Many people come to a point in their life where they want a change of scenery. Sometimes that entails simply moving to a different spot in the same town you already live in or it could mean uprooting your life and moving somewhere else entirely. Sometimes it is for economical reasons or it could be for personal reasons. You may be in a job where you are as high as you’re going to get and that may or may not be as high as you would like to go. Small towns are sometimes limited in the opportunities they can offer residents. If your small town is also a university town, that can also limit your opportunities simply because of the pool of new graduates available that will work for not much money just to get some experience.
If you have decided that a change of jobs is what you need (either in town or elsewhere), you may be able to deduct some of those job search expenses. They are claimed as miscellaneous itemized deductions on the schedule A of your 1040. NOTE: you can only deduct the amount of your miscellaneous deductions that exceed two percent of your adjusted gross income. For example: if your adjusted gross income is $30,000 and you have $500 in job search expenses, your deduction is $0 because your two percent limitation is $600. In the prior example, if you had the same gross income of $30,000 but you had $1,000 of job search expenses, your job search expense deduction would be $400.
The miscellaneous itemized deduction is only a small part of the schedule A. To be able to itemize your deductions on your 1040, the other items on the schedule A plus the miscellaneous deductions must add up to be more than your standard deduction. Otherwise, it is not beneficial to you to itemize your deductions.
Your job search expenses do need to meet some criteria in order to qualify as a deduction.
The expenses must be in a job search in your current occupation. If you are an engineer, you need to be looking for another job in engineering. You also cannot deduct expenses that were reimbursed. For example, if a prospective employer pays for your travel expenses to come to an interview, that is not deductible. If you have decided to change occupations, (say you were an engineer who decided to become a nurse), those job search expenses are not deductible. (NOTE: the schooling to become a nurse may be eligible for an education credit. Consult a tax professional in that situation).
If you utilize employment or job placement agencies, those are deductible expenses.
When searching for a new job, one of your best assets is a good résumé. You can deduct the cost of preparing and mailing copies of your résumé to prospective employers.
Some job searches may include travel, especially if you are going to a new town. You can deduct those travel expenses as long as the trip is primarily to look for a new job. If the interview is one day and you spend six days being a tourist, you will have to break out the job expenses from the play expenses.
If you are looking for your first job or there has been a substantial break between the end of your last job and looking for a new job, those job search expenses are NOT deductible. What qualifies as a “substantial break” is not clearly defined. It is a gray area of the tax code. Please consult a tax professional if you have job expenses and would like to deduct them. There may be other deductions available to you that you had not even thought of.
Changing jobs can be a life-altering step. You may be leaving behind all that is familiar and comfortable to you. Not all of that change has to be bad. Look for the small perks that come with it. Some may be tangible (close to a hiking trail or good schools). Some may be intangible such as a tax deduction. Whether you changed because you wanted to or were forced to, enjoy your new life and make the best of it. FBN
By Roxanne Augenstein, Northern Arizona Financial Services
