Cash in on tax deductible job search-related expenses for 2017.
Tax season is once again upon us. If you choose to itemize deductions on your 2017 tax returns, you'll want to be mindful of any job search-related expenses you might be eligible to deduct. Many of these deductions will not be allowed for 2018 with the new Tax Cuts and Job Act that was passed in December 2017, so take advantage while you still can. Consult with your accountant or the IRS website to determine what deductions are allowable for your specific circumstances.
Tax Cuts and Job Act, plus changes for 2018 tax returns
The Tax Cuts and Job Act suspends or eliminates several previously-allowed deductions on tax returns. The Act took effect on January 1, 2018. As a result, based on current tax law, all of the possible job-search deductions listed in this article, if incurred after December 31, 2017, will no longer be deductible on your 2018 and future tax returns through at least 2025.
Tax deductions for job searches in your current profession
The IRS might offer tax-free dollars for your job hunt, but only if you're searching for a job in your current field of work. In other words, the IRS is not going to allow you to deduct job-search expenses if you're looking to change occupations, like if you're currently working as a Human Resources representative and decide you want to pursue your passion as a journalist. Don't let anyone stop you from pursuing your dreams, just don't turn to the IRS for tax-free dollars. On the other hand, if you are part of a severance program where you lost your Human Resources position and are pursuing a similar type of position elsewhere, then certain job hunt-related expenses might be tax deductible.
Your resume is the most important marketing tool you have when it comes to your job search. Expenses related to creating, updating, and submitting your resume might be tax deductible, including printing, mailing, typing, and professional resume-writing services like TopResume.
You might be surprised to learn that phone calls related to your job search are tax deductible. Even if you have unlimited minutes, as most people do these days, you can still calculate the percentage of time you used your phone for job search-related phone calls, interviews, and networking and then deduct that amount on your 2017 taxes. The formula you want to use for your deductible amount is this:
Percentage = (Job-Search Minutes X 100) / (Total Minutes Used)
Deductible Amount = (Percentage / 100) X (Monthly Cost)
Travel expenses can add up when you're looking for a new job. Gas mileage and transportation expenses for local interviews fall under this category, as do travel expenses for job fairs and professional training seminars related to your job search. If you need to travel out of state for an interview at your own expense, then expenses such as airplane tickets, bus tickets, airport parking, hotels, and meals associated with the trip might be tax deductible.
Note: Gas mileage for use of your personal vehicle for business expenses is calculated using the standard mileage rate allowed for 2017, which is 53.5 cents per mile.
Career coaching and counseling expenses
Having a career or interview coach can make all the difference when searching and interviewing for a new job. Career coaching and counseling services that you utilize specifically for your job search might be tax deductible.
Outplacement and employment agency fees
Fees that you pay out of pocket to professional outplacement and employment agencies for a new job might be tax deductible. This could also include expenses related to online networking for sites such as LinkedIn, where you can pay a premium price to more easily connect with others in your field. Bear in mind that if you deduct such expenses and are reimbursed at any point in the future for them, "you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year," as shared on The Balance.
Creating a portfolio
Expenses related to creating a work portfolio, samples, or a lookbook for your job search might be tax deductible if it's for a position in your current profession.
Items you cannot deduct
You cannot deduct personal care expenses, such as a new interview suit, haircut, manicure, or time off to look for a job, even if you incurred the expenses for your job search.
As mentioned earlier, you cannot deduct job-search expenses for a job outside of your current occupational field or profession. If there is a lengthy break between leaving your previous position and beginning to look for a new position, then any job-search expenses are likely not deductible on your tax return. For those new to the workforce, job search-related expenses are not tax deductible, either.
In addition, as shared on Forbes, you can only deduct allowable miscellaneous expenses that exceed 2 percent of your AGI (adjusted gross income) on your 2017 taxes. This means you cannot deduct the amount that is less than 2 percent.
Finally, you do not need to be unemployed to deduct job-search expenses, nor do you need to have successfully secured a new job to deduct allowable expenses on your tax return.
To read more about the allowable job-search related deductions for 2017, refer to the IRS Publication 529.
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