When you’re in a job search, taxes may be one of the last things you’re thinking about. But at this time, finances can be even more important. In recent months, there have been changes to the tax deductibility of certain job search expenses, so it’s important to learn what’s new, and what issues may affect your tax liability.
In December 2017, Congress passed the Tax Cuts and Jobs Act, which significantly impacted tax deductions, including those related to the job search.
Previously, jobseekers could deduct things like moving expenses if you were relocating for a job transfer, or the investment of working with a résumé writer or a career coach, or the cost of transportation and lodging when traveling as part of your job search. These types of job search expenses were tax deductible, but only if the expenses exceeded 2 percent of your adjusted gross income, and only if you itemized on your tax return.
With the itemized deduction, if your adjusted gross income was $55,000, you could deduct job search expenses if they exceeded $1,100 (2 percent of $55,000).
This has now changed. If you are looking for a new job in 2018 and beyond, you will no longer be able to deduct job search expenses on your tax return.
The 2017 tax law change may also impact your salary negotiations for a new job. If your new job requires you to drive extensively (using your own vehicle) as part of the position, carefully consider the company’s reimbursement policy. With the new tax law, employees will no longer be able to deduct unreimbursed automobile expenses. In 2017 and earlier, these expenses were deductible to the extent they exceeded 2 percent of adjusted gross income, if you itemized on your tax return.
While many deductions have been eliminated for 2018, the standard deduction has significantly increased, from $6,500 to $12,000 for single filers, from $9,550 to $18,000 for head of household filers, and $13,000 to $24,000 for married taxpayers filing jointly. The standard deduction reduces your taxable income by that amount without having to itemize deductions.
Most taxpayers choose to take the standard deduction. While 68.5 percent of taxpayers filed using the standard deduction in 2013 — the most recent year figures are available — that number is expected to rise to almost 90 percent in 2018, according to the nonpartisan Tax Policy Center, because of the larger standard deduction.
In addition, tax rate percentages have changed with the 2017 tax law, and each of the seven tax brackets has decreased by 2-3 percent. Overall, this is expected to reduce tax liability for most people, although jobseekers who incur significant job search expenses will likely not benefit from the tax change, with the loss of the ability to deduct these job search expenses.
The bottom line: Starting in 2018, job search expenses are no longer tax deductible, even if you itemize on your tax return
Note: This information is not intended to provide financial, legal, or tax advice. Consult with a tax accountant for specific guidance.