Can you claim tax deductions for job search expenses, including job and career coaching?
Yes, you may be able to, if you follow key IRS guidelines and keep meticulous records of your job hunting expenses.
Many of my clients are surprised when I suggest they talk to their tax preparer about whether or not their job seeking expenses might be tax deductible. In a Motley Fool website, we found some guidelines about this topic.
The job search tax deduction and what expenses qualify
The IRS allows you to deduct certain expenses related to a job search in your current occupation. In the eyes of the IRS, job hunting is not really job hunting unless you are looking in the field you’ve already been working in. “Costs associated with a career change are not deductible,” says Dave Du Val, vice president of TaxAudit.com.
For example, if you’re currently a business consultant and you’re looking for another job as a business consultant, your job hunting expenses can be deductible. If, on the other hand, you decide you’re tired of consulting and look for a job teaching business, the costs associated with that search would not be allowed.
For those looking for work for the first time, or for those have had a “substantial break” (probably several years) in their work history, the deduction will not apply.
What expenses may be deducted?
The IRS considers several types of eligible expenses:
• Job search coaching fees
• Job placement agency fees and fees paid to job recruiting websites
• Cost of preparing and sending your resumes
• Travel and transportation expenses if the trip is primarily for job seeking purposes
There are many resources online about job search expenses and tax deductions. Make it a point to review IRS information about job search expenses and tax deductions in IRS Publication 529, Miscellaneous Deductions. Of course, please be sure to check with your tax adviser as well.
How much would these deductions be worth?
It depends on how much your expenses are and how much your other deductions are worth. Job search expenses are claimed under “miscellaneous expenses” on Schedule A, with the deduction limited to the amount of miscellaneous deductions that’s in excess of 2% of your adjusted gross income.
You’ll need to keep excellent records and receipts to document whatever you’ve claimed. But if you meet the criteria and keep careful track, you may be pleasantly surprised at tax time.
