|Illustration by Billy Frank Alexander|
Whether you were employed or unemployed and looking for a new job in 2012, there are several tax breaks that can be claimed on your income tax return. Jackson Hewitt Tax Service offers job seekers a few commonly overlooked deductions and credits that can increase your refund amount or lessen your tax burden.
"Landing a job can have its tax perks even before you get your first paycheck," explained Mark Steber, chief tax officer at Jackson Hewitt Tax Service Inc.
“If you are continuing your search in 2013, you can still apply your expenses from 2012 to your income tax return now," he continued. "The job search experience is different for everyone. A knowledgeable tax adviser can work with you to accurately claim all the deductions and credits that apply to your situation."
To help you get started, Jackson Hewitt offers a list of job search-related expenses you may be able to claim as itemized deductions on your federal income tax return:
Preparing and sending your resume. You can deduct amounts you spend for preparing and sending copies of your resume to prospective employers, as long as you are looking for a new job in your present occupation. Resumé paper, printing costs, long-distance calls, faxes and postage, are all tax deductible.
Employment agency fees. You can deduct employment / recruitment agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year 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.
Travel expenses. If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area, including meal and lodging expenses. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
Moving expenses. If you secured a new job in 2012, but the position was more than 50 miles from your old job, you may be able to claim the expenses of moving yourself, your family, your pets and your household goods and personal vehicles. Moving expenses are a direct deduction against income on form 1040.
For unemployed job seekers, federal unemployment benefits, job severance payments, and debt forgiveness are considered taxable income. Early withdrawals from your retirement plans are also taxable, even if you use those monies for job search-related expenses. Taxpayers under the age of 59 1/2 will also owe a 10% penalty for early withdrawals, though there are a few exceptions, such as paying for medical insurance after the loss of your job.
These tax tips for job seekers are your Warrendale Tip of the Week.