Deductions Subject to the 2% Limit in header of articles
Deductions Subject to the 2% Limit
You can claim part of your total job expenses and certain miscellaneous expenses. These expenses must be more than 2% of your adjusted gross income (AGI). Claim these deductions from taxable income on Schedule A.
Usually, these three basic categories fall under the 2% rule:
Employee business expenses
Employee Business Expenses
Your employer might reimburse you for business expenses. If not, you might be able to deduct certain expenses. However, if you're eligible for employer reimbursement but don't put in a claim, you can't deduct the costs.
You can deduct your ordinary and necessary business-related expenses under the 2% rule on Form 1040, Schedule A. However, they must be ordinary and necessary. These include:
An ordinary expense is common and accepted in your field of trade, business, or profession. A necessary expense is helpful and appropriate for your business. An expense doesn't have to be required to be considered necessary.
Job-related expenses you can deduct under the 2% rule include:
Unreimbursed travel, entertainment, and gift expenses
Cost of special work clothes not suitable for everyday wear
To learn more, see Publication 463: Travel, Entertainment, Gift, and Car Expenses or Publication 529: Miscellaneous Deductions at www.irs.gov.
You can deduct tax-advice costs under the 2% rule on Schedule A. These include:
Long distance phone calls to the IRS
However, you'll deduct the cost of tax help for:
Your own business on Schedule C
Rental activity on Schedule E
You should claim the remainder under tax-related expenses on Schedule A. You also might be able to deduct:
Cost of software that tracks deductible expenses
Taxable sales of assets and investments
If you prepare your own taxes, you can deduct these costs:
Tax-planning and tax-preparation manuals
Convenience fees charged if you paid your tax electronically using:
Report these fees on Schedule A, line 23 instead of line 22.
Postage if you file a paper return
You can also deduct these tax-related amounts:
Part of attorney's fee that applies to tax advice
Lawyer's fee for securing you alimony in a divorce
Lawyer’s fee and court-filing fees for court cases against the IRS over a tax issue
To learn more, see Publication 529: Miscellaneous Deductions at www.irs.gov.
You can deduct certain fees and other expenses for managing investments. The investments must produce taxable income. You'll deduct the fees and expenses under the 2% limitation rule.
These include the cost of:
Safe-deposit box rental for storage of taxable securities
Investment books, magazines, and newsletters bought for investment advice
Computer software or online services used in connection with taxable investment activities
Computers used in whole or in part for investment purposes claimed as depreciation
Investment counseling and management
You can't include the cost of attending investment seminars or meetings.
To learn more, see Publication 550: Investment Income and Expenses at www.irs.gov.