Tax goodies for job seekers

By Blake Ellis, staff reporter


NEW YORK (CNNMoney.com) -- Job hunting can be expensive. The costs of hiring career coaches, printing hundreds of résumés at Kinko's and flying out for weekend job interviews can really add up, especially for someone who doesn't have an income.

But finally, there's a benefit to being unemployed. Job seekers can deduct search-related expenses, including employment and outplacement agency fees, travel costs and résumé costs.

Do you cheat on your taxes?
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  • As much as possible
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Your job search doesn't even have to result in employment for you to qualify.

"The government is in favor of people finding work and understands that it takes a little money to get there," said Matthew Rothenberg, editor in chief of TheLadders.com, an online job marketplace. "Looking for a job is now your job, and the government recognizes that."

Do you qualify?

Not every workplace hopeful can deduct job-related expenses. You're eligible for these deductions only if you're seeking a job in your present field of work, you aren't looking for your first job and you aren't entering the job market after a "substantial" period of unemployment, according to the IRS.

That means career changers, recent grads, and stay-at-home parents returning to work are out of luck.

This "substantial" period of unemployment is one of the so-called gray areas of the tax code, said Tom Karsten, managing partner of Karsten Tax & Financial Management.

"What I usually look at is if during that whole period of time, the person was actively looking for work," he said. "It's not an area [the IRS] would look at too closely as long as the costs are reasonable and it isn't a really long period, like five years or more."

To claim job search expenses, you just need to itemize them on your return.

But because knowing what qualifies for a deduction can get complicated, it's always a good idea go to an accountant or tax expert with any questions.

Will move for work

Traveling across the country for an interview? Make it worth your while by writing off the plane ticket or gas costs and getting some money back.

If the interview is over the phone, you can deduct the cost of the call as well.

Even if you travel somewhere without an interview lined up but you're still looking for work, you can claim items such as airfare costs, gas expenses and other transportation fees.

"If you were in a different city for interviews, document who you spoke to, what the company was and where it was located as well as the total number of appointments you had while you were in that city," Karsten explained.

Karsten said the IRS is not likely to look into a claim unless the costs you deduct seem unreasonably high. For example, jetting off to Hawaii for a month-long job search and dropping off a few résumés while you're there would probably raise a red flag.

In addition, if you are eventually offered a position in a different city (at least 50 miles from your current home), you're able to deduct moving costs, including lodging, packing, transportation, tolls and parking. The IRS will even let you deduct the cost of transporting Fido across the country, said Amy McAnarney, executive director of the Tax Institute at H&R Block.

But make sure your employer isn't already reimbursing the costs. "There's no double-dipping," said McAnarney. "You have to understand what your future employer is going to cover so that you can track and claim all the other expenses associated with the move."

Wanted: Any job

Because of how desperate so many unemployed Americans are for work, a job hunt today can involve hiring help, sending out hundreds of résumés, or even promoting yourself with ads. All of those things can be itemized as a deduction.

If you paid an outplacement agency, a headhunter or a career coach to assist you in your job search, you can deduct those fees. Costs associated with interview preparation, résumé assistance, job search site memberships and child care are generally all eligible deductions as well. You can even claim the amounts you spend posting employment ads in newspapers, magazines or online.

Even if you're not quite that proactive, just the cost of printing and mailing so many résumés can get expensive. But most people don't realize that they can claim that expense on a tax return.

"For all that résumé work and all those copies you're making at your local copy store, keep those receipts," said McAnarney. "Any type of assistance preparing your résumé counts for a deduction."

What you can't deduct

While most expenses necessary to a job search are deductible, there are a number of job-related costs that the IRS won't give you a break on.

For example, one of Karsten's clients asked if getting her nails done to look good for an interview counts as an eligible deduction. But manicures are a no go.

Other personal maintenance expenses, including new clothes purchased for job interviews, do not qualify for a deduction either.

"You can't just say, 'I'm going to go out and get a new suit and haircut and deduct the cost,'" McAnarney said. "It's really important to know what can and cannot be included, or else you can get yourself in trouble."

Generally, if what you buy can be used for other purposes, you can't deduct it as a job search expense, said McAnarney.

In addition, if you travel to search for a job and bring someone else along for the ride, that person's expenses are not eligible for deductions. And if you've taken a job in another city and are weighing the cost of moving vs. commuting, keep in mind that commuting costs are not a tax deduction either, McAnarney said. To top of page

 
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