Changing Jobs May Create Tax Deductions
by Karl L. Fava, CPA as appeared in the Career Central for the month of February, 1999
Often overlooked is the opportunity to take income tax deductions for expenses associated with changing jobs or moving from one job location. Specifically the Internal Revenue Code has provided that expenses incurred in looking for a new job would be deductible. Additionally, the Code allows deductions for moving expenses when attributable to moves related to ones job, either a new one or an existing one.
Expenses for looking for a new job are deductible business expenses and would be itemized on a Schedule A. For one to have the opportunity to deduct job hunting expenses one must have established themselves in some type of trade or business, profession, or occupation. What this means is that expenses attributable to obtaining someone’s very first job would not be deductible. But, job search expenses incurred after that first job would be deductible if the new job is in the same line of work that the taxpayer established him or herself in. For example someone may have worked at a bank in a financial capacity for a few years and incurred expenses looking for a job in a financial capacity in a manufacturing company. In this case the taxpayer changed industries, but did not change their trade or occupation, i.e. finance, and would therefore have the benefit of deducting expenses incurred in the job change.
Examples of expenses that would be deductible in looking for a new job would be the costs associated with resume preparation, special paper, mailings, long distance telephone calls, subscriptions to employment journals, head-hunter and agency fees, travel, lodging, and meal expenses associated with interviews and networking. Of course these expenses are only deductible up to the point that they are not reimbursed. Therefore, if a prospective employer reimbursed a job applicant for a flight across the country the airfare would not be deductible.
Expenses incurred in moving to a new job location are also tax deductible provided the taxpayer moved at least fifty miles and worked full time in the new locality at least thirty nine weeks within the first twelve months after the move. The thirty nine week test can be waived for a loss of job, a job transfer, or for the convenience of one’s employer. Specific expenses related to the move that would be deductible would be the actual costs of transportation of household goods and personal effects. Additionally, travel and lodging expenses, (but not meals), incurred on the way to the new residence would be deductible. If an automobile is used in the move actual expenses or a standard mileage rate of ten cents per mile can be used.
As with most aspects of your personal tax and financial matters it is always good to consult with a qualified professional before attempting to utilize these strategies on your personal income tax return.
Karl L. Fava, CPA, MBA, is president of Business Financial Consultants, Inc., (BFC), located in Dearborn, Michigan. His firm handles tax and financial matters for businesses and individuals located on five continents. In the United States, BFC has clients in most major cities. Mr. Fava has been providing tax consul since 1983 and spent over ten years with two of the Big Five Firms. BFC’s web site is www.bfcinc.com. Mr. Fava’s email address is: firstname.lastname@example.org.