Know the Secrets Behind 'Miscellaneous Deductions'
Want to reduce taxable income and the dough you have to fork over to the IRS? You may not have considered some work expenses — uniforms, for example — that fall under the category of miscellaneous deductions. So here's the deal: Itemize deductions rather than take the standard deduction. Let's see how this works:
The 2-percent limit
Take something like uniforms, for instance. The costs for them are deductible only if the amount of money spent exceeds 2 percent of your adjusted gross income, or AGI. So if you have an AGI of $50,000, you'd have to have more than $1,000 in uniform costs to deduct.
Key items to consider include the following:
- Unreimbursed expenses that you've incurred as an employee.
- Job search costs for a new job in the same line of work.
- Job tools.
- 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.
But then there are deductions that aren't subject to the 2 percent limit:
- 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.
Now you're getting into this, aren't you? "Oh boy, what else can I deduct?" But hold on — there are some expenses that you just can't deduct. Personal living or family expenses, for example, are not deductible.
But back to the good news — if any of the above fit your life, use Schedule A when filling out your taxes next year. Schedule A is for itemized deductions. You may also want to check out Publication 529, Miscellaneous Deductions, which is available on the IRS website. Of course, we can help you sort out the deductibles to make sure you get what you have coming to you, but don't fall afoul of IRS rules.
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 weekly commuting ticket or your drive to the company parking lot. However, if you're searching for work, you may be able to deduct relevant travel costs, if you meet certain conditions.
The point is to get professional advice about your deductions. As you gather your paperwork in preparation for the April 15 deadline, make a list of your expenses so we can put them in the right categories as we proceed with preparing your tax return.