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Credit or debit card convenience fees paid. If you pay your income tax (including estimated tax payments) by credit or debit card, you can deduct the convenience fee charged by the card processor. See Credit or Debit Card Convenience Fees later.
Limit on itemized deductions. For 2009, if your adjusted gross income is more than $166,800 ($83,400 if you are married filing separately), you may have to reduce the amount of certain itemized deductions, including most miscellaneous deductions. For more information and a worksheet, see the instructions for Schedule A (Form 1040), line 29, or Schedule A (Form 1040NR), line 17.
Losses from Ponzi-type investments. Special rules apply to theft losses from Ponzi-type investment arrangements. See Form 4684 and Instructions for more information.
Standard mileage rate. The 2009 rate for business use of a vehicle is 55 cents per mile.
This publication explains which expenses you can claim as miscellaneous itemized deductions on Schedule A (Form 1040 or Form 1040NR). You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. This publication covers the following topics.
Some of the deductions previously discussed in this publication are adjustments to income rather than miscellaneous deductions. These include certain employee business expenses that must be listed on Form 2106 or Form 2106-EZ and some that are entered directly on Form 1040. Those deductions, which are discussed in Publication 463, Travel, Entertainment, Gift, and Car Expenses, include employee business expenses of officials paid on a fee basis and performing artists.
Generally, nonresident aliens are allowed miscellaneous itemized deductions to the extent they are directly related to effectively connected income.
You must keep records to verify your deductions. You should keep receipts, canceled checks, substitute checks, financial account statements, and other documentary evidence. For more information on recordkeeping, see Publication 552, Recordkeeping for Individuals.See How To Get Tax Help near the end of this publication for information about getting these publications and forms.
You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040 or Form 1040NR). You can claim the amount of expenses that is more than 2% of your adjusted gross income. You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. Your adjusted gross income is the amount on Form 1040, line 38, or Form 1040NR, line 36.
Generally, you apply the 2% limit after you apply any other deduction limit. For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed later under Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging) before you apply the 2% limit.
Deductions subject to the 2% limit are discussed in the following three categories.
Generally, the following expenses are deducted on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 9.
You can deduct only unreimbursed employee expenses that are:
An expense is ordinary if it is common and accepted in your trade, business, or profession. An expense is necessary if it is appropriate and helpful to your business. An expense does not have to be required to be considered necessary.
You may be able to deduct the following items as unreimbursed employee expenses.
A business bad debt is a loss from a debt created or acquired in your trade or business. Any other worthless debt is a business bad debt only if there is a very close relationship between the debt and your trade or business when the debt becomes worthless.
A debt has a very close relationship to your trade or business of being an employee if your main motive for incurring the debt is a business reason.
You make a bona fide loan to the corporation you work for. It fails to pay you back. You had to make the loan in order to keep your job. You have a business bad debt as an employee.
You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job.
If you break an employment contract, you can deduct damages you pay your former employer if the damages are attributable to the pay you received from that employer.
You can claim a depreciation deduction for a computer or cell phone that you use in your work as an employee if its use is:
This means that your use of the computer or cell phone is for a substantial business reason of your employer. You must consider all facts in making this determination. Use of your computer or cell phone during your regular working hours to carry on your employer's business is generally for the convenience of your employer.
This means that you cannot properly perform your duties without the computer or cell phone. Whether you can properly perform your duties without it depends on all the facts and circumstances. It is not necessary that your employer explicitly requires you to use your computer or cell phone. But neither is it enough that your employer merely states that your use of the item is a condition of your employment.
You are an engineer with an engineering firm. You occasionally take work home at night rather than work late at the office. You own and use a computer that is similar to the one you use at the office to complete your work at home. Since your use of the computer is not for the convenience of your employer and is not required as a condition of your employment, you cannot claim a depreciation deduction for it.
The depreciation method you use depends on whether you meet the more-than-50%-use test.
You meet this test if you use the computer or cell phone more than 50% in your work. If you meet this test, you can claim accelerated depreciation under the General Depreciation System (GDS). In addition, you may be able to take the section 179 deduction for the year you place the item in service.
If you do not meet the more-than-50%-use test, you are limited to the straight line method of depreciation under the Alternative Depreciation System (ADS). You also cannot claim the section 179 deduction. (But if you use your computer in a home office, see the exception below.)
Your use of a computer or cell phone in connection with investments (described later under Other Expenses) does not count as use in your work. However, you can combine your investment use with your work use in figuring your depreciation deduction.
The more-than-50%-use test does not apply to a computer used only in a part of your home that meets the requirements described later under Home Office. You can claim accelerated depreciation using GDS for a computer used in a qualifying home office, even if you do not use it more than 50% in your work. You also may be able to take a section 179 deduction for the year you place the computer in service. See Computer used in a home office under How To Report, later.
See How To Report, later, for information about reporting a deduction for depreciation. You must keep records to prove your percentage of business and investment use.
You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. Similar organizations include:
You may not be able to deduct that part of your dues that is for certain lobbying and political activities. See Lobbying Expenses under Nondeductible Expenses, later.
If you were an eligible educator in 2009, you can deduct up to $250 of qualified expenses you paid in 2009 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. If you file Form 1040A, you can deduct these expenses on line 16. If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. However, neither spouse can deduct more than $250 of his or her qualified expenses.
An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year.
Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. An ordinary expense is one that is common and accepted in your educational field. A necessary expense is one that is helpful and appropriate for your profession as an educator. An expense does not have to be required to be considered necessary. Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. You must reduce your qualified expenses by the following amounts.
If you were an educator in 2009 and you had qualified expenses that you cannot take as an adjustment to gross income, you can deduct the rest as an itemized deduction subject to the 2% limit.
If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home.
You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively:
The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job.
If you have more than one place of business, the business part of your home is your principal place of business if:
Otherwise, the location of your principal place of business generally depends on the relative importance of the activities performed at each location and the time spent at each location. You should keep records that will give the information needed to figure the deduction according to these rules. Also keep canceled checks, substitute checks, or account statements and receipts of the expenses paid to prove the deductions you claim.
You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. You cannot deduct these expenses if:
You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation.
If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income.
You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation.
You can deduct legal fees related to doing or keeping your job.
You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession.
You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return.
An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment.
If you are a college professor, you can deduct your research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. However, you cannot deduct the cost of travel as a form of education.
If your expenses to use a vehicle in performing services as a rural mail carrier are more than the amount of your reimbursements, you can deduct the unreimbursed expenses. See chapter 4 of Publication 463 for more information.
Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. You can depreciate the cost of tools that have a useful life substantially beyond the tax year. For more information about depreciation, see Publication 946.
If you are an employee and have ordinary and necessary business-related expenses for travel away from home, local transportation, entertainment, and gifts, you may be able to deduct these expenses. Generally, you must file Form 2106 or Form 2106-EZ to claim these expenses.
Travel expenses are those incurred while traveling away from home for your employer. You can deduct travel expenses paid or incurred in connection with a temporary work assignment. Generally, you cannot deduct travel expenses paid or incurred in connection with an indefinite work assignment. Travel expenses may include:
If your assignment or job away from home in a single location is realistically expected to last (and does in fact last) for 1 year or less, it is temporary, unless there are facts and circumstances that indicate it is not.
If your assignment or job away from home in a single location is realistically expected to last for 1 year or less, but at some later date it is realistically expected to exceed 1 year, it will be treated as temporary (in the absence of facts and circumstances indicating otherwise) until the date that your realistic expectation changes, and it will be treated as indefinite after that date.
If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the 1-year rule for deducting temporary travel expenses. This means that you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year. To qualify, the Attorney General must certify that you are traveling:
Local transportation expenses are the expenses of getting from one workplace to another when you are not traveling away from home. They include the cost of transportation by air, rail, bus, taxi, and the cost of using your car. You can choose to use the standard mileage rate to figure your car expenses. The 2009 rate for business use of a vehicle is 55 cents per mile. In general, the costs of commuting between your residence and your place of business are nondeductible.
If you work at two places in a day, whether or not for the same employer, you can generally deduct the expenses of getting from one workplace to the other.
You can deduct expenses incurred in going between your home and a temporary work location if at least one of the following applies.
You can deduct expenses incurred in going between your home and a workplace if your home is your principal place of business for the same trade or business. (In this situation, whether the other workplace is temporary or regular and its distance from your home do not matter.) See Home Office, earlier, for a discussion on the use of your home as your principal place of business.
Generally, you can deduct entertainment expenses (including entertainment-related meals) only if they are directly related to the active conduct of your trade or business. However, the expense only needs to be associated with the active conduct of your trade or business if it directly precedes or follows a substantial and bona fide business-related discussion. You can deduct only 50% of your business-related meal and entertainment expenses unless the expenses meet certain exceptions. You apply this 50% limit before you apply the 2%-of-adjusted-gross-income limit.
You can deduct 80% of your business-related meal expenses if you consume the meals during or incident to any period subject to the Department of Transportation's “hours of service” limits. You apply this 80% limit before you apply the 2%-of-adjusted-gross-income limit.
You can generally deduct up to $25 of business gifts you give to any one individual during the year. The following items do not count toward the $25 limit.
You can deduct dues and initiation fees you pay for union membership.
You can also deduct assessments for benefit payments to unemployed union members. However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. Also, you cannot deduct contributions to a pension fund even if the union requires you to make the contributions.
You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. See Lobbying Expenses under Nondeductible Expenses, later.
You can deduct the cost and upkeep of work clothes if the following two requirements are met.
Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc.).
Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear.
However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible.
You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers.
You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. If you are a student at an armed forces academy, you cannot deduct the cost of your uniforms if they replace regular clothing. However, you can deduct the cost of insignia, shoulder boards, and related items. You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school.
You can deduct expenses you have for education, even if the education may lead to a degree, if the education meets at least one of the following two tests.
You cannot deduct expenses you have for education, even though one or both of the preceding tests are met, if the education:
If your education qualifies, you can deduct expenses for tuition, books, supplies, laboratory fees, and similar items, and certain transportation costs.
If the education qualifies you for a new trade or business, you cannot deduct the educational expenses even if you do not intend to enter that trade or business.
You cannot deduct the cost of travel that in itself constitutes a form of education. For example, a French teacher who travels to France to maintain general familiarity with the French language and culture cannot deduct the cost of the trip as an educational expense.
You can usually deduct tax preparation fees in the year you pay them. Thus, on your 2009 return, you can deduct fees paid in 2009 for preparing your 2008 return. These fees include the cost of tax preparation software programs and tax publications. They also include any fee you paid for electronic filing of your return. See Tax preparation fees under How To Report, later.
You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2%-of-adjusted-gross-
income limit. On Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 11, you can deduct expenses that you pay:
You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonable and closely related to these purposes.
These other expenses include the following items.
If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses, later, under Nondeductible Expenses.
You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property.
You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. First report the loss in Section B of Form 4684, Casualties and Thefts. You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 36 and 42b, or Form 4797, line 18a. For more information on casualty and theft losses, see Publication 547, Casualties, Disasters, and Thefts.
You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them.
You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. The fees are deductible in the year paid. For example, fees charged to payments made in 2009 can be claimed on the 2009 tax return.
You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. But if you work as an employee and also use the computer in that work, see Depreciation on Computers or Cell Phones under Unreimbursed Employee Expenses, earlier. For more information on depreciation, see Publication 946.
If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators.
You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. You must add the fee to the cost of the property.
You cannot deduct the fee you pay to a broker to sell securities. You can use the fee only to figure gain or loss from the sale. See the instructions for columns (d) and (e) of Schedule D (Form 1040) for information on how to report the fee.
You can generally deduct hobby expenses, but only up to the amount of hobby income. A hobby is not a business because it is not carried on to make a profit. See Not-for-Profit Activities in chapter 1 of Publication 535.
Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. Deductions of pass-through entities are passed through to the partners or shareholders. The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit.
You are a member of an investment club that is formed solely to invest in securities. The club is treated as a partnership. The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income.
Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. A mutual fund is “publicly offered” if it is:
You should receive information returns from pass-through entities.
You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income.
You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax.
You can also deduct legal expenses that are:
You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F) on the appropriate schedule. You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040 or Form 1040NR). See Tax Preparation Fees, earlier.
If you can reasonably estimate the amount of your loss on money you have on deposit in a financial institution that becomes insolvent or bankrupt, you can generally choose to deduct it in the current year even though its exact amount has not been finally determined. Once you make this choice, you cannot change it without IRS approval.
If none of the deposit is federally insured, you can deduct the loss in either of the following ways.
If any part of the deposit is federally insured, you can deduct the loss only as a casualty loss.
If you have a loss on your traditional IRA (or Roth IRA) investment, you can deduct the loss as a miscellaneous itemized deduction subject to the 2% limit, but only when all the amounts in all your traditional IRA (or Roth IRA) accounts have been distributed to you and the total distributions are less than your unrecovered basis. For more information, see Publication 590, Individual Retirement Arrangements (IRAs).
If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later.
If the total of the amounts in box 5 (net benefits for 2009) of all your Forms SSA-1099, Social Security Benefit Statement, and Forms RRB-1099, Payments By the Railroad Retirement Board, is a negative figure (a figure in parentheses), you may be able to take a miscellaneous itemized deduction subject to the 2% limit. The amount you can deduct is the part of the negative figure that represents an amount you included in gross income in an earlier year.
The amount in box 5 of Form SSA-1099 or RRB-1099 is the net amount of your benefits for the year. It will be a negative figure if the amount of benefits you repaid in 2009 (box 4) is more than the gross amount of benefits paid to you in 2009 (box 3).
If the deduction is more than $3,000, you will have to use a special computation to figure your tax. See Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for additional information.You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities.
You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. These service charges include payments for:
Trustee's administrative fees that are billed separately and paid by you in connection with your IRA are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit.
You can deduct the items listed below as miscellaneous itemized deductions. They are not subject to the 2% limit. Report these items on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 16.
In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. You can elect to amortize the premium on taxable bonds. The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item.
Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988.
The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you chose to treat it as an offset to interest income on the bond.
The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2% limit.
On certain bonds (such as bonds that pay a variable rate of interest or that provide for an interest-free period), the amount of bond premium allocable to a period may exceed the amount of stated interest allocable to the period. If this occurs, treat the excess as a miscellaneous itemized deduction that is not subject to the 2% limit. However, the amount deductible is limited to the amount by which your total interest inclusions on the bond in prior periods exceed the total amount you treated as a bond premium deduction on the bond in prior periods. If any of the excess bond premium cannot be deducted because of the limit, this amount is carried forward to the next period and is treated as bond premium allocable to that period. Pre-1998 choice to amortize bond premium. If you made the choice to amortize the premium on taxable bonds before 1998, you can deduct the bond premium amortization that is more than your interest income only for bonds acquired during 1998 and later years.
You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). First report the loss in Section B of Form 4684. You may also have to include the loss on Form 4797 if you are otherwise required to file that form. To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 36 and 42b, or Form 4797, line 18a. For more information on casualty and theft losses, see Publication 547.
You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. See Publication 559 for information about figuring the amount of this deduction.
You must report the full amount of your gambling winnings for the year on Form 1040, line 21. You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. You cannot deduct gambling losses that are more than your winnings. Generally, nonresident aliens cannot deduct gambling losses on Schedule A (Form 1040NR).
You cannot reduce your gambling winnings by your gambling losses and report the difference. You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Therefore, your records should show your winnings separately from your losses. Diary of winnings and losses. You must keep an accurate diary or similar record of your losses and winnings. Your diary should contain at least the following information.Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records.
A record of the machine number and all winnings by date and time the machine was played.
The number of the table at which you were playing. Casino credit card data indicating whether the credit was issued in the pit or at the cashier's cage.
A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets. Supplemental records include any receipts from the casino, parlor, etc.
A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Supplemental records include unredeemed tickets and payment records from the racetrack.
A record of ticket purchases, dates, winnings, and losses. Supplemental records include unredeemed tickets, payment slips, and winnings statements.
If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses.
Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and other expenses in connection with your place of work that are necessary for you to be able to work.
You are blind. You must use a reader to do your work. You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. The reader's services are only for your work. You can deduct your expenses for the reader as impairment-related work expenses.
See Impairment-related work expenses, later under How To Report.
If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 16 (only if effectively connected with a U.S. trade or business). It is not subject to the passive activity limitations.
If you are a fee-basis official, you can claim your expenses in performing services in that job as an adjustment to income rather than as a miscellaneous itemized deduction. See Publication 463 for more information.
If you are a qualified performing artist, you can deduct your employee business expenses as an adjustment to income rather than as a miscellaneous itemized deduction. If you are an employee, complete Form 2106 or Form 2106-EZ. See Publication 463 for more information.
If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid, or take a credit against your tax. See Repayments in Publication 525 for more information.
A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. See Publication 575, Pension and Annuity Income, for more information about the tax treatment of pensions and annuities.
You cannot deduct the following expenses.
You cannot deduct the expenses of adopting a child but you may be able to take a credit for those expenses. For details, see Form 8839, Qualified Adoption Expenses.
You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. These include qualification and registration fees for primary elections.
You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign.
You cannot currently deduct amounts paid to buy property that has a useful life substantially beyond the tax year or amounts paid to increase the value or prolong the life of property. If you use such property in your work, you may be able to take a depreciation deduction. See Publication 946. If the property is a car used in your work, also see Publication 463.
If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest.
Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs.
You cannot deduct dues paid to an organization if one of its main purposes is to:
Dues paid to airline, hotel, and luncheon clubs are not deductible.
You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). If you haul tools, instruments, or other items in your car to and from work, you can deduct only the additional cost of hauling the items, such as the rent on a trailer to carry the items.
You cannot deduct fines or penalties you pay to a governmental unit for violating a law. This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike.
You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer.
You cannot deduct the cost of a home security system as a miscellaneous deduction. However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. See Home Office under Unreimbursed Employee Expenses, earlier, and Publication 587.
You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes.
You cannot deduct premiums you pay on your life insurance. You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. See Publication 504, Divorced or Separated Individuals, for information on alimony.
You generally cannot deduct amounts paid or incurred for lobbying expenses. These include expenses to:
Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities.
A covered executive branch official, for the purpose of (4) above, is any of the following officials.
If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part.
You can deduct certain lobbying expenses if they are ordinary and necessary expenses of carrying on your trade or business.
You cannot deduct a loss based on the mere disappearance of money or property. However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. See Publication 547.
A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. The diamond falls from the ring and is never found. The loss of the diamond is a casualty.
You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. See Publication 463 for information on deductible expenses while traveling away from home.
You cannot deduct the cost of meals while working late. However, you may be able to claim a deduction if the cost of the meals is a deductible entertainment expense, or if you are traveling away from home. See Publication 463 for information on deductible entertainment expenses and expenses while traveling away from home.
You cannot deduct personal legal expenses such as those for the following.
You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property.
You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible.
You cannot deduct professional accreditation fees such as the following.
You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation.
You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job.
You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business.
You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments.
You cannot deduct expenses to produce tax-exempt income. You cannot deduct interest on a debt incurred or continued to buy or carry tax-exempt securities.
If you have expenses to produce both taxable and tax-exempt income, but you cannot identify the expenses that produce each type of income, you must divide the expenses based on the amount of each type of income to determine the amount that you can deduct.
During the year, you received taxable interest of $4,800 and tax-exempt interest of $1,200. In earning this income, you had total expenses of $500 during the year. You cannot identify the amount of each expense item that is for each income item. Therefore, 80% ($4,800/$6,000) of the expense is for the taxable interest and 20% ($1,200/$6,000) is for the tax-exempt interest. You can deduct, subject to the 2% limit, expenses of $400 (80% of $500).
You generally cannot deduct travel expenses you pay or incur for a spouse, dependent, or other individual who accompanies you (or your employee) on personal or business travel. See Publication 463 for more information on deductible travel expenses.
You cannot deduct voluntary unemployment benefit fund contributions you make to a union fund or a private fund. However, you can deduct contributions as taxes if state law requires you to make them to a state unemployment fund that covers you for the loss of wages from unemployment caused by business conditions.
You cannot deduct the cost of a wristwatch, even if there is a job requirement that you know the correct time to properly perform your duties.
You must itemize deductions on Schedule A (Form 1040 or Form 1040NR) to claim miscellaneous deductions.
See Instructions for Schedule A in your Form 1040 or Form 1040NR instruction booklet for more information.
Debra Smith is employed as a salesperson. She is not a statutory employee. Her adjusted gross income is $40,000, and she did not receive any reimbursement for her expenses. She has the following qualifying miscellaneous deductions:
| Entertainment expenses | $ | 500 | ||
| Transportation expenses | 500 | |||
| Home office expenses | 1,100 | |||
| Tax return preparation | 200 | |||
| Investment counseling | 300 | |||
| Gambling losses (reported $200 as income) | 200 |
Her filled-in Form 2106-EZ and part of her Schedule A (Form 1040) are shown. Of Debra's deductions, only gambling losses are not subject to the 2%-of-adjusted- gross-income limit. She enters the gambling losses on Schedule A, line 28. The other items are subject to the 2% limit and are shown on Schedule A, lines 21, 22, and 23.
Debra completes Form 2106-EZ, Part I. She enters the transportation expenses of $500 on line 2. The home office expenses of $1,100 are entered on line 4. The entertainment expenses of $500 are subject to the 50% limit and are entered on line 5. She then completes the rest of the form. The total expenses of $1,850, shown on line 6, are entered on Schedule A, line 21.
Debra's expenses for tax return preparation are entered on Schedule A, line 22. Her expenses for investment counseling are entered on line 23. She then totals the amounts on lines 21, 22, and 23 and enters this total of $2,350 on line 24. She enters $40,000, her adjusted gross income, on line 25. She multiplies this amount by 2% (.02) and enters the result of $800 on line 26. She subtracts the amount on line 26 from the amount on line 24 and enters $1,550, her allowable deduction, on line 27.
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