Many of the jobs lost in the Great Recession may be back, however, there are always some people in the job market. It's healthy to have an unemployment rate of roughly 5 percent to 6 percent, as it represents a normal number of people seeking new employment opportunities.
Many people who currently have jobs spent time last year looking for one. If you were on the job market in 2014, there's a chance you qualify for a number of tax deductions.
The Internal Revenue Service provides some basic guidelines when it comes to tax deductions for job seekers. You should look at these guidelines before you attempt to claim any deductions related to a job search:
- Tax deductions only apply to looking for a new job in your current profession. You cannot use the tax deductions to look for a job in a different profession. Further, first-time job seekers cannot use any of the deductions.
- If you get a job through a placement agency, you may deduct the associated fees. However, if you are reimbursed by your employer for the cost of a placement agency, you must report this as regular income.
- The IRS does not allow deductions after a "substantial break" between your last job and your current job. The IRS does not say specifically what constitutes a "substantial break."
- Only amounts over 2 percent of your adjusted gross income (AGI) are deductible.
6 available job search tax deductions
There are a number of things you can begin adding up to reach the required 2 percent of your AGI. Income tax deductions are allowed for the following on your itemized deductions worksheet:
- Résumé and application costs. Whether it's printing out your résumé, sending it through the mail or buying special paper to print your résumé on, all of these costs are deductible.
- Travel. You can deduct a number of costs associated with travel. However, the travel must be directly related to looking for a job. This includes the mileage you put on your car during your job search as well as taking a flight and booking a hotel to look for work in another city.
- Babysitting. Do you need someone to look after your kids while you're out job hunting? Your babysitting fees qualify as deductions, provided that you are legitimately hiring a babysitter to look after the little ones while you look for your next job.
- Moving. If your job search lands you a gig on the other side of the country, you're in luck: You can deduct all costs associated with your move, from packing tape to shipping. There are some stipulations, including that you must move more than 50 miles from where you currently live to qualify.
- Training and networking. Looking for a new job can often include job training and heading off to seminars to keep your skills fresh and your foot in the networking pond. The cost of such events is deductible, provided that it is legitimately related to your job search.
- Phone calls. You can deduct the cost of phone calls made from a landline or a mobile account used only for your job search. Therefore, you cannot deduct the cost of phone calls made from most mobile accounts, as minutes are bought in bulk.
When filing your 2014 taxes (or any other year) you should take all legally available deductions. Don't try and play "audit roulette," but don't be afraid to to take every deduction you're allowed.