Many taxpayers are unaware that they may be able to deduct the costs of searching for a job or moving to start work for a new employer. The IRS allows taxpayers to write off their reasonable moving expenses under certain conditions, as well as the necessary expenses involved in searching for employment. However, in order to receive the deductions, taxpayers must meet certain qualifications as to the types of costs they claim and the reasons for their relocation.
Deducting job search expenses – Tax Preparation
The primary qualification for claiming job search expenses is that the costs must be associated with searching for employment in the same line of work that you’ve had in the past. You cannot deduct costs associated with changing careers, job hunting in an entirely different field, or searching for your very first job. If your job hunt is for a job in your previous field, you can write off your mileage costs for travel to job interviews, the cost of printing resumes, the postage for mailing out written applications, and even the travel expenses if you have to attend an interview in another city.
In order to claim job search expenses, you must itemize your deductions on Schedule A. According to the IRS, these costs are classified as “miscellaneous deductions”, which means that your total deduction will be limited to the amount that exceeds two percent of your adjusted gross income (AGI).
Deducting moving expenses – Tax Preparation
In order to claim moving expenses as a tax deduction, you must be relocating for the purpose of employment. You’ll also have to meet two tests: the distance test and the time test. First, your new job must be at least 50 miles farther from your old home than your old home was from your old job. As an example, if you had to drive 15 miles from your old residence to your previous job, your new job must be at least 65 miles away from your old residence to meet the distance test.
Moving expenses must also meet a time test. The time test states that you must work full-time at your new job for at least 39 weeks after the move. If you work for yourself, this period is lengthened to 78 weeks for two years after the move. Because of the time test, you may have to wait until the following tax year to claim the moving expenses. These costs are calculated on Form 3903 “Moving Expenses” and deducted on the front page of Form 1040 as an adjustment to income.
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