaneous deductions, amount to more than 2% of a person’s adjusted gross income (AGI), the costs are considered deductible. When a person’s gross income (everything generated) is reduced by adjustments, for example, personal exemptions for family members, the AGI number is calculated. It shows the remaining income before deductions are applied. Furthermore, as a person’s income rises, the minimum threshold raises with it.
To use miscellaneous deduction expenditures on a tax return, a person earning $50,000 in a year must have at least $1,000 in miscellaneous deduction expenses. A person earning $100,000 must spend more than $2,000 on expenses and so on.
What Types of Deductions Are Allowed?
Not every job expense will be taken into account. Photocopies of resumes, mailing, placement agent fees, headhunter fees, and travel relevant to a job search are all eligible job-search expenses like travel costs to and from an interview in another city. In addition, the IRS sets a limit on the kind of searches that are qualified. The job search must be in the same field of work and function as the previous position.
So starting a new job isn’t an option. Earning a qualification to transition from teaching to nursing, for example, is not authorized as a job-search expense. However, it might be utilized elsewhere on a tax return as a tuition cost deduction, so not all is lost.
There are a variety of strategies to save money on taxes for your job search, but you must first understand the requirements. Consult a tax professional if you’re unsure about what you can and can’t deduct.