Facts: Taxpayer Adams is an accountant employed at a firm located in Boston. Adams decides to leave this position and seek employment as an accountant with another firm. Accordingly, Adams pays a fee to an employment agency to help secure a new position. In addition, Adams incurs transportation expenses to attend interviews in the Boston area and traveling expenses to attend interviews outside Massachusetts. Adams property deducts the transportation expenses and traveling expenses on the federal Form 2106 for employee business expenses. He also deducts the fee paid the employment agency on his federal Form 1040 (Schedule A).

Issue 1: To what extent may Adams deduct these expenses incurred in connection with job-seeking activities on his Massachusetts return?

Discussion: Federal law allows a taxpayer-employee to deduct from gross income expenses incurred in connection with the taxpayer's trade or business. I.R.C. § 62(2). An employee's trade or business is the performance of services as an employee separate and apart from the performance of services for his employer. See Rev. Rul. 77-16, 1977-1 C.B. 37. Consequently, expenses incurred in seeking new employment in the employee's present line of work qualify as deductible expenses. I.R.C. § 162.

Transportation expenses incurred while seeking new employment in the same line of work are deductible from gross income if they are ordinary and necessary and directly connected to the taxpayer's present line of work. I.R.C. §§ 62(2), 162(a). Similarly, traveling expenses incurred while seeking new employment, including expenses for meals and lodgings, are deductible from a taxpayer's gross income if they are incurred while away from home, ordinary and necessary, and directly connected to the taxpayer's present line of work. I.R.C. §§ 62(2), 162( a)(2). All other job-seeking expenses are claimed as itemized deductions to reduce adjusted gross income.

Massachusetts law adopts the trade or business deductions permitted under section 62 of the Code, with certain exceptions. G.L. c. 62, § 2(d). Consequently, the job-seeking expenses deductible under Massachusetts law are transportation expenses and traveling expenses incurred while away from home. Those job-seeking expenses claimed as itemized deductions on a taxpayer's federal return are not allowed under Massachusetts law.

Directive: Taxpayer Adams may deduct the transportation expenses and the traveling expenses incurred to attend the interviews on his Massachusetts return to the extent allowed on his federal Form 2106. Taxpayer Adams may not deduct the fee paid the employment agency.

Reference: G.L. c. 62, § 2(d); I.R.C. §§ 62(2), 162(a); Rev. Rul. 77-16, 1977-1 C.B. 37.

/s/Ira A. Jackson
Ira A. Jackson
Commissioner of Revenue

12 June 1986

DOR-D 86-14

This Directive represents the official position of the Department of Revenue on the application of the law to the facts as stated. The Department and its personnel will follow this Directive, and taxpayers may rely upon it, unless it is revoked or modified pursuant to 830 CMR § 62C.01(5)(e). In applying this Directive, however, the effect of subsequent legislation, regulations, court decisions, Directives, and TIRs must be considered, and Department personnel and taxpayers may rely upon this Directive only if the facts, circumstances and issues presented in other cases are substantially the same as those set forth in this Directive.