Job Search Tax Deduction Changes for 2018
When you're job searching, it's important to keep track of your job search expenses, because these costs may be a tax deduction when you file your income taxes. However, since what's deductible on your income taxes — and what's not — is determined by the current tax law, be aware that this is a changing landscape.
What Does the New Tax Bill Mean for Job Searchers?
In December 2017, the House and Senate passed the Tax Cuts and Job Acts, with provisions that will take effect in 2018 and last through 2025. This new bill suspends or eliminates many deductions, including the option to deduct job-search-related expenses, according to Forbes. Forbes reports that "Miscellaneous deductions which exceed 2% of your AGI will be eliminated for the tax years 2018 through 2025." This includes job search expenses.
The information below is accurate for taxes paid for 2017 (that is, the taxes you will file by April 15, 2018). If you searched for a new job in 2017, take some time to review this information — and consult the IRS website or your accountant — to see if you're potentially able to deduct expenses.
But be aware that in 2018, and going forward, these deductions will not be available or will change. For example, the deduction for moving expenses if you are relocating because of a job transfer, for a new job, or to start a business has been suspended through 2025.
2017 Deductions If You Searched for a Job in the Same Line of Work
If you've been looking for a job in the same line of work you're currently in, many of your expenses like phone calls, the costs of preparing and copying your resume, and career counseling are deductible for 2017.
You don't have to be out of work to have some of your costs qualify as a deductible expense, but only expenses that exceed 2% percent of your income count. If you have been unemployed during the last year, you'll need to report your unemployment compensation as income.
Also, severance pay, bonuses, 401(k) and/or other pension distributions may be taxable. Work done as an independent contractor also must be included in your income. For detailed information on what you need to report and how to report it, the IRS website is an excellent resource.
What You Can't Deduct
You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. You cannot deduct these expenses if:
- You are looking for a job in a new occupation
- There was a substantial break between the ending of your last job and when you began looking for a new one
- You are looking for a job for the first time
Deductible Job Search Expenses
The following are allowable job search deductible expenses, summarized from IRS Publication 529. (Again, note that these are deductible expenses for the year 2017, but will not be available for taxes paid in the year 2018 and going forward.)
Employment and Outplacement Agency Fees
You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. However, if in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year.
Also, if your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. Fees for online services directly connected to your job search like premium networking through LinkedIn might also be covered.
You can deduct amounts you spend for typing, printing, and mailing copies of a resume to prospective employers if you are looking for a new job in your present occupation.
Travel and Transportation Expenses
If you travel to an area and, while there, you look for a new job in your present occupation; you may be able to deduct travel expenses to and from the area. You can deduct the travel expenses if the trip is primarily to look for a new job. Hotel accommodations and meals associated with travel to another area for a job in your field may also be deductible.
Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area.
Local and long distance phone calls to prospective employers are also deductible.
As with all tax deductions, there are three important words to remember: document, document, document. Keep track of your expenses, and back them up with receipts.