Tax Planning Tip for University Graduates, Job Seekers and all Others
YOU CAN DEDUCT THE COST ASSOCIATED WITH FINDING A NEW JOB AND/OR JOB RELOCATION
Do you know that certain amounts spent in finding a new job can be used to reduce the amount of tax you pay (or increase the amount of refund you receive)? Did you change your job in 2017 and/or do you plan to change your job in 2018? If you itemize your deductions (expenses) rather than take the standard deduction, certain expenses incurred in finding a new job and/or relocating within the same company are deductible.
WHAT ARE SOME OF THE JOB RELATED DEDUCTIBLES?
- Expenses incurred in hunting for a job, which include everything from preparing and printing your resume to even travelling to another city for an interview may be deductible, as long as you were not reimbursed for these expenses. Now let’s be practical. Will the IRS allow you to deduct all this money? No, there is a limit. For expenses incurred in finding a new job, the IRS allows you to deduct everything over 2% of your Adjusted Gross Income (AGI). For example, let’s say your AGI is $45,000, then 2% of $45,000 = $900. Now total all that you have spent during the year in finding a new job and if that adds to say $1,900, you will be allowed $1,000 as a deduction if you itemize. This can either reduce the amount of tax you pay or increase the amount of refund you will received. You may be quite surprised how much you have spent in trying to find a new job.
- Point 1 above covers expenses incurred to find a job. What if you found a job, are there any additional expenses that’s deductible after you find a job? Answer: YES; however, there are rules. If you find a new full-time job or your current job requires that you relocate, the IRS rules allow you to deduct those moving expenses providing that the distance between your new job and your former home must be at least 50 miles farther than your previous employer is from that home. For example, if your previous commute to work was ten (10) miles each way, then the distance from your new job location to your old home must be at least 60 miles. In addition to the fifty (50) miles distance test, you are required to work in the new job for at least thirty-nine (39) weeks, and the deduction covers the reasonable expenses you incur to transport your personal effects and household items to your new home. This includes even the cost of renting a storage unit, gas, toll, lodging and much more.
The above tips are summaries of the detailed rules relating to tax deductions for finding a new job and/or job relocation. You should consult an expert for more details. To understand and learn more above this and other deductibles and tax planning measures, please contact us for a free consultation at 703-828-2336 or 571-765-6035.