What are miscellaneous itemized deductions?
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 and Form 1040NR.
The following discusses the miscellaneous expenses not subject to the 2% floor. (As 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 -- captured on Schedule A-- is broken down into several categories of deductions.
With the enactment of the Tax Cuts and Jobs Act of 2017, many of the following Schedule A itemized deductions will disappear, beginning with the 2018 tax year.
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. This deduction was eliminated by the Tax Cuts and Jobs Act of 2017, starting in 2018 and expiring 2025.
3) casualty and theft losses: any losses not covered by insurance and subject to a 10% floor. This deduction is retained for tax years 2018 through 2025 but only for losses incurred in a federally declared disaster area.
4) gambling losses: to the extent of gambling winnings that you have reported as income on the same return. This was slightly modified for tax years 2018 through 2025.
5) safe deposit box rent. This deduction is gone for 2018 through 2025.
6) tax preparation fees: You can deduct your tax preparation fee or the cost of your tax preparation software, electronic filing fees and tax publications. These expenses are no longer deductible for tax years 2018-2025.
7) union dues. These are no longer deductible for 2018 through 2025.
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.