Many of us wonder, as we prepare our taxes, whether or not some of our expenses are deductible. A tax deduction offers you the chance to offset some of your income, reducing your taxable income and what you owe in taxes. However, some tax deductions are harder to categorize than others.
As you fill out your tax form, especially if you itemize using Schedule A, it is possible for you to take deductions for expenses that are considered “miscellaneous.” Some of these expenses can be taken, no matter how big or small. Other expenses, though, are subject to the 2% rule. There are some miscellaneous deductions that you can only take if they exceed 2% of your adjusted gross income.
Miscellaneous Deductions You Can Take for Any Amount
There are some deductions that you can take, even if they don’t amount to more than 2% of your AGI. These tax-deductible expenses include :
- Federal estate tax
- Bond premiums
- Ending of an annuity
- Expenses related to handicapped individuals, and caring for them
- Gambling losses – but only up to the amount of your gambling earnings
It’s important, though, to have very good records related to the expenses you plan to deduct. You should have receipts when possible. Keep good records of what you have spent, including dates. You will need this information if you are audited. Being able to back up your deductions is an important part of claiming miscellaneous expenses.
Deductions You Can Take Only if They Exceed 2% of Your AGI
The other class of miscellaneous deductions can only be taken if you spend more than 2% of your adjusted gross income on them. A lot of these expenses are fees. Legal fees, appraisal fees, and tax preparation fees are all tax-deductible – as long as you spend at least 2% of you AGI on each item.
You can also deduct fees related to your efforts to improve your employ-ability, and your ability to make money. If you pay for education that can help you improve your job skills, including seminars, certifications and other educational costs, you can deduct them if your expenses exceed 2% of your AGI. Job hunt expenses are also tax-deductible under these rules, so long as you are searching for a job in the same field as your current job.
When you pay for the cost of investing, you can deduct those expenses. You can also deduct expenses related to storing bonds in a safe deposit box. But, these are expenses that you can’t deduct unless you spent at least 2% of your AGI.
You can also deduct work-related expenses that you haven’t been reimbursed for. If you have paid for the tools related to your trade, subscriptions to industry publications, union dues, cell phone costs, and other job expenses, and you spent more than 2% of your AGI, you can deduct those items as miscellaneous expenses.
If you are in doubt about whether or not something qualifies as a miscellaneous tax deduction, it’s a good idea to consult with a tax professional to ensure that you are taking only the deductions you are entitled to.