By David M. Kendrick, CPA, MST

With unemployment hovering just over 9%, you or someone you know may be looking for a new job.  Here is a reminder of the expenses attributable to your job search that may be deductible!

Job search costs may be claimed as a miscellaneous itemized deduction subject to certain adjusted gross limitations; taxpayers who take the standard deduction cannot claim these expenses. By themselves, job search expenses might not be sizable enough to produce a tax deduction due to the IRS imposed limitations. However, when combined with other allowable miscellaneous deductions, they just might yield a refund.

Qualified job search expenses:

  • the cost of preparing a resume, including postage for sending them to prospective employers;
  • local as well as out-of-town travel for interviews, to the extent not reimbursed by the prospective employer;
  • job counseling and referral fees;
  • employment agency fees;
  • telephone expenses related to seeking new employment.

For job search expenses to be deductible, you must be looking for employment in the same or similar trade or business in which you were previously engaged.  Keep in mind that accepting temporary employment in another line of work won't affect your deduction for expenses when searching for permanent employment in your regular line of work, and job search costs may be deductible even if they don't result in an employment offer or even obtaining the position that was being sought in the first place!

Job search expenses aren't deductible if you are looking for employment in a new trade or business, even if you find employment as a result of the search. Also, job hunting expenses incurred in seeking employment for the first time aren’t deductible.

Please keep in mind that unemployment benefits are generally taxable; you may want to consider if your federal income tax withholding on these benefits is sufficient in order to minimize any potential underpayment of estimated tax penalties.

Please do not hesitate to contact us directly with any questions you may have.