Chapter 19

Deducting Job Costs and Other Miscellaneous Expenses

On Schedule A (Form 1040), you may be able to deduct a portion of miscellaneous expenses covering a wide and varied range of items, such as employee travel and entertainment expenses, work clothes expenses, union and employee professional dues, investment expenses, legal expenses, tax preparation expenses, and educational expenses. They share a significant limitation: the 2% of adjusted gross income (AGI) floor. If your expenses do not exceed this floor, you may not deduct them. If the expenses exceed the floor, only the excess is deductible on Schedule A (19.1). However, the deduction (after the 2% floor) must be added back to income in determining if you are subject to AMT (23.2) and if you are, the benefit of the Schedule A deduction is effectively lost. Some miscellaneous expenses, such as gambling losses and impairment-related work expenses, are not subject to the 2% AGI floor.

In addition to the 2% AGI floor, employees who incur unreimbursed meal and entertainment costs face this further restriction: Only 50% of meal and entertainment costs are deductible.

19.1 2% AGI Floor Reduces Most Miscellaneous Expenses

19.2 Effect of 2% AGI Floor on Deductions

19.3 Checklist of Job Expenses Subject to the 2% AGI Floor

19.4 Job Expenses Not Subject to the 2% AGI Floor

19.5 Dues and Subscriptions

19.6 Uniforms and Work Clothes

19.7 Expenses of Looking for a New Job

19.8 Local Transportation Costs

19.9 Unusual Job Expenses

19.10 Computers Bought for Work

19.11 Cell Phones, Calculators, Copiers and Fax Machines

19.12 Small Tools

19.13 Employee Home Office Deductions

19.14 Telephone Costs

19.15 Checklist of Deductible Investment Expenses

19.16 Costs of Tax Return Preparation and Audits

19.17 Deducting Legal Costs

19.18 Contingent Fees Paid Out of Taxable Awards