About the author: This is a guest article written by Leigh Mutert, CPA. Leigh is the manager of the H&R Block Get it Right Community, a blog that focuses on breaking down complex topics for taxpayers, and the manager of social media, corporate relations for H&R Block. Leigh was a recent guest on the Consumerism Commentary Podcast.
Searching for and starting a new job can cause workers to spend money when they may be short on funds. A bright spot is that some of those expenses may be tax-deductible.
Unemployed and searching for a new job
Taxpayers — particularly the unemployed and underemployed — should file tax returns to claim all tax credits and deductions they are entitled on their tax returns, to ensure they get the largest tax refund they are due.
Remember, all income must be reported to the IRS, regardless of the source. It does not matter if it is from unemployment compensation (all of which is subject to federal income tax this year), tips, a lawn mowing business or working as a nanny.
While looking for a new job, keep good financial records because items used exclusively for the job search are tax-deductible as long as the job is in the same field. Among these expenses are résumé development, professional placement services, and unreimbursed mileage, airfare and hotel expenses for interview travel.
Moving for a new job
If relocating for a new job, unreimbursed moving expenses may be eligible deductions that do not have to be itemized. These are the eligibility requirements:
- Any moving expenses incurred within one year from the first day of work
- The new job would have increased the taxpayer’s commute by more than 50 miles, and if the taxpayer was previously unemployed, the new job must be at least 50 miles from the taxpayer’s old home
- Taxpayers must be employed at least 39 weeks during the first 12 months after the move.
Starting a new job
Expenses for unreimbursed items necessary for working, such as computers, mobile phones, training that allows workers to keep their current positions, union dues and required uniforms may be eligible tax deductions. To be eligible, these items must be required by your employer and used exclusively for work purposes. This job deduction calculator on H&R Block’s Tax Calculators page can help you quickly see what expenses are typically claimed based on your occupation.
Eligible job expenses must be claimed as itemized tax deductions and they must total more than 2% of adjusted gross income; only the portion of job deductions and other miscellaneous itemized deductions that exceed 2% of adjusted gross income may be claimed.
Getting help filing taxes correctly
H&R Block has online tax preparation software for filing your taxes yourself that can help you accurately claim your job-hunting expenses automatically. If you have questions about what qualified as a job-hunting expense, or any other tax question, you can always get a free 30-minute consultation with an H&R Block tax pro at an office near you.
Updated March 21, 2011 and originally published February 17, 2011.