Itemizing job-search expenses on your tax return.

Posted by It’s Only Money Blog April 02, 2009 20:02PM

Categories: Taxes

If you were looking for a job in 2008, you might be able to deduct the expenses against your taxable income. But you must itemize deductions and there are other limits. Read on for the details.

The IRS considers many job-hunting costs to be “unreimbursed employee expenses” (Line 23, Schedule A). That includes the money you spend preparing a resume, traveling to a job interview or using an outplacement firm, according to IRS Publication 529.

You CANNOT, however, deduct job-search expenses if:

You’re looking for work in a new field.

You’re looking for your first job

You’ve taken a “substantial break” between jobs.

IRS senior tax consultant Kathy Howell points out: “We don’t really define what a substantial break is.” Most likely, she added, the IRS would consider a substantial break to be taking a year off to go back to school.

You can only deduct job-hunting costs if you itemize deductions using Schedule A and Form 1040. Normally, you itemize if the costs of such things as mortgage interest, real-estate taxes, state income or sales taxes, charitable contributions and high out-of-pocket health care costs exceed your standard deduction. The standard deduction in 2008 for a married couple under 65 filing jointly is $10,900. For singles or married couples filing separately, it’s $5,450.

Also, you can only deduct the amount of your job-hunting and other employee business expenses and other “miscellaneous deductions” (your accountant’s fees, the cost of your safe-deposit box, etc.) that exceed 2 percent of your adjusted gross income, Howell notes. Again, see lines 21 through 27 on Schedule A. For example, a person with an adjusted gross income (Line 38 on Form 1040) of $50,000 would need to spend more than $1,000 on those job-hunting and miscellaneous expenses.

More tax-savings tips here, on Kathy Howell’s Tax Q/A Blog and from the American Institute of Certified Public Accountants.

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