With many college and high school graduates still looking for jobs, we thought it would be a good time for a refresher on which expenses are and are not deductible in connection with landing that first post-graduation job.
Job Search Expenses
Expenses incurred by taxpayers when searching for new employment in the same trade or business are deductible as a miscellaneous itemized deduction. Therefore, they are deductible for regular tax purposes and only to the extent they and other miscellaneous itemized deductions exceed 2% of adjusted gross income (AGI). Examples of deductible job search expenses include employment agency fees, resume preparation expenses, and travel and transportation expenses. Additional expenses that may be deductible include employment counseling fees, postage, typing and printing, and advertising.
However, the costs of finding first-time employment are not deductible, since first-time employment by definition cannot be in the taxpayer’s same trade or business. Therefore, recent college and high school graduates seeking first-time employment cannot deduct any of their job search expenses.
Moving Expenses
While the costs of finding first-time employment are not deductible, moving expenses associated with first-time employment are deductible if the time and distance tests are met (see below). Moving expenses (for both foreign and domestic moves) are generally deductible above the line in computing AGI. These expenses include the cost of transporting household goods and personal effects from the former residence to the new residence. This includes the cost to pack and crate, store, and insure household goods and personal effects within any period of 30 days in a row after they were moved from the taxpayer’s old home and before they were delivered to the new home. Moving costs also include the cost of traveling from the former residence to the new residence. (Traveling expenses include lodging, but not meals.) Automobile expenses can be calculated per mile in lieu of actual expenses. For 2012, the standard mileage rate is 23 cents per mile.
In most cases, moving expenses incurred within one year from the date the individual first reports to work at the new location meet the time test. It is not necessary that the individual has a job before moving to a new location, as long as he or she actually goes to work in that location. And in the case of an individual without a former principal place of work (for example, recent high school or college graduates), the distance test is met if the distance between the individual’s former residence and the new principal place of work is at least 50 miles (as long as the distance from the new home to the new job location is not more than the distance from the former home to the new job location).