Deducting Job Hunting Expenses

Finding a job can be time-consuming and frustratingly difficult in this economy. On top of that, it can get pretty expensive.

If it's any consolation, some of the costs you incur while searching for a job may be tax deductible. Here's how to determine what expenses qualify:

Sorry, career-changers. While it may seem unfair, the tax rules say you can only deduct expenses to search for a job that's in the same occupation as the last one you had (or the one you still have if you're simply looking for a better deal). If you pass this test, you can potentially deduct the expenses -- after considering some limitations.
So what does this "same occupation rule" really mean? To answer the question, focus on the nature of the work performed rather than more nebulous things like job titles. For example, if your last job was working as a youth minister, getting a associate or senior minister position would be considered staying in the same occupation. But getting a secular job within a nonprofit organization would not, and job hunting expenses would be nondeductible.
Expenses incurred by a seminary student or college graduate seeking first-time employment are generally not deductible because by definition, you're considered to be seeking a new occupation. However, if you did enough ministry work while in school to actually establish an occupation, you could deduct post-graduation expenses to search for another job in the same line of work.

You can also deduct expenses to look for a new job in the same occupation even if you're temporarily working in another field to pay the bills. Unfortunately, many folks are in this situation these days. Say you lost your job as a associate minister and are now working temporarily in a secular position.  You can deduct expenses to look for a associate minister position.  You can deduct expenses to look for full-time work in your existing occupation while you're working part-time or sporadically (including via self-employment) in the same line of work.

Qualified Expenses:

Some common examples of deductible job hunting expenses include employment agency or headhunter fees, travel costs (including 50% of meals while out of town), resume preparation, copying, postage, and long-distance calls (if you actually have to pay extra for them). If you drive locally in connection with your employment search (say for job interviews, appointments with your job counselor, or trips to the job bank), you can deduct the IRS business mileage allowance (55 cents per mile for 2009). In addition to, if you drive out of town for job hunting reasons.
But keep this in mind: Transportation expenses to go out of town (whether by plane, train or automobile) are only deductible if the primary reason for the trip is job hunting. So if you visit your sister in Myrtle Beach for a month and play lots of golf while mixing in some random job searches, please forget about deducting the airfare to and from Myrtle Beach. Personal pleasure must not exceed 25%.

Also forget about claiming that the cost of haircuts, makeovers, gym memberships and new clothes are somehow related to your job search. The IRS won't buy it even though truth and justice may be on your side. Ditto for Internet access, and your regular cellphone and mobile device charges. Even though these things are almost mandatory in today's job search environment, the IRS will say they are nondeductible personal expenses.

Last but not least, you can't deduct expenses that are reimbursed by a prospective employer or a future or past employer.