Miscellaneous itemized deductions are allowable only to the extent that they exceed 2% of your adjusted gross income (AGI), which is shown on page one of your return, Form 1040, Form 1040NR.
Some miscellaneous expenses are not subject to the 2% floor. For example, impairment related work expenses for disabled employees would not be subject to the floor. Therefore if an employee had to buy certain items out of their own pocket in order to be able to fully function in their role as an employee, those items would not be subject to the 2% floor.
Miscellaneous itemized deductions are captured on Schedule A. Schedule A is broken down into several categories of deductions. Miscellaneous itemized deductions are one of those categories.
Examples
Common miscellaneous itemized deductions include:
1) deductions for interest used in the production of income: For example, interest for money you borrowed to pay an attorney to collect a personal debt
2) unreimbursed employee business expenses: this category includes courses you take to upgrade your job skills, seminars, vocational courses, refresher courses; professional books; work clothes; business travel that is unreimbursed; dues to a professional associations
3) casualty and theft losses: any losses not covered by insurance and subject to a 10% floor
4) gambling losses: to the extent of gambling winnings that you have reported as income on the same return.
5) safe deposit box rent
6) tax preparation fees: You can deduct your tax preparation fee or the cost of your tax preparation software.
7) union dues.
Many people do not have sufficient itemized deductions to reach a level that is higher than their standard deduction. Therefore, they are better off claiming the standard deduction.
Employee business expenses, which are included in miscellaneous itemized deductions, are a hot topic with the IRS as there has been a large amount of tax fraud associated with deductions for employee business expenses. For example, if you are claiming business miles that your employer is reimbursing, that would be tax fraud. Therefore, if you are taking deductions for employee business expenses it is critical to ensure that you have solid documentation for those expenses. Documentation would include a properly filled out mileage log, receipts for meals, travel, parking and tolls, and receipts for work clothing.