Job Searching in the Same Line of Work
If you've been looking for a job in the same line of work you're currently in, many of your expenses like phone calls, the costs of preparing and copying your resume, and career counseling are deductible. You don't have to be out of work to have some of your costs qualify as a deductible expense, but only expenses that exceed 2% percent of your income count.
If you have been unemployed during the last year, you'll need to report your unemployment compensation as income.
Also, severance pay, bonuses, 401K and/or other pension distributions may be taxable. Work done as an independent contractor also must be included in your income. For detailed information on what you need to report and how to report it, the IRS web site is an excellent resource.
What You Can't Deduct
You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. You cannot deduct these expenses if:
Deductible Job Search Expenses
The following are allowable job search deductible expenses, summarized from IRS Publication 529:
Employment and Outplacement Agency Fees
You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. However, if, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. Also, If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income.
You can deduct amounts you spend for typing, printing, and mailing copies of a resume to prospective employers if you are looking for a new job in your present occupation.
Travel and Transportation Expenses
If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can deduct the travel expenses if the trip is primarily to look for a new job. Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area.
Local and long distance phone calls to prospective employers are also deductible.
The information in this article is from United States government resources. I presume the governmental information is correct, although I recommend you contact the Internal Revenue Service or seek legal assistance if interpretation of a law is a problem. Most government websites do provide ways for you to ask questions and receive additional, personal assistance. Seek legal assistance, however, if your questions are inadequately answered, if you are uncertain, or if your situation is unusual. This information is not legal advice and is for guidance only.