Have security clearance or job search expenses? Be sure to include them as an itemized deduction when completing your federal income tax return. Security clearance expenses are most applicable to federal contractors overseeing the security clearance applications of their employees, but the costs can apply to any clearance holder and are particularly relevant for 1099 employees.
Q: What security clearance costs are deductible?
Beginning in 2013, security clearance expenses can qualify as a miscellaneous itemized deduction.
Qualifying costs include:
1) Costs associated with preparing applications for security clearances.
2) Maintaining, upgrading, or installing computer systems required to obtain federal security clearances;
3) Training costs incurred during the security clearance application process.
Q: What job search costs are tax deductible?
These are basically laid out in the IRS Publication 529. If you meet the first test for job searching, there are three major deduction categories you can claim.
The expenses you have must be from looking for a new job in your present occupation, even if you do not get a new job. You cannot deduct these expenses if:
1) You are looking for a job in a new occupation,
2) There was a substantial break between the ending of your last job and you are looking for a new one, or
3) You are looking for a job for the first time.
1) Outplacement and Employee Agency Fees: If you pay for job counseling or to have an agency match you with an employment opportunity, this expense is generally deductible. Of course, if you are reimbursed by an employer or anyone else, you cannot deduct these fees. If that is the case, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year.
2) Tangible Expenses: Resume Preparation, Mailing and Related Expense (Paper, envelopes, portfolios, postage, phone calls) can usually be deducted if you have records of each.
3) Travel and Transportation Expenses: Your job search-related travel and transportation expenses may be deductible; but remember, the amount of time you spend searching for a job versus engaging in personal activities is offset.
*All deductions of course subject to the 2% AGI*
Information courtesy Fairfield Hughes, CPAs: FAIRFIELD HUGHES, CPA’s, provides professional tax preparation and consulting services to individuals living and working outside of the US. Our area of concentration and primary expertise is internationally focused. We also provide tax preparation and consulting to local individuals, small & medium sized businesses, and trusts & estates.