Tax Tip: Misc. Deductions Can Trim Taxes
Miscellaneous deductions may reduce your tax bill. These may include certain expenses you paid for in your work if you are an employee. You must itemize deductions when you file to claim these costs. Many taxpayers claim the standard deduction, but you might pay less tax if you itemize. According to Mark von Rotz, a tax and advisory services partner with White Nelson Diehl Evans, the most common misc. deductions filers overlook include unreimbursed employee expenses, union dues and tax preparation fees.
Here are some IRS tax tips you should know about misc. deductions:
The Two Percent Limit. You can deduct most miscellaneous costs only if their sum is more than two percent of your adjusted gross income. These include expenses such as:
- Unreimbursed employee expenses.
- Job search costs for a new job in the same line of work.
- Tools for your job.
- Union dues.
- Work-related travel and transportation.
- The cost you paid to prepare your tax return. These fees include the cost you paid for tax preparation software. They also include any fee you paid for e-filing of your return.
Mark also cautioned filers about mistakes commonly made in regard to misc. deductions, in particular when filers are unaware of the limitations associated with the 2% of AGI limitation.
Deductions Not Subject to the Limit. Some deductions are not subject to the two percent limit. They include:
- Certain casualty and theft losses. In most cases, this rule is for damaged or stolen property you held for investment. This may include property such as stocks, bonds and works of art.
- Gambling losses up to the total of your gambling winnings.
- Losses from Ponzi-type investment schemes.
You can’t deduct some expenses. For example, you can’t deduct personal living or family expenses. Claim allowable miscellaneous deductions on Schedule A, Itemized Deductions. For more about this topic see Publication 529, Miscellaneous Deductions. You can get it on IRS.gov/forms at any time.
Mark noted that taxpayers must maintain documentation to support any claim made in regards to these deductions.
IRS Tax Tips provide valuable information throughout the year. IRS.gov offers tax help and info on various topics including common tax scams, taxpayer rights and more.
Additional IRS Resources:
- Tax Topic 508 – Miscellaneous Expenses
- Interactive Tax Assistant tool – Can I Claim My Expenses as Miscellaneous Itemized Deductions on Schedule A (Form 1040)?
IRS YouTube Videos:
- Standard Versus Itemized Deductions – English | Spanish | ASL
- Standard Versus Itemized Deductions – English | Spanish
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