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How can you get in on those Miscellaneous Expenses for Schedule A?
Jun 15, 2012
Just reading that line on your schedule A may already throw red flags in your mind: "Miscellaneous Expenses."
"Just what in the world is that?" you may ask. No, it's not the cost of miscellaneous things you spend your money on...you know--going to movies, home decor, buying clothes, beef jerky, etc. The expenses the IRS has in mind are clearly defined by IRS code. It's just that they do not get the star power of income and property taxes, mortgage interest, donations, etc.
This lack of starpower is really evident in this first group of miscellaneous expenses because only the amount that exceeds 2% of your adjusted gross income (AGI) is deductible. For example, if your AGI is $10,000, only the amount that exceeds $200 would be deductible (so $525 total expenses would give you a $325 deduction but if the total was just $199, you'd have nothing to deduct).
Anyway, it turns out that these "B-list" expenses are divided into 3 main types: certain unreimbursed employee expenses, tax preparation fees and "other" expenses.
CERTAIN UNREIMBURSED EMPLOYEE EXPENSES
In order for you to be able to deduct these costs, the expense must be:
"Paid or incurred in the tax year
For carrying on your trade or business of being an employee, and
Ordinary and necessary"--IRS
Included on the list are the familiar things like union dues, professional society dues, subscriptions to trade journals related to your profession; home office deduction (make sure you qualify, though), continuing work-related education, job search expenses in your present occupation; excess educator expenses (the amount over the $250 you claim "on the front" of the return), and purchase and upkeep of work uniforms.
Uniforms get a special paragraph because there is some confusion out there about its definition. A uniform must meet the two criteria: it is required to be worn while doing your job AND it can not be suitable for everyday wear. You would not believe the number of people who want to pass off their tennis shoes, "work" jeans and shirts, suits, jewelry--even haircuts! If it has your company's logo, can wear it for Halloween, or you wouldn't go to the movies wearing it--it's probably a uniform, otherwise, don't try to claim it.
In addition to the above, here are a few more that you may not have realized you could deduct--remember, though, that these have to be business related somehow: passport fees for business travel, employer required medical exam fees; depreciating a computer the employer requires you to use for your work (outside salesman or work mostly from home); travel, transportation, meals, entertainment, gifts, and local lodging related to your work and even "laboratory breakage fees" for you mad scientists out there!
TAX PREPARATION FEES
Just as it sounds. Whatever you paid a professional tax preparer for the tax return preparation and tax planning consultations. This also would include the cost of any tax software and publications (for you do-it-yourselfers out there).
OTHER EXPENSES
These generic deductions include expenses you paid to:
"Produce or collect taxable income
Manage, conserve, or maintain property held for producing such income, or
Determine, contest, pay, or claim a refund of any tax"--IRS
So, basically you can deduct expenses you incur in connection with taxable transactions. Some examples of these guys include: appraisal fees for charitable contributions or casualty losses, investment fees and expenses; repayment of social security benefits; legal fees in connection with the production or collection of TAXABLE income (not divorces, DWI's, etc); hobby expenses--but not more than hobby income; and even tax advice fees (so come by for a tax consultation--it could be a deduction to you!)
Some obscure ones include the service fee you pay when paying your federal taxes online with your credit card, loss on deposits in an institution that is bankrupt or insolvent, safe deposit box rental (if you store income producing stuff like stocks, bonds, investment statements, etc--not just jewelry), and your IRA's trustee administrative fees.
MISCELLANEOUS EXPENSES NOT SUBJECT TO 2% FLOOR
Okay, so they don't each get their own line on schedule A, but at least these "B+ list" expenses don't get limited by the pesky 2% floor.
Some of the better known ones are casualty losses on income-producing property, gambling losses (to the extent of your "winnings"), and because of that guy up in the northeast, losses on a Ponzi-type schemes.
Some obscure ones include: amortizable premium on taxable bonds (the extra amount you paid for the bond because you think you can sell it for more than its stated value), federal estate tax on income in respect of a decedent, and impairment-related work expenses (expenses you incur to do your job because of a mental or physical impairment).
WHAT YOU CAN'T DEDUCT
Finally, here's the list of the things IRS says you can't deduct--so don't even think about it. We listed them all for you so that you can't say we didn't warn you:
Adoption expenses.
Broker’s commissions.
Burial or funeral expenses, including the cost of a cemetery lot.
Campaign expenses.
Capital expenses.
Check-writing fees.
Club dues.
Commuting expenses.
Fees and licenses, such as car licenses, marriage
licenses, and dog tags.
Fines and penalties, such as parking tickets.
Health spa expenses.
Hobby losses—but see Hobby expenses, earlier.
Home repairs, insurance, and rent.
Home security system.
Illegal bribes and kickbacks—see Bribes and kickbacks in chapter 11 of Publication 535.
Investment-related seminars.
Life insurance premiums.
Lobbying expenses.
Losses from the sale of your home, furniture, personal car, etc.
Lost or misplaced cash or property.
Lunches with co-workers.
Meals while working late.
Medical expenses as business expenses other than
medical examinations required by your employer. Check-Writing Fees on Personal Account
Personal disability insurance premiums.
Personal legal expenses.
Personal, living, or family expenses.
Political contributions.
Professional accreditation fees.
Professional reputation (expenses to improve).
Relief fund contributions.
Residential telephone line.
Stockholders’ meeting, expenses of attending.
Tax-exempt income, expenses of earning or collecting.
The value of wages never received or lost vacation time.
Travel expenses for another individual.
Voluntary unemployment benefit fund contributions.
Wristwatches.
For an even more in-depth explanation of deductible and nondeductible expenses, please check out Publication 529, Miscellaneous Deductions. Go to the "files" section above and click on the "as seen on our blog" folder for the 2011 version of Publication 529.
Category: Taxes
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