[credit provider=”Joe Raedle / Getty”]
Let’s just say we’re pretty relieved to see U.S. unemployment figures beginning to trend down.But even if you were among the 200,000 formerly jobless Americans to nab a paycheck at the end of 2011, you’re still facing a pretty complicated tax season this year.
First, we can be grateful there aren’t a ton of new tax provisions to worry about this year.
That being said, we thought we’d take a look at one of the stickier areas the unemployed face when approaching tax season: Itemizing your job hunt.
It’s possible to reduce your taxes by reporting all the expenses incurred trying to score a new job, but that doesn’t mean Uncle Sam is going to make it easy for you. To help break things down a bit, we asked Certified Public Accountant Gail Rosen for her advice.
“The truth is that it is really hard to deduct job hunting expenses because it is a miscellaneous itemized deduction subject to AMT (alternative minimum tax),” Rosen says. “But it does work for some.”
Here are some factors to keep in mind:
-Even if you didn’t land the job, you can still deduct costs associated with searching for one.
-You must be looking for employment in the same business as your last profession.
-Bad news for college grads: Your first job hunting expenses aren’t deductible.
– If you re-enter the job market and have a long break between jobs you cannot deduct expenses of looking for a job.
-Since you’re applying for ‘miscellaneous itemized deductions, you can’t pick the standard deduction option when you go to file.
-In order to see a significant break, you have to have some major expenses.
“Miscellaneous itemized deductions are deductible only to the extent they exceed 2% of your adjusted gross income,” Rosen says. “Therefore, if your job hunting costs are large or you have other significant miscellaneous deductions, you may be able to derive a tax benefit from these expenses. “
What constitutes job expenses?
The cost of resumes, including postage for sending them to prospective employers
Job counseling and referral fees
Employment agency fees
Telephone charges related to seeking new employment
Local as well as out-of-town travel for interviews to the extent they are not reimbursed by the prospective employer
Moving expenses count, but there’s a catch
-You need to have worked 39 weeks during the year after you move
-The distance between your hold home and your new job has to be more than 50 miles further than your previous job
-You can deduct: Cost of moving household goods, travelling expenses and lodging expenses.