If you are job hunting, tax deductions may not be your top priority, but your expenses may be deductible. If you can use those deductions, you’ll lower the real cost of job search services.
In other words, the real cost of getting professional help in your search is lower than it first appears. In effect, deductibility provides a built-in discount.
Of course, nothing is quite that simple when dealing with tax regulations, and the IRS stays true to its hallowed tradition of making it all a little more complicated than you’d hope.
There are three threshold requirements to meet before anything is deductible:
• You cannot be looking for work in a new occupation.
• You cannot be looking for work for the first time.
• You cannot have had a “substantial break” between the end of your last job and the start of your current search.
The IRS could have delighted its many fans by telling the world what made a break “substantial,” or what occupations were roughly equivalent. Alas, we have no such guidance to rely on, so we are left to decide for ourselves what’s reasonable.
Sometimes, that decision is tricky. Nelson Rockefeller, then Governor of New York and a man, presumably, with access to first-rate legal talent, deducted the cost of the hearings needed to confirm his appointment as Vice President of the United States. Common sense may have dictated that both jobs were in the same political occupation, but the IRS disagreed.
If you’re a nationally known public figure, you may get that kind of scrutiny,
but questions of job search deductions rarely become matters for courts to
If your deductions fall within IRS guidelines, a broad range of expenses will qualify.• Resume preparation
• Job coaching and all services directly related to the search
• Employment agency fees
• Outplacement agency fees
• Paper and postage
• Telephone calls
• Transportation and travel
I’m sorry to say that you can’t deduct the cost of the drink you needed after a particularly painful interview experience, even if its value was purely medicinal.
Of course, it’s essential to check with your tax advisor who needs to understand how the latest changes in the tax law but don’t ignore these possible financial savings.
If your search ends happily and your new employer reimburses you – for agency fees, for example – you’ll have to include that reimbursement in your gross income. For most of us, that is a very small price to pay for a job search with a successful conclusion.