Cliff Beacham CPA | email cliffbeacham@cpa.com | California |  Tel: (949) 813-1349 
Cliff Beacham Tax and Business Consulting Certified Public Accountants
If you have been looking for work, you can, at least deduct certain of your job hunting expenses. You can deduct these expenses: - whether or not you are currently employed, and - whether or not you actually find a job. However, there are some limitations  So where Do I Claim the Deduction for Job Search Expenses? Job hunting expenses are categorized as a “miscellaneous deduction” and should be reported on Schedule A (Itemized Deductions) of Form 1040 This does mean you will have to itemize your deductions in order to deduct your job search expenses And it also means that you can only benefit from this deduction if the sum of your miscellaneous deductions exceeds 2% of your Adjusted Gross Income (AGI). What Kind of Job Hunting Expenses Can I Deduct? Probably, the largest expenses you will incur are: 1) resume costs - ie: the costs of writing and mailing your résumé Nearly all expenses that are related to your résumé are eligible for a deduction. This includes hiring a professional to edit and format your résumé, as well as the cost of paper, printing, and postage 2) fees charged by job placement agencies and career councelling Job placement agencies typically provide career counseling and can help match you with potential employers. The money that you pay these agencies directly is eligible for the deduction 3) travelling to interviews If you are traveling to look for work, then you can deduct your travel expenses. However, you must be careful about combining personal travel with job search travel Keep in mind, this could conceivably be in a different tax year than when you took the deduction For example, suppose you traveled from Los Angeles to New York for a job interview in December 2016, and the company reimbursed you for your travel in 2017. You could likely deduct the cost of travel as a job hunting expense on your 2016 tax return, but you would have to claim the reimbursement as income on your 2017 return New Career? Sorry, the IRS only allows you to deduct job hunting expenses if you are looking for a job in the same line of work as your current occupation You also cannot claim the job hunting expense deduction if you are looking for your first job Finally, you cannot deduct your job search expenses if there is a large gap in between the time you left your previous job and the time you began searching for a new job. The IRS does not clearly specify how long this gap can be — but, for example, if you took a year off work to spend time with your children, you will not qualify for a tax deduction Despite these limitations, the deduction for job hunting expenses is something to keep in mind, both during your job hunt and while preparing your taxes For more information, 1.  Please see Page 5 of IRS Publication 529 (Miscellaneous Deductions) 2.   Call Cliff at (949) 813-1349
Job Search Expenses
Cliff Beacham CPA | email cliffbeacham@cpa.com | California | Tel: (949) 813-1349
Cliff Beacham Tax and Business Consulting Certified Public Accountants
Job Search Expenses
Some hobbies generate income; some may eventually develop into a business The IRS treats hobbies differently from a trade or business. The crux of the matter is that the IRS does not want a taxpayer to be able to write off hobby expenses by calling them trade or businesses expenses So, the first question is whether the activity is a hobby or a trade or business The tax law does not define a “trade or business” but for it to be a trade or business, an activity must have a profit motive and some kind of economic activity So what defines a profit motive –  The IRS uses a list of things to consider whether an activity is for profit      - all of which must be considered together: What is the possibility of profit? Does the taxpayer depend on the activity as a source of income? Is the activity carried out in a businesslike manner? How much time and effort does the taxpayer spend on the activity? Are losses from the activity the result of sources beyond the taxpayer’s control? Has the taxpayer changed business methods in attempts to improve profitability? What is the taxpayer’s expertise in the field? What success has the taxpayer had in similar operations? Will there be a possibility of profit from asset appreciation? Presumption of profit motive: If an activity shows a profit for any 3 or more years during a period of 5 consecutive years then the IRS will presume that a taxpayer has a profit motive Note:  if the activity involves breeding, training, showing or racing horses, the period is 2 out of 7 years Of course, any activity that is reported on a tax return as a business but has had year after year of losses and no gains will probably eventually come under scrutiny by the IRS Tax Treatment of Hobbies - if an activity is deemed to be a hobby, then “hobby loss” rules – apply. Under these rules, any income from the hobby is reported on the face of the tax return, and the expenses are only deductible if a taxpayer itemizes their deductions on Schedule A. In addition, hobby expenses are limited by category as follows: Category 1:  In this category expenses are reported on the appropriate lines of Schedule A as they would be if no hobby activity existed and includes deductions for home mortgage interest, taxes, and casualty losses Category 2:  Most expenses that a business would incur, such as those for advertising, insurance premiums, interest, utilities, wages, etc., belong in this category. They don’t result in an adjustment to the basis of property but only to the extent that gross income from the activity is greater than the deductions under Cat 1 Category 3:  Depreciation and amortization belong in this last category. These deductions are allowed, but only to the extent that the gross income from the activity exceeds the deductions under categories 1 & 2 above. In other words category 3 is not intended to create a loss as a net result Note:  Taxpayers have to claim the amounts in categories (2) and (3) (as miscellaneous deductions on Schedule A) which are subject to the 2% AGI reduction; as a result, they are not deductible for AMT 2.   Call Cliff at (949) 813-1349