Job hunting expenses may be tax deductible

Deductions for tax preparation services, financial advice, professional journals and a host of other items are known in the tax code as miscellaneous itemized deductions. They are only partially deductible from your gross income. You may write off only that portion of these costs that exceeds 2 percent of your adjusted gross income (AGI). For example, let’s say in 2004 your AGI totals $50,000 and you report miscellaneous itemized deductions of $1,200. That means you may deduct only $200 – the amount of these expenditures that tops $1,000 ($50,000 times 2 percent).

You may write off your miscellaneous itemized deductions only if you itemize. Therefore, if you take the standard deduction, you cannot claim them. You claim these deductions on Schedule A of your Form 1040. The IRS says a miscellaneous deduction is any expense that is related to your job, your investments or your taxes.

In light of the increased number of layoffs over the past year, it is important to note the Tax Code allows you to deduct expenses you may incur from the start of your job hunt to its conclusion. The costs of typing and printing your resume are valid deductions. Postage and long distance telephone calls can also be deducted, as well as the cost of travel to a job interview. Here, it is important to remember that the auto mileage expense allowance changes every year. For 2004, it is 37.5 cents per mile. Remember to keep thorough records of these expenses because although some may be minor, together they may add up to a significant amount that could exceed the 2 percent limitation.

The law also allows you to deduct the cost of career counseling as long as you incur the expense as part of your efforts to find a new job. In addition, you are allowed to deduct the cost of employment-related education as long as it meets one of two requirements:

Your courses must help you maintain or improve your present work skills, or

Your education must be required either by your employer or by law to keep your salary, status or job.

The education costs you may deduct include tuition, books, supplies, lab fees and the cost of travel to and from your courses. A word of caution, however – you are not permitted to deduct education expenses that enable you to meet the minimum education requirements of your profession. The key word here is minimum. Suppose you are hired as a lab technician for a large corporation. You never graduated from college and the company requires you to complete your education. You may not deduct the cost of attending school, as a college diploma is the minimum requirement of your profession. Continuing education classes taken after you have secured your degree will be an acceptable write-off.

Finally, you may not deduct education expenses that qualify you for a new trade or business. For example, even if earning a law degree would meet the minimum requirement of improving your present work skills, you may not deduct the cost of obtaining the degree. Why? Because it will permit you to practice law, a new trade or business. A medical assistant who seeks to change his or her career path and pursue a career as a professional photographer cannot deduct any of his or her job-hunt expenses. Just what constitutes a “new field” is not necessarily intuitive. The IRS has held that different types of jobs in the same employment sector are jobs in different fields. However, there are always exceptions to this rule. The IRS allows retired servicemen and women to search for jobs in new fields and still claim job-search deductions. And temporary jobs you take while searching for permanent employment in your field will not affect the deductibility of your job search expenses.

College students entering the job market for the first time cannot deduct their job-search expenses. If, however, a college student has worked in his or her chosen field while attending college, post-college job search expenses may be deductible. If a jobseeker has been out of the workforce for a long period of time, the costs of searching for a job are not deductible. This rule may particularly affect parents who have taken time off from work to raise their children.

If you are self-employed, you should claim any expenses that relate to your work on Schedule C, not Schedule A in order to avoid the 2 percent limitation. These expenses include the cost of summarizing the information and other accounting and record keeping for the business portion of your tax return.

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