Tax Tips for Job Hunters: 5 Deductions You Need To Know

Last Updated Mar 3, 2011 11:35 AM EST

Losing your job can feel like getting sucker-punched. (Trust me, I know.) But getting laid off and then having to pay taxes on the precious morsels of money you did earn? Talk about hitting a woman when she's down.

Luckily, there are some tax tricks that can take the sting out of your struggle. Your first step should be to read through the information on the IRS website specifically for job seekers. Then, see a tax expert who can double check that you're not missing opportunities, suggests Daniel Greenberg, chief marketing officer of "Seeking help from a tax specialist can cut down on personal hours of research, and can help uncover refunds that a job seeker might not have otherwise found," says Greenberg.

To get job seekers started, I've asked tax expert Kathy Pickering, executive director of The Tax Institute at H&R Block, for her five don't-miss tips for job seekers:

1. Diligently Deduct Job-Seeking Expenses
Put the usual job search suspects -- like copying your resume and mailing it out, travel costs when interviewing, or hiring headhunters to help you find work -- in the miscellaneous itemized deductions section of your return, says Pickering. Be sure to count them up closely: "Only the portion of all of those things greater than 2 percent of your gross adjusted income, including unemployment insurance, will be deductible that year," says Pickering.

That means if you made $50,000, you'll need to have at least $1,001 of expenses in order to claim any. Two important exceptions: You can't claim deductions when changing careers, or for Internet and cell phone bills that you also use for personal reasons. Either of these could land you on the IRS "naughty" list - and put you in the firing line for an audit.

2. Mention Your Moving Expenses
Got a great new gig in another state? Ka-ching! That's another deduction. But again, there is a catch, says Pickering. "Your new job has to be at least 50 miles further from home than your old job was. So if you commuted 20 miles from home for your old job, your new job needs to be at least 70 miles from your old home to claim moving expenses," says Pickering.

3. Make Note of Medical Expenses (Including Insurance)
Whether you're shelling out for COBRA or have found your own individual health insurance, you can deduct the portion of those premiums that are more than 7.5 percent of your gross adjusted income. Look under the medical expenses part of your return. "If you made $50,000, that would be $3,750," says Pickering. "People paying $400 per month for COBRA premiums ... [would] get there over the course of a year."

4. Take Advantage of Low-Income Credits
If you earned some income but it was significantly lower than in prior years, you might now be eligible for something called the Earned Income Tax Credit, say Pickering. A single person supporting three children can receive about $5,000 if they make less than about $43,000.

5. Get Deductions for Education
Whether it's a masters degree or a refresher course on Excel, you may be able to get a tax benefit for classes you took to become more attractive to employers. "For instance, if you were taking one class, you could take advantage of the Lifetime Learning Credit," says Pickering. "That's up to $2,000 and is 20 percent of whatever your costs were. There is also the Tuition and Fees Deduction, which adjusts your overall [taxable income] with a maximum deduction of $4,000," says Pickering, although she encourages people in this category to speak to a tax expert to maximize their savings. In order to qualify for these tax benefits, the courses must be taken at an eligible educational institution, and you must be enhancing your current career - not planning for a career change.

Bonus tip: Pickering says one of the most common mistakes job seekers make during tax season is not realizing that their unemployment benefits will be taxed on their federal return; some states also tax the benefits. For last year, the first $2,400 was tax-free, but you'll pay federal tax after that. Depending on the state, you may be able to have the government withhold at least part of what you owe - but brush up on your state's unemployment website to make sure you're not going to owe more than you expect. Also, check with your state to see if they tax unemployment benefits.

What career-related deductions will you be claiming this year ? Please sign in below and share. And for more career advice, follow @MWOnTheJob on Twitter.
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    Amy Levin-Epstein is a freelance writer who has been published in dozens of magazines (including Glamour, Self and Redbook), websites (including, and and newspapers (including The New York Post and the Boston Globe). To read more of her writing, visit