How To Deduct The Cost Of Your Job Search
Everyone looks for the best forms of tax relief, and unemployed folks are no exception. Whether you have been out of work for a day or a month, you need to know how to report job-search expenses on your tax return. Remember a major rule, however, and you will stay out of trouble. Namely, you can only deduct expenses related to searching for a job in your current occupation. The cost of hunting for a position in a new line of work is not deductible.
That said, the IRS allows you to reduce your reportable income by the amount of agency fees, copying, mailing, travel, and other expenses that are directly related to the search. If your travel is only partly connected to the search, then you will have to decide how much is personal and how much is job-related. The IRS will want documentation in any case.
Be aware that if there is a significant break in time between when you lost your job and when you get a new one, some or all of the search expenses might be disallowed by the IRS. The main thing is to keep looking, retain all receipts, and if possible maintain a log of your job-hunting activity. These items will come in handy if the government asks for backup paperwork.
Finally, realize that there are limits to the amount you can deduct from your income, for tax purposes. On the Schedule A, which is the form you must file to take advantage of these expenses, you can only deduct the amount of the job search that exceeds two percent of adjusted gross income.
The IRS is very strict about the rules, so be certain to keep a careful paper trail and do your math properly. If you have lots of expenses, it is wise to consult a tax professional in order to get the tax relief you need.