MONEY MANAGEMENTFrom the Virginia Society of Certified Public Accountants - Presented by Dean Knepper, CPA, CFP®
JOB HUNTING COSTS: WHAT YOU CAN AND CAN’T DEDUCT
(October 25, 2004) — Did you know you may be able to deduct certain costs associated with looking for a new job? It’s a fact, says the Virginia Society of CPAs. What’s more, even if you don’t find a job or if you get terrific offers but decide to stay with your current employer, the deduction rules still apply. Of course, you must meet certain eligibility guidelines, and you’ll need to itemize your deductions.
Learn How to Qualify for the Deduction
To be eligible, you must be seeking a job in your current line of work. That means if you’re a nurse and you’re looking for a new nursing position, you qualify. Should you decide you’d like to become a librarian, you won’t be able to write off the cost of finding your new position.
Job search expenses are not deductible when there has been a substantial break between your prior employment and your search for a new job. For example, a spouse who leaves the work force for several years to raise a child cannot deduct costs associated with a job search. You’re also barred from deducting expenses related to your job search if you’re looking for your first job, as might be the case for college graduates.
Know What Is Deductible
You can deduct fees you pay to an employment agency or outplacement firm. The cost of resume preparation, printing and mailing are deductible, as is the cost of stationery, such as paper and envelopes. Long distance phone calls, publications that aid your job search and job-wanted ads, such as classifieds or those in trade journals, are also deductible.
For some job hunters, the cost of travel is the biggest expense. Air or train fares, hotel and meal expenses, cab fares and other incidentals may be deductible when you travel a distance for an interview. CPAs caution that this holds true only if your primary reason for the travel was related to your job search. The amount of time you spend on personal activities compared to the amount of time you spend looking for work determines whether your expenses are deductible. Bear in mind that you may not deduct expenses for which a prospective employer reimburses you.
Understand How to File
You must be able to itemize deductions on Schedule A of your tax return in order to claim a deduction for job search expenses. These expenses fall under the heading of miscellaneous itemized deductions, which also includes tax preparation fees, unreimbursed employee business expenditures, education that furthers your profession, investment fees and work uniforms.
Even if you itemize, you may not get the full benefit of this deduction. That’s because these expenses are deductible only to the extent that in the aggregate they exceed 2 percent of your adjusted gross income. If your adjustable gross income is $100,000, you can deduct only those miscellaneous itemized deductions that exceed $2,000 (2 percent of $100,000).
Keep Good Records
Be sure to keep good records to document your job hunting expenses. An effective way to track your expenses is to keep a log in your PDA or in a notebook. On a daily basis, record your job search activities and the expenses associated with them. Also, be sure to save related credit card receipts and cancelled checks. If your job hunt includes travel, a log showing what you did while out of town will help you substantiate that the trip was primarily for job seeking purposes.
Consult with a CPA
A CPA can help you understand the requirements for deducting job search expenses
and answer your questions concerning how to qualify for this deduction.
The Virginia Society of CPAs is the leading professional association dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. Founded in 1909, the Society has nearly 8,000 members who work in public accounting, industry, government and education. This Money Management column and other financial news articles can be found in the Press Room on the VSCPA Web site at www.vscpa.com.
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