Outplacement and Employment Agency Fees
These costs are acceptable whether or not a new job is landed — assuming, of course, that you’re looking for a job in the same line of work. Career-coaching fees can generally be deducted, too, according to Mark Luscombe, principal federal tax analyst for Wolters Kluwer Tax & Accounting US.
Paper, ink-jet cartridges, fees paid to a résumé writer and printing costs for your résumé and postage are all probable write-offs. But again, don’t get careless; detailed records are crucial, especially for expenses such as paper and ink-jet cartridges, since the IRS could question the connection to your job search (which, again, has to be for a job in the same line of work).
Dues, Subscriptions, Association Fees
Do you pay dues to professional organizations or subscribe to certain industry publications? These fees can be deductible if you use the services provided by the groups to help your job search, Luscombe says. If challenged, you will need to show documentation that a job board at your professional association, for example, was a direct source of leads for you.
You can deduct the IRS standard mileage rate for that year (it is 56 cents for 2014) if you use your personal vehicle for business, but be sure to keep travel mileage logs in case you are asked for documentation. Airfare, train tickets and taxi fare are deductible, provided they’re specifically related to your job hunt. You can’t, for instance, take a five-day trip to Washington, D.C., to visit the museums, spend a single day interviewing and then count the entire trip as a write-off.
If you are job searching and meeting with clients, sources or other business contacts, keep track of whether you pick up lunch or coffee, as 50 percent of the total cost of those meals can be deducted, Luscombe says.
Moving costs can be deducted on IRS Form 1040 (line 26), even if you take the standard deduction and do not itemize. Should you accept a job that requires you to relocate, you might be able to write off all expenses associated with your move if your new employer doesn’t offer to reimburse you. Your new workplace must be at least 50 miles farther from your old home than your old job location was from your old home If you use your vehicle to move, you can deduct mileage at 23.5 cents per mile. For more information, see IRS Publication 521 “Moving Expenses.
You should be able to deduct work-related Wi-Fi expenses, online job sites that charge a fee and networking services such as LinkedIn, which charges a fee for upgraded professional access. Again, you must be able to show evidence that these were tools used in your job search. “In today’s market, these costs are normal,” Luscombe says. “While they aren’t specifically listed in the IRS guidelines, they are an acceptable cost of the job-hunting process.”
Home Office Deduction
If you’re working as a freelancer, contract worker or consultant while you pound the pavement for a new full-time gig, you can write off some of your home office costs if you have set aside a specific place solely for work. You must file Form 8829 “Expenses for Business Use of Your Home.” The IRS now allows a “Simplified Option for Home Office Deduction”, which permits you to deduct $5 per square foot of your home office on your tax return, with a maximum write-off of $1,500 (based on a maximum of 300 square feet). You can read all the home office rules in IRS Publication 587, “Business Use of Your Home.”
The cost of job search seminars and networking events is generally deductible, but again, you must be certain you can prove that they’re connected to your job search. Tuition money to acquire or improve job skills may qualify for the lifetime learning credit, which has limitations and income restrictions that are explained in IRS Publication 970, “Tax Benefits for Education.”
If you accepted a severance package and benefits or were paid for unused vacation and sick leave, this is considered taxable income. Be sure that enough taxes were withheld from these payments by your former employer, or make estimated payments. See IRS Publication 17, “Your Federal Income Tax,” for more information.
When you filed for unemployment benefits, you had the option of having state and federal taxes withheld via Form W-4V. Your earnings are reported on Form 1099-G, and it will show what you received in compensation and what was withheld. IRS Publication 525, “Taxable and Nontaxable Income,” and Publication 4128, “Tax Impact of Job Loss,” also have additional information.