A tax deduction reduces the amount of your taxable income and generally reduces the amount of taxes you may have to pay. In general, if you itemize your deductions you already have been taking miscellaneous deductions. However, understanding why you can take some and not others can be complicated. Here are some things you should know about miscellaneous tax deductions:
You can deduct the amount of certain miscellaneous expenses only if they exceed 2 percent of your adjusted gross income. Deductions subject to the 2 percent limit include:
- Unreimbursed employee expenses such as searching for a new job in the same profession, certain work clothes and uniforms, work tools, union dues, and work-related travel and transportation.
- Tax preparation fees.
- Other expenses that you pay to:
- Produce or collect taxable income,
- Manage, conserve, or maintain property held to produce taxable income, or
- Determine, contest, pay, or claim a refund of any tax.
Examples of other expenses include certain investment fees and expenses, some legal fees, hobby expenses that are not more than your hobby income and rental fees for a safe deposit box if it is not used to store jewelry and other personal effects.
Deductions Not Subject to the 2 Percent Limit. The list of deductions not subject to the 2 percent limit of adjusted gross income
- Casualty and theft losses from income-producing property such as damage or theft of stocks, bonds, gold, silver, vacant lots, and works of art.
- Gambling losses up to the amount of gambling winnings.
- Impairment-related work expenses of persons with disabilities.
- Losses from Ponzi-type investment schemes.
Qualified miscellaneous deductions are reported on Schedule A, Itemized Deductions. Keep records of your miscellaneous deductions to make it easier for you to prepare your tax return when the filing season arrives.
There are also many expenses that you cannot deduct such as personal living or family expenses. The professionals in our office can help you minimze your tax liability through deductions. Please call us today.