NEW YORK (Reuters) - Looking for a job can be frustrating, especially now, with the unemployment rate seemingly stuck above 8 percent. There is a silver lining at tax time, though: Those job hunting costs may cut your tax bill.
Of course, where taxes are concerned, it’s never quite that simple. There are a lot of hoops to jump through before you can write off those job-hunting expenses.
First of all, they get lumped into the miscellaneous tax deduction, which includes a grab bag of expenses and which can only be taken after those costs top 2 percent of your adjusted gross income. That 2 percent hurdle works like this: If your adjusted gross income is $100,000, and you have $3,000 in miscellaneous expenses, you’d get to deduct $1,000, worth $280 in the 28 percent tax bracket.
Secondly, for the job search expenses to count, you have to be looking for a job in your current or most recent occupation (sorry, job switchers!) and you can’t have had a substantial break between ending your last job and searching for a new one or be looking for a job for the first time (sorry, new college grads).
To be clear, you can deduct job hunting expenses if it takes you years to find a job, as long as you’ve been looking all along. But if you take off a couple of years to travel with your family, and then come back and job hunt, you’re out of luck.
If you think you’ll qualify, the good news is that the definition of job-hunting costs is quite broad, including the costs of preparing and mailing your resume, traveling to out-of-town job interviews, payments to headhunters and career coaches, and the like. And, yes, you can deduct those costs even if you aren’t successful in finding a new job. (You cannot, however, deduct them if you get reimbursed by your current or future employer.)
There are many other miscellaneous deductions, in addition to job-hunting costs, that may help push you over the 2 percent hurdle.
These include business expenses that you aren't reimbursed for, such as dues paid to a union or professional society or subscriptions to professional journals and trade magazines; courses to improve your job skills; fees for investment advice that help you produce taxable income; and the costs of preparing your tax return. For more details on this deduction, see the Internal Revenue Service's Publication 529: (here)
Despite its reputation as being a little-used deduction, the miscellaneous deduction was claimed by nearly 12 million taxpayers in 2009 (the most recent year for which data is available), to the tune of $80.9 billion, according to IRS data.
If you qualified this year, congrats. If you didn‘t, but came close to meeting the 2 percent floor, you can try bunching your expenses at year-end so that you’ll qualify for 2012 or 2013. If, come December, it looks like you’ve had a lot of deductible miscellaneous expenses all year long, you could pull added expenses into 2012. That might mean renewing all your professional subscriptions then, instead of holding off till the new year.
But if your 2012 deductible spending was light, you might put off paying for deductible year-end items until 2013. Tax advisers often tell their clients to use this bunching technique so they can claim miscellaneous deductions every other year.
There’s one more bit of good news for job hunters: If you do find a job, but you have to relocate to take it, your moving costs are deductible. Even better -- moving costs are an adjustment to income and you don’t need to worry about the 2 percent threshold to take them.
So if you’re spending a fortune to move your family from New York to California for your new job, keep good records and know that you’ll get a break at tax time. That will make it worth carrying that box of receipts with you.
(The writer is a Reuters contributor. The opinions expressed are her own.)
Editing by Linda Stern and Andrea Evans