Looking for a job is hard enough. Paying taxes on what little you may have earned is just salt on a fresh wound.
Luckily, job seekers have recourse. An overlooked item in the tax code allows job seekers to deduct certain expenses on their taxes, resulting in a lower 2013 tax bill.
The IRS' Publication 529 outlines who can and cannot deduct job hunting expenses from their earned income. Taxpayers must meet only three criteria.
- You must be looking for a job in the same occupation as you previously worked.
- You cannot have taken a "substantial" break between your last job and looking for a new one.
- This cannot be your first job search. (Sorry, recent college graduates.)
Don't get greedy! A new designer wardrobe isn't a deductible expense. But most job-related expenses are deductible. Here are some expenses the IRS mentions specifically.
1. Transportation costs
With gasoline topping $3.00 per gallon in the United States, commuting costs add up quickly. Fortunately, the IRS says this expense can be reasonably deducted at a rate of $0.565 per mile.
Don't expect to get a tax deduction for a trip to Disneyland, however. Your job hunt has to be the primary motivator for hitting the road.
2. Marketing yourself
Have you hired an employment agency, or posted a listing on a job board? Your expenses should be tax deductible, provided you won't be reimbursed by your employer.
Memberships to employment-related social networks or costs incurred to read the jobs classifieds fit the bill, too.
3. Making a resume
Whether you've hired someone to craft your resume for you, or invested in materials to print and mail your resume, the costs are deductible. The IRS specifically mentions postage, but in the era of online applications, it's unlikely stamps will be a major drag on your job hunt.
How much can you save?
The deduction kicks in once your miscellaneous deductions top 2% of your adjusted gross income. Thus, someone who earned $20,000 in 2013 could deduct expenses above $400 for the year. Someone who earned $50,000 would only be able to deduct expenses above $1,000.
It won't be your biggest deduction, but don't leave money on the table. Double-check your collection of receipts for job-related purchases before you make a date with your accountant.
Is Uncle Sam about to claim 40% of your hard-earned assets?
Thanks to a 2013 law called the American Taxpayer Relief Act, or ATRA, he can, and will, if you aren't properly prepared.
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