Tax deductions for the unemployed
Job hunters who have been out of work for months and are watching their nest egg fly out the window may actually be able to catch a break in April. Out of-work job hunters can take a whole slew of tax deductions unavailable to the steadily employed.
Most job hunt expenses Tax deductions
Unemployed job-seekers can deduct most of the expenses associated with looking for work that exceed 2 percent of their adjusted gross income. That includes printing, phone calls, career counseling and hiring job agents — even travel expenses if they help get you to an interview. And for those whose lack of work prevents them from being able to pay their taxes, the IRS is even granting a grace period to square up accounts without incurring penalties.
A job is better, but…
Mark Luscombe, a tax analyst at the firm CCH, said:
“There’s no question most people would rather have a job than have to look for tax breaks for being unemployed. But for those facing an extended period of unemployment, they can benefit from knowing the steps to take to lower their tax bill.”
Don’t raise red flags
The tax break is not contingent upon finding work. But, as in all tax dealings, keep all records that pertain to the deduction, and always be scrupulous. Getting too greedy and pushing it too far — say, trying to write off new clothes — will cause the IRS to see red flags.
Rule of thumb
Gordon Ulen, a Massachusetts-based CPA, said a good rule to follow would be to only deduct those things that can only be used as part of the job hunt. Also, since taking deductions requires itemizing your return, Ulen suggested springing for a tax preparer, if possible.
Who doesn’t qualify
To qualify for the deductions, a job-seeker also needs to to looking for work in their established field. Those looking to switch careers midstream better not plan on a break from the federal tax agent. Those looking for their first job also do not qualify. Sorry, recent college grads. Also ineligible are those returning to the workforce after a protracted absence, such as to go to school or to raise a child.