Outside of the more popular deductions reported on Schedule A (mortgage interest, charitable contributions, and medical expenses), there are a few that don’t get as much attention, but can still have an effect on your taxes. In this post, we’ll take a look at a few of the deductions that are subject to the 2% floor. This means that these expenses, in total, are greater than 2% of your adjusted gross income. You can only deduct the amount that is above this 2% floor. For example, if you had an adjusted gross income of $100,000 and expenses of $2,500, you would be able to deduct $500 of these expenses ($2,500-$2,000, which is 2% of $100,000).
The first type of expense is expenses related to your job. These would be expenses you incur in the course of doing your job that are unreimbursed by your employer. These would be for things like business cards, licenses, union dues, small tools and supplies, employment related educational outlays, home office expenses and the like. These will be reported on Form 2106, Employee Business Expenses. If you work for yourself, you would report these expenses on Schedule C, and not be limited to the 2% floor for these types of expenses for schedule A.
The next type of miscellaneous expense is job hunting expenses. You can deduct for costs of putting together your resume, fees for employment and search agencies, travel costs, and meals while traveling (limited to 50% of your costs). If you are starting out and looking for your first job, you cannot take a deduction for these expenses. Likewise, you cannot take a deduction for expenses when you look for a job in a new line of work. Make sure you keep your receipts, as you should for anything you want to deduct.
Lastly, you can deduct the cost of preparing your tax return. That is a big selling point for CPAs, that our fees for preparing your returns can be deducted. You can also deduct for legal fees you are charged, as long as they relate to any tax advice provided, and not other legal matters.
What experiences have you had with reporting the expenses related to your job or the costs of searching for a job on your tax return? I’d love to hear about it. Also, if you have any questions, shoot them to me at firstname.lastname@example.org, and I would be happy to answer them. If you need help with other tax questions, or with preparing a return, drop me a line, and we can discuss your situation.