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Itemizing Tax Deductions

Miscellaneous tax deductions can save you quite a bit of money, if you qualify. They can also cause problems if you're not sure which expenses count as allowable tax deductions.

This page:

  • Describes two types of miscellaneous tax deductions.

  • Makes clear what is claimed if you're itemizing tax deductions.

  • Explains the difference between limited and un-limited deductions

Claiming Deductions Made Simple:

If you want to avoid costly mistakes, while at the same time taking advantage of all credits and deductions, you'll want to do your taxes with TurboTax this year.

TurboTax helps you work quickly and easily, and it double-checks your return to help you get the largest possible refund. You can even file your state taxes at the same time, and get your state refund (which may be substantial) much faster than if you mail a paper return.

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How to claim miscellaneous tax deductions

If you are thinking about itemizing tax deductions for expenses that do not fall within the general categories of allowable tax deductions, familiarize yourself with miscellaneous tax deductions, before claiming them.

We discussed earlier what miscellaneous tax deductions are and the difference between limited and un-limited tax deductions.

The one basic rule of itemizing tax deductions for miscellaneous expenses is that any expenses must be necessary for the production of income.

Using an online filing program is the easiest and fastest way to claim all credits and deductions, and it dramatically cuts down on filing mistakes. You can easily e-file with TurboTax. Their tax prep interview is quick and simple, and you can have a tax professional review your return, if you choose. Best of all, you can work on your return for free, and pay nothing until you file.

Expenses that are not allowable tax deductions

Many people often think that expenses incurred in conjunction with financial transactions, home repair, etc. are allowable tax deductions. These people think "I'll just write it off!" far too many times while they working on their returns, without a care in the world.

It's not that simple. The IRS strictly enforces its rules for what are and are not allowable deductions, and if you try itemizing expenses that cannot be legally claimed, you can find yourself in deep trouble.

Here are some common expenses that are often thought of as being allowable tax deductions, but in fact are not:

  • Adoption expenses
  • Broker's commissions that you paid in connection with your IRA or other investment property
  • Burial or funeral expenses, including the cost of a cemetery lot
  • Capital expenses
  • Fees and licenses, such as car licenses, marriage licenses, dog tags, etc.
  • Hobby losses - (though you can deduct expenses, see this page.)
  • Home repaIRS, insurance, and rent
  • Losses from the sale of your home, furniture, personal car, etc.
  • Personal disability insurance Premiers
  • Personal, living, or family expenses
  • The value of wages never received or lost vacation time

Ok, some of these are no-brainers, (do people really think that the IRS would pay their rent?) and yet many taxpayers imagine that somehow everything can count when they are itemizing tax deductions.

If you bend the rules, and you're caught in a tax audit, you could face seriously stiff penalties.

How to claim miscellaneous tax deductions, by the book

Claiming miscellaneous tax deductions can be a daunting task, complete with numerous forms to fill out, and calculations to perform.

Here are the basics for the most commonly taken allowable tax deductions; keep in mind that these instructions are for those who plan on filing a paper return. Using an efile tax return online service is much simpler, and there are no extra forms to fill out :

If you are claiming tax deductions for expenses subject to the 2% reduction (see a list here) you can do so right on Schedule A, and include it with your 1040 paper tax return.

If some of the reduced expenses you are claiming as tax deductions are unreimbursed employee business expenses, meaning, money you shelled out for job related expenses you were never compensated for, you'll also need to file Form 2106-EZ. If you were reimbursed for a portion of your business expenses, you need to complete Form 2106.

Expenses not subject to the 2% reduction limitation can be even more complicated.

Depending on the nature of the tax deductions, you'll need to fill out either Forms 2106 and 2106-EZ as with the reduced tax deductions, or you'll have to take matter into your own hands and calculate your tax deductions on your own. (Click here for a partial list of allowable tax deductions not subject to the 2% reduction.)

The IRS also provides worksheets and additional information (see the bottom of this page) to assist you in figuring out your tax deductions. But...

...but the easiest way to claim your all income tax deductions is to file online. Normally, itemizing deductions can be confusing, but you can make it simple and avoid costly mistakes, by using the TurboTax e-filing interview.

Related IRS Publications

You can get more information about itemizing tax deductions for miscellaneous expenses directly from the IRS, in the form of IRS Publication 529

As mentioned above, there are ancillary publications and worksheets which may help you with your tax deductions. They are:

Publication 463 dealing with travel, entertainment and gift expenses (for business purposes;)
Publication 535, "Business Expenses;"
Publication 587 for business use of your home;
Publication 946 "How to Depreciate Property".

If you file a paper tax return, you will also need to fill-in the appropriate lines in Schedule A. And you will most likely also need Forms 2106 and 2106-EZ to claim employee business expenses. (If you e-file, all of this will be done for you automatically.)

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