If you itemize deductions on your tax return, you may be able to deduct certain miscellaneous expenses. You may benefit from this because a tax deduction normally reduces your federal income tax. Here are some things you should know about miscellaneous deductions:
To produce or collect income that is required to be included in your gross income;
To manage, conserve, or maintain property held for producing income that is required to be included in your gross income; or
To determine, contest, pay, or claim a refund of any tax.
Deductions Subject to the Two Percent Limit. You can deduct most miscellaneous expenses only if they exceed two percent of your adjusted gross income. For deductions that are subject to the 2% rule, you may only deduct the part of the expenses that exceeds 2% of your Adjusted Gross Income (AGI). To figure the amount of your allowable deduction for these expenses, the IRS provides a section on Schedule A, Job Expenses and Certain Miscellaneous Deductions . You first list the full amounts for each expense. These are then added together. From the total of these expenses (the expenses that are subject to the 2% rule), you would subtract 2% of your AGI. What remains is the amount of your deduction. These include expenses such as:
Deductions Not Subject to the Two Percent Limit. Some deductions are not subject to the two percent of AGI limit. Some expenses on this list include:
· Certain casualty and theft losses. This deduction applies if you held the damaged or stolen property for investment. Property that you hold for investment may include assets such as stocks, bonds and works of art.
Many expenses are not deductible. For example, you can’t deduct personal living or family expenses. Report your miscellaneous deductions on Schedule A, Itemized Deductions . Be sure to keep records of your deductions as a reminder when you file your taxes in 2014.