Preparing to move abroad and getting ready to start the job search overseas? Did you know there are certain tax deductions you can take for job searching? Yes, it’s true – the IRS actually has some perks for those seeking a new job abroad – here are a few things you should know when it comes to expatriate tax preparation!
Deductions to Consider
As you’re probably aware by now, you must file expat tax returns while living overseas – no avoiding taxes when you’re not living in the US! However, there are many credits, deductions and exclusions you can take as an American living abroad – some of those being related to your job-hunting expenses.
First things first, though – the biggest thing to know is that you must look for a new job in the same line of work as your current profession in order to take a tax deduction. If you look for a job in a new occupation, you will not qualify for any deductions. Here are some specific deductions you may take:
- Agency Fees – You are able to deduct employment and outplacement agency fees while looking for a job in your current profession. If for some reason your employer repays you later for employment agency fees, you must include the amount received in your gross income, up to the amount of your tax benefit in the prior year.
- Preparing and Sending Resume – You can deduct the amount you spend preparing and mailing copies of your resume to prospective employers – within your present occupation, of course.
- Travel Expenses – If you end up traveling to look for a new job and the trip was primarily for this purpose, you can deduct your expenses. The amount of time you spend on personal activity not related to your job search compared to the amount of time you spend looking for work is very important when determining whether your expenses qualify. As an American living abroad, you’ll also need to pay close attention to where you travel to seek employment. You’ll want to check with the IRS for specific location qualifications before you book travel by calling (800) 829-3676.
Factors to Know Before Taking Deductions
Being able to take deductions for your job-hunting expenses is definitely a perk, but there are several things you should be aware of as you begin your expatriate tax preparation.
You can’t deduct job search expenses if there was a substantial break between the end of your last job and the time you began looking for a new one. You should always check with the IRS to confirm the length of a break is acceptable before you take the time to calculate these expenses.
When it comes to expatriate tax preparation, you won’t be able to deduct expenses if it’s your first time searching for a job. As mentioned above, you must be looking for another job in your same line of work in order to take these deductions.
The amount of job-hunting expenses you can claim is limited. You’ll want to use Schedule A, Itemized Deductions to determine your deduction amount when you begin your expatriate tax preparation. These expenses are claimed as a miscellaneous itemized deduction and the total of all miscellaneous deductions must be more than two percent of your adjusted gross income (AGI).
For more details about these deductions, you can review IRS Publication 529, Miscellaneous Deductions. Since expat taxes are fairly complicated in nature, it’s also recommended to work with an expat tax professional to determine the exact deductions, credits and exclusions available to you in order to maximize your tax savings!
Need More Help Understanding Job-Hunting Expense Deductions?
We can help! Our team of expat-expert CPAs and IRS Enrolled Agents are here to help you navigate the ins and outs of expat taxation so you can get back to enjoying your amazing adventure abroad. Contact us today!