Jobless on the hunt can find tax breaks

If you're unemployed, you're about to get some breaks.

Tax breaks, that is.

Some unemployed job hunters are eligible for tax deductions related to their search for a new position. And with joblessness hovering around
14 percent statewide and in Las Vegas, those write-offs could be a big deal for tens of thousands of locals.

The breaks also mean more these days than in years past, as the jobless start to push the physical boundaries of their search for a new position.

"People are starting to be a little more open in terms of saying, 'I don't need a job next door, so I'm going to look anywhere I can,' " said Marguerite Janes, a senior associate with Las Vegas accounting and tax-preparation firm Gilmore & Gilmore, CPAs. "People are seeing higher expenses in their job searches as they go farther afield to look for work."

Added John Challenger, chief executive officer of Chicago outplacement consultant Challenger, Gray & Christmas: "Prolonged unemployment has significant implications for one's income tax. In most cases, it is going to lower the burden. Many people will be able to lower the burden even further, for example, if they took continuing education classes to keep their skills fresh, traveled for job interviews or maintained a home office to complete freelance assignments."

Job-search deductions aren't for every­body.

To qualify, you will need to itemize all of your deductions, including mortgage interest, property and sales taxes and job-hunting costs, on the Internal Revenue Service's Schedule A form. If the total falls below the standard individual deduction of $5,700, you cannot file to exclude your job-seeking expenses, or any other Schedule A costs, from your taxable income.

Also, job-hunting expenses fall into a category that includes other miscellaneous business costs, such as tax-preparation fees and investment expenses. Your costs in that category must equal
2 percent or more of your adjusted gross income before you can deduct any of it, though tax preparers say it's fairly easy to reach that threshold these days if your job search extends to other markets.

Nor can you take tax breaks on job-searching if you're a first-time job hunter or if you're looking for work outside your existing field, said Daniel Gerety, a certified public accountant with Gerety & Associates CPAs in Las Vegas. That means if you're a construction worker looking for a position as a craps dealer, you won't be able to write off your job-search costs.

If none of those exceptions applies to you, you will be able to deduct a wide range of expenses.

Start with basic office supplies. Stationery, printer paper, printer ink, envelopes, stamps -- any items you buy to send out cover letters and résumés are fair game for write-offs, Janes noted. Other deductible items include copying costs, file folders, appointment schedulers, computers and fax machines if they apply to your effort to find work.

You can exempt portions of your Internet bill if you're using the access to apply for jobs online, and you can claim breaks on long-distance phone calls related to your job search.

The cost of gasoline required to get you to and from job interviews is deductible, as are plane fares for job interviews in other states. Car rentals, hotel costs and food expenses are also deductible if the trip relates primarily to job hunting. If you land a position that is more than 50 miles from home, you can write off your moving expenses, too.

Consider other business expenses you may be able to write off. If you're still paying dues for membership in a trade group or union, or subscriptions to industry journals, you can claim those fees as deductions.

Education deductions are a little trickier, Janes said.

You can deduct continuing education classes that you take to boost your hiring potential but only if those courses were in your field. If you paid for training outside of your career area in hopes of entering a new sector, you can deduct any student-loan interest, but on a separate part of your tax return.

And if you've had to tap into your 401(k) to cover living expenses, you may be able to avoid some penalties for early withdrawal if you've been jobless long-term, Challenger said.

Experts have a few caveats for job-seekers claiming deductions.

First, if a prospective employer paid for your interview travel expenses or covered your relocation, then you can't claim write-offs for those expenses.

Second, don't even think about writing off expenses related to appearance. Clients often ask Janes if they can write off manicures, shoe shines or business suits they buy for interviews and jobs. Her answer? Nope.

And like any other expenses you're deducting, you'll need proof that you incurred the costs. Track printer paper, stationery or other concrete costs through receipts. Note your car's mileage when you drive to and from interviews, and keep airline boarding passes and credit card statements containing ticket-purchasing details.

Verifying more ambiguous write-offs, such as a portion of your Internet bill, is a little tougher. If you job hunt about half the time you're online, you can claim half of your monthly Internet service bill but keep a dated log of emails and applications to prove that the expense is real and reasonable, Janes suggested.

"The government does realize a lot of people are out of work and looking for work," Janes said. "They want you looking for work, and taking those deductions, but you need to be able to document it, and don't be greedy."

Contact reporter Jennifer Robison at
jrobison@reviewjournal.com or 702-380-4512.