Searching for a new job isn’t just time-consuming, it can be expensive too. Getting professional help with your resume, phoning employers, signing up with agencies to match you with jobs, and traveling back and forth to job interviews all cost money — money that you could well do with saving, especially if you’re out of work. And what happens if you get a job that involves packing up your things and moving across the country? Relocation ain’t cheap.
What many people don’t know, though, is that there’s a way to recoup some job search expenses. If you’re a U.S. taxpayer, IRS Publication 529 lets you claim the following things on your taxes:
- Resume preparation costs
- Travel costs
- Employment agency or recruiter fees
- Communication fees
- Moving expenses
Of course, this being tax-related there are caveats. We’ll get onto those soon, but first, let’s get to breaking down each of these deductible expenses.
Tax-deductible job search expenses
1. Resume preparation
Resume preparation — the process of creating and sending out your resume to employers — can be claimed back at the end of the year.
For example, if you needed to build multiple resumes, each slightly tweaked to appeal to a different employer and you were using one of our subscription packages or another tool to assist you, that’s classed as getting help with your resume and is tax deductible. Getting someone to help write or rewrite your resume is an expense to be claimed too.
While it’s less common now thanks to email and job search platforms, sending resumes out via post and the associated costs of envelopes and stamps can also be written off. And if the employer is slightly less old school than snail mail and prefers fax, make sure you keep those receipts because you’ll be able to get money back.
Any travel that’s job search-related is an expense that can be claimed. If you’re driving or using public transport to get to and from interviews, keep every bit of paperwork — gas receipts, bus and train tickets, flight and cab receipts. Travel costs soon add up and having everything documented might lead to a sizeable deduction.
And it’s not just travel for interviews that’s tax deductible. Travel in search of a job opportunity also counts. Let’s say you worked in marketing and there’s was a large marketing conference in another state. As long as you were going there to spend time looking for a job and not simply taking in the leisurely aspects of the conference, the money you spend on travel and accommodation can be added to a tax return.
Standard mileage rate — According to the IRS, beginning January 1, 2019, the standard mileage rate to calculate the cost of using a car (or van, pickup, or panel truck) for business purposes is 58 cents per mile driven.
3. Employment agency or recruiter fees
Recruiters and employment agencies are hired by companies to find the right people for jobs. Working with them saves you a lot of time and gives you access to more job opportunities. Job roles that recruiters and agencies know about often don’t make it onto job boards or social media, so it makes sense to partner with these guys to get a leg up. The fees that these services cost are deductible, but only if your employer doesn’t reimburse you for the fees. If the employer pays you back in a later year, the IRS states that you must "include the amount received in your gross income, up to the amount of your tax benefit in the earlier year."
If you’re picking up the phone to call potential employers about work or find yourself in lengthy conversations with hiring managers, you’ll be able to get a portion of the cost back. The same goes for online conversations. These expenses can be claimed whether you get the job you’re communicating about or not.
5. Moving expenses
Where you live can hinder your job prospects significantly. For instance, if you have a degree in advertising but live in a small town like Hartly, Delaware, job opportunities in your specialist field are going to be few and far between. You’re probably going to have to move to find work. If you need to relocate to a new town, city, or state for your job, the IRS will reimburse you some of the costs of doing so, providing you meet the following criteria:
- Your new place of employment is 50 miles further away from your home than your previous place of work
- If you’re an employee, you must work a minimum of 39 weeks during the first year of your move
- If you’re self-employed, you must work a minimum of 39 weeks during the first year of your move and a total of 78 weeks in the first two years
Costs you can claim for moving:
- 20 cents per mile driven by car, van, pickup, or panel truck
- Travel costs for flights or public transport
- Lodging expenses
- Packing and shipping costs
- Storage costs for up to 30 days
All good so far, right? The cost of searching for a job isn’t half as bad when you know you can get some of what you spend back. But… (you knew it was coming) there are conditions. Time for those caveats we mentioned.
4 factors to consider before claiming
The IRS was never about to let any jobseeker claim expenses, so it put a few hoops in place for people to jump through.
1. Deductions must exceed 2% of your Adjusted Gross Income (AGI)
This is the biggest caveat of all. You can only deduct job search expenses if they, combined with all other miscellaneous deductions (such as unreimbursed employee expenses, investment fees, and tax preparation fees), are more than 2% of your adjusted gross income. So the higher your income, the higher your expenses must be in order to see any tax benefits. For instance, if your AGI is $50,000, you’ll only be able to deduct job search expenses in excess of $1,000.
2. Your job search must be in the same occupation
If you’re thinking about changing careers, you might need to give up hope on seeing any return from Uncle Sam on your job search. The regulations state that “you may not deduct expenses you incur while looking for a job in a new occupation.” That said, there is some leeway. If you currently work in public relations but want to move into journalism, for example, you’d be able to claim expenses because both occupations fall under communications. If you’re unsure about whether you’d be classed as changing careers, seek advice before making a claim.
3. First-time job seekers don’t count
If you’re fresh out of school or college and looking for your first job, none of the above job search expenses can be claimed. It sucks, but you must be between jobs.
4. No ‘substantial breaks’ allowed
“You cannot deduct your job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one,” says the IRS. But it doesn’t give a timeframe as to what it means by substantial, so you’ll need to take the common sense approach. If you left work years ago to become a stay-at-home parent and have decided to get back on the employment horse, you’ve probably been out of work too long to claim back costs. The idea from the IRS’s point of view is to help people looking to get back into work immediately, so if you’re currently unemployed and like the sound of these deductions, get to searching for a new role as soon as possible.
Claim what you’re owed
Deductible job search expenses are there to encourage you to invest seriously in your job search in the knowledge you can get back a portion of what you spend.
And the IRS will happily give you what you’re owed as long as you make the right claim — just make sure you keep receipts and log every expense you accrue along the way, so if the IRS does show up at your door, you got proof of your spending.
So, go ahead and create those resumes, contact those employers, and look for roles in different states until you find the perfect job.
Disclaimer: This post is for informational purposes for residents of the U.S. only. Before making a claim for job search expenses, you should check Inland Revenue Service documentation and consult a chartered accountant. If you’re reading this from outside of the U.S., you should check with an accountant which tax expenses can be claimed in your country.