Tax Tips & Calculators

If you itemize deductions, don't forget to claim miscellaneous expenses on Schedule A. These are broken down into 2 categories:

1. expenses that are subject to the 2% of AGI limit
2. expenses that are not subject to the 2% limit

Expenses Subject to the 2% AGI Limit

Most miscellaneous deductions fall under this category. To figure out how much you can deduct, calculate 2% of your AGI and subtract that from the amount of eligible miscellaneous expenses. For example, if your AGI is $45,000, 2% of that is $900. If you have $1,100 in miscellaneous expenses, you can only deduct $200 of that amount ($1,100 - $900 = $200). Qualified expenses can be broken down into 3 groups: unreimbursed business expenses, tax preparation fees and "other" expenses. Some common deductions subject to the 2% AGI limit are:

• employee business expenses, including subscriptions to magazines or trade journals related to your work, education expenses for maintaining or improving your job skills, small tools, union dues and expenses and uniforms and other work clothing not suitable for street wear
• travel, transportation, meals and entertainment expenses related to service you perform as an employee
• hobby expenses, not exceeding income you receive from the hobby
• legal fees related to the production of taxable income
• tax advice and preparation fees
• expenses related to the production of taxable investment income, such as interest and dividends

Be sure to start adding such expenses in November to see how close you are to the threshold. If you're going to fall short, hold off paying qualifying expenses, such as professional dues and the cost of subscriptions to tax or investment publications, or postpone buying small tools for use in your job until January. If it's likely your expenses will exceed 2% of your AGI, increase such spending to take advantage of the tax subsidy for the year.

Expenses Not Subject to the 2% AGI Limit

You can claim all miscellaneous deductions that fall under this category. Here are a few examples:

• gambling losses up to the amount of your winnings
• unrecovered investment in a pension when the recipient died before recovering his or her investment
• job-related expenses for handicapped persons, such as an aide
• casualty and theft losses from income-producing property
• repayments of amounts you previously were required to include in your income in a prior year, if the amount repaid exceeds $3,000

For a full list of miscellaneous deductions, see IRS Publication 529. Also, keep in mind that miscellaneous expenses subject to the 2% of AGI limit are not deductible when calculating AMT.