Lewes CPA
officeProgar & Company, P.A.
Certified Public Accounting services for businesses and individuals
Miscellaneous itemized deductions (MS Word)
Miscellaneous itemized deductions (.pdf)
Miscellaneous itemized deductions
Dear Reader:
You recently asked about the deductibility of your [item]. This is a
type of expense classified as a “miscellaneous itemized deduction.”
It 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 items.
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).
What are miscellaneous itemized deductions?
The following are itemized deductions subject, in total, to the 2%
rule described above:
1. 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.
2. 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.
Please let me know if you would like more information about
deducting employment-related expenses.)
3. 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.
4. 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 deductions.
One final caveat: the deduction for miscellaneous itemized
deductions isn't allowed for purposes of the alternative minimum
tax.