Looking for ways to lower your tax liability? Miscellanous deductions, reported on the Schedule A, provide an opportunity to do so. Miscellaneous deductions are especially helpful for W2 employees. Business owners will usually be able to claim the deductions on their business returns. Just remember that these are itemized deductions, so you have to have more than $6,350 in total itemized deductions if you’re single, and $12,700 if your married to see a benefit.
So what are these “Miscellaneous Deductions”???
The 2-percent limit deductions
Items in this category are reduced by two percent of your adjusted gross income (AGI) before they are deductible. You add up all of the items in this category and subtract 2% of your AGI to find if you can take a deduction. So if you have an AGI of $50,000, you’d have to have more than $1,000 in these 2% deduction category costs to see a benefit.
Here are the 2% category expenses:
- Unreimbursed expenses that you’ve incurred as an employee for your employer such as postage, supplies etc.
- Job search costs for a new job in the same line of work.
- Job tools and uniforms.
- Union dues.
- Work-related travel and transportation.
- The cost for preparing last year’s tax return. This can include tax-prep software and the fee for filing an electronic return.
If you own your own business, these are the expenses that you would be able to deduct on your business tax return.
Other deductions
But then there are deductions that aren’t subject to the 2 percent limit and that wouldn’t go on a business tax return:
- Casualty and theft losses, e.g., damaged or stolen property held for investment, and this may include such property as stocks, bonds and works of art.
- Gambling losses up to the total of gambling winnings.
- Losses from Ponzi-type investment schemes.
You may also want to check out Publication 529, Miscellaneous Deductions, which is available on the IRS website. This is one section of the tax return that can throw up a red flag to the IRS if its not completed appropriately.
For example, it’s a common mistake to think that “work-related travel and transportation” means that commuting costs are deductible. That’s not the case, so don’t try to deduct your gas from weekly commuting or company’s parking expense. However, if you’re searching for work, you may be able to deduct relevant travel costs, if you meet certain conditions.
As you gather your paperwork in preparation for the April 15 deadline, make a list of your expenses so that you can put them in the right categories as you proceed with preparing your tax return.
