Get more out of your job search. More money that is. Here’s how to include your job search in your tax return. [TWEET]
Looking for a new career is often a strain on the wallet. On one hand, you’re out of a job and can’t afford to spend money. On the other hand, you can’t afford not to invest on your career. Don’t worry, keep these tips in mind when learning how to include your job search in your tax return and those extra bucks may come back home during tax season.
Uncle Sam knows his family needs gainful employment, and he understands it’s not as easy as it once was (i.e. highlighting your favorite job in the classifieds). The Internal Revenue Service (IRS) created several job search related deductions for this year’s return.
Deductions for job searching in your field
The IRS may offer some tax-free dollars for your job search – only if you are searching within the same occupational range. Government leaders want to help you find a job if you’re unemployed. They are not however, interested in getting you a promotion or helping you job hop.
For example, if you’ve worked as a bank teller for the last ten years, and the branch decides to part ways, you can deduct your job search for another banking job. On the other hand, the IRS does not allow a teacher to deduct a job search for a secretarial job.
For those with absolutely no work experience, learning how to include your job search in your tax return won't do you any good - the IRS wishes you well but will not allow any deductions for first time employment.
Deductions for resumes
On your tax return, resumes are worth their weight in gold. Resume preparation is one of the most important, and expensive, roles of the job search. Nearly every hiring manager for nearly every company wants a one to two-page document detailing your experience, skills, and education. Those two-page documents rack up a lot after a while. Rest easy though, those expenses are all deductible.
Here are a few examples of resume deductions:
Printing and copying
Professional resume writing and editing
Postage and envelopes
Deductions for phone calls
Phone calls are a deduction many may not know exists. Though most have unlimited minutes on their cell phone, you can still determine the percentage of time spent on the phone for your job search and deduct that percentage from your taxes. Keep a log of your calls for tax season. This makes it easier to determine how much time you spent talking with employers.
This deduction is tricky though. First determine the overall minutes spent talking on the phone. Go through your records – hopefully, you kept records! – and calculate the number of minutes spent talking to hiring managers and recruiters. Use the following formula to determine the percentage:
(Job Search Minutes) x (100) / (Total Minutes) = Percentage
If Sam spent 1,000 minutes on the phone last month, and 150 of those minutes talking with employers, then he spent 15 percent of the minutes on job search. He can deduct 15 percent of that month’s phone bill.
150 Job Search Minutes x 100 / 1000 Total Minutes = 15% Deduction from Monthly Bill
Deductions for travel
Traveling to those interviews eats up valuable gas, not to mention the wear and tear on your vehicle. Some interviews even require interstate travel. You may travel vast miles for those daunting meetings with the hiring manager and the IRS allows a small deduction. The standard mileage deduction for job search related travel was 56.5 cents in 2013. Keep detailed logs of your travels. One you do learn how to include your job search in your tax return, it's possible that the IRS may decide to audit your return.
Gas and mileage aren’t the only travel expenses. If you need to travel out-of-state for an interview, hotel, plane or bus tickets, taxi fares, and meals, to a certain extent, are all deductible. Traveling to job conventions, training seminars and lectures also falls under this category. Just be careful how much you deduct. Travel expenses are often a red flag on tax returns.
What’s the catch?
Anyone who has filed taxes knows there are rules, libraries of rules actually, specifying the limitations on how much you can deduct. Job search deductions are no different. When determining how to include your job search in your tax return, the general rule is you cannot deduct all of your job search costs unless it reaches a certain percent of your annual gross income. The IRS places the cap at two percent of your annual gross income. Miscellaneous costs are factored into this as well.
For example, if you made $40,000 last year and spent $1,000 on your job search with no other miscellaneous costs, $200 is deductible from your taxes. However, if the same scenario applies but you have $800 miscellaneous costs, the entire $1,000 is deductible. In other words, the first two percent of your income is not deductible towards job search and miscellaneous costs.
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* Editor's note: Please note that I am not a lawyer or accountant, and am not qualified to provide you with legal advice. I can offer some guidance, but they are only my opinions and have not been confirmed with a lawyer. I strongly urge you to seek out a certified tax professional if you have legal questions regarding your taxes.