Job hunting could help cut taxes
These days a lot of Americans find themselves pounding the pavement in quest of a new job, whether they've gotten the pink slip or expect to get one soon. The good news: The search may help you cut your tax bill -- under certain circumstances, job-hunting expenses are tax-deductible.
New job, same field
First, your hunt for new work must be in the same field in which you're currently or were formerly employed. Uncle Sam won't help out if you decide to totally switch career gears.
Second, you can't decide to chill out for a while and then expect the Internal Revenue Service to help when you decide it's time to get back on the career track. Deductions aren't allowed for employment-search costs when there is a "substantial break" between your last job and when you begin looking for a new one.
Finally, recent graduates are out of luck. The costs you incur in getting your first job aren't deductible, because the tax law only allows you to write off expenses incurred in searching for another position in your present occupation.
But if you're on the lookout for a new position, start saving those job-search receipts.
What you can write off
- Employment and outplacement agency fees.
- Resume services.
- Printing and mailing costs of search letters.
- Want-ad placement fees.
- Telephone calls.
- Travel expenses, including out-of-town job-hunting trips.
Even self-employment efforts could count at tax-filing time. The costs associated with investigating or attempting to start your own business, as long as it's in the same field as your current profession, may be tax-deductible.
Careful tracking of these expenses is critical because they are classified as miscellaneous itemized deductions. You itemize them on line 21 of Schedule A.
But you can't automatically subtract your job-hunting costs from your income -- just those that, when added to all your miscellaneous deductions, come to more than 2 percent of your adjusted gross income.
So hang on to those job-hunt vouchers. They can help push that miscellaneous amount to the allowable level, even if you don't get new work.