There are really two kinds of miscellaneous deductions that can be deducted on your itemized schedule: items that are subject to the 2% of AGI limitation, which will be discussed on this article and the ones that are not such as gambling losses, casualty or theft losses, etc.
Miscellaneous Section Subject to the 2% of AGI limitations means that you can only deduct the amount that exceeds 2% of your AGI. For example, if you make $100,000, you can only deduct anything that exceeds $2,000. So if your total miscellaneous expenses is $5,500, you can only deduct expenses $3,500 on your tax return.
These are reported on the following line items of Schedule A:
- Line 21 – report unreimbursed employee expenses
- Line 22 – report tax preparation fees
- Line 23 – report other miscellaneous expenses
Unreimbursed Employee Expenses
You can deduct unreimbursed employee expenses that are paid or incurred during the year, are ordinary and necessary in carrying your profession in your trade or business. For a more detailed items on what you can deduct, please read the article “Unreimbursed Expenses: What Can You Deduct.”
Tax preparation Fees
Tax preparation fees are deductible in the year that you pay them. These fees include the cost you paid a professional preparer such as an enrolled agent or a certified public accountant, the cost of tax preparation software and any associated electronic filing fees, and the cost of tax publications or tax books.
Other Deductible Miscellaneous Expenses
You can deduct reasonably expenses that you incurred for the year if they are used:
- To produce or collect income that must be included in your gross income
- To manage, conserve, or maintain property held for producing such income or
- To determine, contest, pay, or claim a refund on any tax
Examples of DEDUCTIBLE Expenses
- Appraisal fees to determine the amount of a casualty loss or fair market value of a donated property
- Clerical Help and office in connection with your investment and for collecting taxable income
- Credit or debit card convenience fees charged by the card processor for paying your income tax liability
- Depreciation on your home computer used to produce income or manage investments
- Hobby expenses but only up to the amount of your hobby income –
- Investment fees and expenses you paid for managing your investments that produce taxable income
- Legal Expenses that you incur to produce or collect taxable income or you pay in connection to refund of any tax.
- Safe deposit box rent that you used to store taxable income-producing stocks, bonds, or investment-related papers and documents
- Loss on deposits
- Fees to collect interest and dividends
- Repayments of income
Other Miscellaneous Expenses That Are NOT DEDUCTIBLE
- Broker’s commission you paid in connection with your IRA or other investment property
- Adoption expenses – although you may qualify to claim an adoption credit for those expenses.
- Campaign expenses
- Check-writing fees on personal checking account
- club dues
- commuting expenses – the cost of transportation between your home and the place of your main work.
- Fines and penalties – for violating a law such as a traffic ticket, parking tickets, tax penalties, etc.
- Health spa expenses
- Home security system
- Life insurance premiums
- Investment-related seminars – such as attending a convention, conference, seminars, or similar meetings for investment purposes
- Personal Legal expenses such as attorney’s fees paid for custody of children, civil or criminal charges resulting from a personal relationships, damages for personal injury, preparation of a title or will, property claims or property settlement in a divorce.
Source: irs.gov – Pub 17