There are types of
expenses classified as a "miscellaneous itemized deductions," which
may result in a tax deduction for you if you itemize your deductions, depending
on your adjusted gross income (AGI) and the total of all your miscellaneous
First, you compute
your total of all expenses that fall into the miscellaneous deduction categories.
This amount is deductible as an itemized deduction but only if (and to the
extent) it is greater than 2% of your AGI. Note that since it is an itemized
deduction, it can only be claimed if you itemize your deductions and don't
claim the standard deduction.
Example. Jerry's AGI is $75,000. His miscellaneous itemized
deductions total $2,000. If he itemizes deductions, he can claim a $500
deduction for his miscellaneous items: $2,000 − $1,500 (2% of $75,000).
miscellaneous itemized deductions? The following are itemized deductions
subject, in total, to the 2% rule described above:
Tax return preparation costs. This category includes
the fee to have your tax return prepared as well as other costs related to
determining your taxes, such as appraisal costs or legal fees.
Employment-related expenses of an employee other than
those reimbursed under an arrangement that meets special requirements. If you
incur deductible expenses in connection with your employment, they are
miscellaneous deduction items. These include out-of-pocket expenses for which
you aren't reimbursed by your employer. They also include expenses for which
you are reimbursed or are paid an expense allowance but not under an
arrangement that meets specific requirements. You will have to include the
reimbursements or allowances in income and then separately deduct the expense
as a miscellaneous itemized deduction.
(If the arrangement meets the requirements, the
reimbursement or allowance isn't included in income and the expense isn't
deducted. To meet the requirements the arrangement must require you to give a
detailed account of your expenses to your employer and to return any excess
allowance amounts you received over the expenses incurred.
Investment expenses, and expenses of producing or
collecting taxable income. This category includes investment advisor's fees,
investment publications, and the cost of a safe deposit box.
Hobby expenses. Expenses related to an activity that
is a mere "hobby" (i.e., not a trade or business) are only deductible
up to the extent of your income from the activity. You are taxed on the income
and then only separately deduct the related expenses as miscellaneous itemized
There is one final
caveat. The deduction for miscellaneous itemized deductions isn't allowed for
purposes of the alternative minimum tax.
If you have questions,
please contact us.We would be happy to
assist you with your tax situation.