Job-hunting expenses can be deductible if you meet certain requirements
First you must be looking for a new job in your present line of work. Expenses for this type of search are deductible even if a new job is not found. Expenses incurred looking for a job in a new trade or business are not deductible, even if a job is found. Thus job-hunting expenses for most new college graduates are not deductible as one's first "real" job is considered by the IRS to be in a new trade or business.
Second you must itemize your deductions as job-hunting expenses fall under the category "miscellaneous itemized deductions subject to the 2% floor." This means that the deductions you wish to claim must exceed 2% of your adjusted gross income (the bottom line number on page 1 of Form 1040) before you will receive any tax benefit for them.
Examples of deductible job-hunting expenses include:
- transportation costs to job interviews (cab fare or parking and mileage at 55 cents per mile)
- fees for legal or tax advice relating to employment contracts.
- 50% of meals and entertainments expenses directly related to job searches
- fees paid to employment agencies or job search websites
- postage on correspondence related to the job search
- newspapers and professional subscriptions bought for employment advertisements
- career counseling services
- out-of-town travel expenses including meanls, lodging and local transportation, if the trip is primarily to look for a new job. If the primary purpose of the trip is personal, travel costs are not deductible. However, out-of-pocket job-hunting expenses at the dsitination are still deductible.
Examples of non-deductible job-hunting expenses include:
- professional clothing to wear to interviews
- haircuts and manicures
As with any tax deduction, be sure to keep receipts to support the job-hunting expenses deducted on your tax returns. Better yet, make notes on the receipts to indicate the potential employer or position that expense relates to.