Perhaps you are a Registered Investment Adviser transitioning between firms. Maybe you are looking for advancement in your industry, or simply need some change in your life. Whatever the case, looking for a new job in today’s economy can be financially challenging. Fortunately, many of expenses incurred during your job search are tax deductible!
Job search expenses are considered a miscellaneous itemized deduction subject to a 2% Adjusted Gross Income limit. In layman’s terms, this means only those people who itemize can potentially benefit from deducting their job search expenses. If you are among the many who take the standard deduction, your job search expenses will not affect your taxable income.
Although many itemizers may lower their tax liability due to their job search expenses, most high-income earners who itemize will not. Instead, they will find themselves unable to deduct their job search expenses because of the two percent of AGI limitation. This two percent floor means their job search expenses are only tax deductible if they, combined with all of their other miscellaneous itemized deductions, exceed two percent of their adjusted gross income (AGI).
For instance, let’s say you AGI equates to $100,000, 2% of that is $2000. That means your job expenses + other miscellaneous itemized deductions must exceed $2000 to see any tax benefit. If for example your miscellaneous expenses totaled $3000, you will be only be allowed to deduct $1000 (i.e. 3000-2000).
You may be wondering what is included in Job Search Expense according to the law, and we are here to help you quench that wondrous thirst:
• Only expenses incurred while searching for a new career in the same profession as your old or current one are tax deductible.
• Employment and outplacement agency fees
• Resume preparation and mailing fees
• Travel and transportation expenses; Ideally, that prospective career is located in the Bahamas, and requires multiple interviews!
For more a more detailed and comprehensive understanding of tax deductible Job Search Expenses, check out the IRS website.
Did we miss anything that you have deducted as a job search related expense? Share it in the comments section below!