You can elect each year to itemize deductions rather than claim the standard deduction. Itemized deductions are those that you claim on Schedule A of Form 1040, Itemized deductions are as follows:
(1) a part of your medical and dental expenses;
(2) certain taxes;
(3) interest;
(4) gifts to charity;
(5) personal casualty and theft losses attributable to a federally declared disaster; and
(6) certain other expenses.
For years 2018 through 2025, all miscellaneous itemized deductions, which were previously allowed only to the extent that they exceed 2 percent of your adjusted gross income (AGI), are NOT deductible. These expenses include unreimbursed employee business expenses such as:
(1) business bad debts of an employee;
(2) business gifts, up to a limit of $25 for gifts made to any one individual during the year;
(3) business liability insurance premiums a taxpayer pays for protection against personal liability for wrongful acts on the job;
(4) damages paid to a former employer for breach of an employment contract;
(5) depreciation on a computer or cell phone the employer requires the employee to use on the job;
(6) dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps the taxpayer carry out the duties of his or her job;
(7) expenses of a home office or part of the employee’s home used regularly and exclusively for work;
(8) job search expenses in the employee’s present occupation;
(9) legal fees related to doing or keeping the employee’s job;
(10) licenses and regulatory fees a taxpayer pays each year to state or local governments for the taxpayer’s trade, business, or profession;
(11) malpractice insurance premiums;
(12) medical examinations required by an employer;
(13) occupational taxes;
(14) passport for a business trip;
(15) subscriptions to professional journals and trade magazines related to the employee’s work;
(16) tools and supplies used in the employee’s work, if they wear out and are thrown away within one year from the date of purchase;
(17) travel, transportation, meals, entertainment, and local lodging related to the employee’s work;
(18) union dues and expenses;
(19) work clothes and uniforms if required and not suitable for everyday use; and
(20) work-related education.
The temporary repeal of miscellaneous itemized deductions for years 2018 through 2025 also applies to certain other expenses paid or incurred for the production of income and which previously were deductible subject to the 2 percent of AGI limitation. These production-of-income expenses include expenses paid or incurred in the tax year:
(1) to produce or collect income that is included in gross income;
(2) to manage, conserve, or maintain property held for producing such income; or
(3) to determine, contest, pay, or claim a refund of any tax.
Examples of these types of expenses include:
(1) appraisal fees for a casualty loss or charitable contribution;
(2) casualty and theft losses from property used in performing services as an employee;
(3) clerical help and office rent in caring for investments;
(4) convenience fees charged for paying income tax by credit or debit card;
(5) depreciation on home computers used for investments;
(6) excess deductions (including administrative expenses) allowed a beneficiary on termination of an estate or trust;
(7) hobby expenses, but generally not more than hobby income;
(8) indirect miscellaneous deductions of pass-through entities (partnerships, S corporations, and mutual funds that are not publicly offered);
(9) investment fees, custodial fees, trust administration fees, and other expenses paid for managing investments that produce taxable income;
(10) legal fees related to producing or collecting taxable income or getting tax advice;
(11) loss on deposits in an insolvent or bankrupt financial institution (if not treated as a casualty loss);
(12) loss on traditional IRAs or Roth IRAs, when all amounts have been distributed;
(13) repayments of income;
(14) repayments of social security benefits;
(15) safe deposit box rental on a box used to store taxable income-producing stocks, bonds, or investment-related papers and documents;
(16) service charges on dividend reinvestment plans; (17) tax advice and preparation fees; and (18) trustee’s fees for an IRA, if separately billed and paid.
Certain other expenses are deductible as miscellaneous itemized deductions on Schedule A (Form 1040), but are not subject to the 2 percent of AGI floor continue to be deductible for years 2018 through 2025. These items include:
(1) amortizable premium on taxable bonds;
(2) casualty and theft losses from income-producing property;
(3) federal estate tax on income in respect of a decedent;
(4) gambling losses up to the amount of gambling winnings;
(5) impairment-related work expenses of persons with disabilities;
(6) losses from other activities from Schedule K-1 (Form 1065-B), box 2;
(7) losses from Ponzi-type investment schemes;
(8) repayments of more than $3,000 under a claim of right; and (9) unrecovered investment in an annuity.
Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.
DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260
Toll Free: (877)CPA-Help or (877)272-4357
Cell: (760)567-3110
Fax: (760)836-0968
Email: DonFitchCPA@paylesstax.com
Website: http://www.paylesstax.com
P.S. My firm is based upon referrals. Please feel free to refer my firm to anyone you know that is looking for a new CPA and/or tax preparer. Thank you in advance.
(Updated 04/21/2021 15:41)