What do you call those deductible expenses that don’t fit squarely into any other category? The IRS refers to them as “miscellaneous” expenses. If you qualify, you can deduct the excess above 2 percent of your adjusted gross income (AGI) on your 2017 tax return. For instance, if your AGI for 2017 is $100,000 and you incurred $3,000 in miscellaneous expenses, your deduction is $1,000.
Under the Tax Cuts and Jobs Act (TCJA), the miscellaneous expenses deduction is suspended from 2018 through 2025. However, you can still deduct these expenses on your 2017 tax return.
The list of expenses is long and varied, but you can generally break them down into two groups: production-of-income expenses and unreimbursed employee business expenses.
1. Production-of-income expenses: This group includes fees relating to tax and financial planning and assistance. Some common items are as follows:
- Accounting, legal or tax fees to produce or preserve income
- Appraisal fees for charitable contributions and casualty losses
- Custodial fees for income-producing property and IRAs
- Fees paid to collect interest or dividends
- Hobby expenses (up to the amount of hobby income)
- Safe deposit rentals to store non-tax-exempt securities
- Tax assistance expenses for services, periodicals, manuals and other materials
Tax return tip: The cost of having your 2017 tax return prepared qualifies as a deductible miscellaneous expense.
2. Unreimbursed employee business expenses: The second group of miscellaneous expenses consists of unreimbursed employee business expenses. It includes the following items:
- Cellphones and home computers (when required for employment)
- Dues paid to professional societies
- Employment-related education
- Home office expenses as employee
- Malpractice insurance premiums
- Subscriptions to professional journals and magazines
- Travel and entertainment expenses (limited to 50% of cost of business meals and entertainment)
- Union dues
- Work clothes or uniforms
The cost of searching for employment may also qualify as a deductible miscellaneous expense, even if you don’t get the job.
This deduction is no longer available in 2018, so take advantage of it now on your 2017 tax return if you can. Questions? Contact Dye & Whitcomb, Fort Collins CPA’s and we can help you.