There are plenty of rules in the tax code, and it’s easy to break one when filing job-search expenses. Keep these common errors in mind to stay on the right side of Uncle Sam.
The U.S. tax code comprises more than 16,845 pages, according to the U.S. Government Printing Office. By comparison, “War and Peace,” Tolstoy’s hefty masterpiece, is a mere 1,400+ pages and the Bible a scant 1,200 or so. It is easy to see where any layperson could make mistakes when considering what expenses from their job search qualify as tax deductions.
Melissa Labant, a tax expert with the American Institute of Certified Public Accountants, has seen many in her career but said most of the mistakes related to the job search fall into three main categories — travel, personal appearance and relocation.
Travel and meals
The IRS has special rules about how much of the money we spend on meals is tax-deductible, whether the meals are job related or enjoyed on interview day.
“A lot of people think [meals are] 100 percent deductible, but that’s not the case,” she said.
According to the IRS’ page for entertainment expenses you can deduct 50 percent of business-related meal and entertainment expenses, unless you’re subject to the Department of Transportation’s “hours of service” limits — check the entry labeled “Individuals subject to ‘hours of service’ limits” for an explanation of what those limits are. “The 50 percent limit applies to employees or their employers, and to self-employed persons (including independent contractors) or their clients, depending on whether the expenses are reimbursed,” according to the IRS.
Meals you buy while traveling away from home, whether eating alone or with others, are reimbursable at that 50 percent rate. But don’t mix business with pleasure and think you can deduct the whole package, Labant warned.
“People take trips to look for jobs, but it’s more a vacation,” she said. “If they’re vacationing three days and looking for work one day,” that’s not deductible, she said. “The primary purpose has to be to seek a job, not personal recreation.”
As with all job-search expenses, to be considered tax deductible, the job being pursued must be in the same field as your current or most recent occupation.
Manicures, haircuts, clothing. Nice suit. Must have cost you a little cashola, huh? But you’re serious about your job search. You’ll look good in the interview. Besides, you can always deduct it on your tax return, right?
Wrong. Your interview duds are considered a personal expense and hence aren’t deductible, Labant said.
The same goes for other personal-care expenses, such as haircuts and manicures, tax experts said.
Moving expenses are in fact deductible, but the new job has to be at least 50 miles farther from your current home than your old job was, Labant said. For example, if your old job was 10 miles away from where you live, your new job has to be at least 60 miles away. In other words, your commute has to grow by at least 50 miles.
In addition, the moving-expenses deduction generally only pertains if you’re moving to work full time.
Quite a few types of moving expenses qualify, Labant said, including paying someone to pack and move your belongings. Some don’t. For example, once you move, if you fly back to visit your old house for any reason, you can’t deduct your travel. Nor can you deduct part of the purchase price of a new home or the loss you might take on selling your old home. Tax rules also exclude taking a deduction if you lost money on anything having to do with your old home, whether you lost a security deposit on a rental, you broke your lease or you lost money discontinuing membership in a country club.