Miscellaneous Itemized Deductions
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
- Tax-related expenses
- Investment-related 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:
- Business gifts
- Local transportation
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:
- Automobile expenses
- Home-office expenses
- 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
- Tax preparation
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
- Tax-preparation software
- E-filing fees
- Convenience fees charged if you paid your tax electronically using:
- American Express
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.
Head of household is a filing status for single or unmarried taxpayers who have maintained a home for a qualifying person, such as a child or relative. This filing status provides a larger standard deduction and more generous tax rates for calculating federal income tax than the Single filing status.
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