Miscellaneous Itemized Deductions
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What are Miscellaneous Itemized Deductions?
Miscellaneous itemized deductions are certain non-business expenses that the tax law allows individual taxpayers to deduct against their income. Most miscellaneous itemized deductions are subject to a 2% adjusted gross income limitation. This means that the taxpayer may only deduct the amount of expenses that exceed 2% of the taxpayer¿s adjusted gross income.
What are Some Examples of Miscellaneous Itemized Deductions Subject to the 2% AGI Limitation?
Some of the more common miscellaneous itemized deductions subject to the 2% AGI limitation include:
1. Union dues;
2. Job searching costs;
3. Education and related expenses;
4. Uniforms and special clothing;
5. Expenses for the production of income; and
6. Expenses connected with the determination of tax.
Unless the taxpayer is self-employed, union fees, initiation fees, and professional dues are deductible subject to the 2% limitation. Self-employed individuals may deduct these expenses as business expenses.
Job Searching Costs
An individual taxpayer may deduct the cost of finding a job in the same profession only. Thus, a recent college graduate trying to find his/her first job or an individual making a career change will not be able to deduct job searching costs. Typical job searching costs include printing and mailing of resume, employment agency fees, and travel and transportation expenses associated with the job search.
Education and related expenses
An individual taxpayer may deduct his/her education expenses if:
- The education maintains or improves a skill required in the taxpayer¿s employment or other trade or business; or
- The education meets the expressed requirements of the employer for the taxpayer to retain his employment relationship, status, or rate of compensation.
Education expenses are not deductible if:
- The education is required to meet the minimum threshold to enter into a trade or profession; or
- The education qualifies the taxpayer for a new trade or business.
Traveling as a form of general education (ex: an architect decides to travel around the world to observe buildings in different countries) is usually not deductible.
Uniforms and Special Clothing
Uniform and special clothing are not deductible unless they meet the following three requirements:
1. The clothing is required as a condition for employment;
2. The clothing is not adaptable for normal everyday use; and
3. The clothing is not actually used by the taxpayer for everyday use.
Even the cost of maintaining these clothing will be deductible, such as dry-cleaning expenses.
Expense for Production of Income
An individual taxpayer is allowed to deduct expenses paid or incurred for the production of income or for the management, conservation, or maintenance of property held for the production of income.
Examples of expenses that fall under this category include:
- Investor expenses such as investment counsel fees, custodian fees, fees for clerical help, office rent, and transfer taxes;
- Expenses paid for a guardian to manage the income producing properties of a minor.
- Certain legal expense paid or incurred in maintaining or recovering income producing property.
Expenses Connected With the Determination of Tax
Expenses incurred to in connection with the determination, collection, and refund of any tax is deductible. These expenses include:
- Tax preparation and planning;
- Legal fees associated with defending against criminal tax evasion charges; and
- Appraisal fees for determining the fair market values of property for tax purposes.
Do I Need an Attorney to Help Me with My Tax Problems?
Tax laws are complex and ever-changing. Although there are various tax preparation softwares on the market that may help you with your tax problems, they cannot provide the same level of service that an experienced and knowledgeable tax attorney can. If you are unsure about the characterization of your expenses or you need someone to represent you before the IRS, a tax attorney can help you.
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Last Modified: 10-24-2011 04:21 PM PDT
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