IRS Pub. 17, Your Federal Income Tax
You can deduct the following expenses as miscellaneous itemized
deductions on Schedule A (Form 1040). You can claim the amount of
expenses that is more than 2% of your adjusted gross income. You
figure your deduction on Schedule A (Form 1040) by subtracting 2% of
your adjusted gross income from the total amount of these expenses.
Your adjusted gross income is the amount on line 33, Form 1040.
Generally, you apply the 2% limit after you apply any other
deduction limit. For example, the 50% (or 55%) limit on
business-related meals and entertainment (discussed in chapter 28)
applied before you subtract 2% of your adjusted gross income.
Deductions subject to the 2% limit are discussed in the two general
categories that are shown on Schedule A (Form 1040): unreimbursed
employee expenses and other expenses.
If you are a qualifying performing artist, you may be able to
deduct your employee business expenses as an adjustment to gross
income rather than as a miscellaneous itemized deduction. See
Special Rules in chapter 28
if you need more information
about this exception.
Impairment-related work expenses.
If you have a physical or mental disability, certain expenses you
incur that allow you to work may not be subject to the 2% limit. See
Impairment-Related Work Expenses, under Deductions Not
Subject to the 2% Limit, later.
State and local government officials paid on a fee basis.
If you performed services as an employee of a state or local
government and you were paid in whole or in part on a fee basis, you
can claim your trade or business expenses in performing those services
as an adjustment to gross income, rather than as a miscellaneous
deduction. See Officials Paid on a Fee Basis under
Deductions Not Subject to the 2% limit, later.
You can deduct only unreimbursed employee expenses that are:
- Paid or incurred during your tax year,
- For carrying on your trade or business of being an employee,
- Ordinary and necessary business expenses.
An expense is ordinary if it is common and accepted
in your type of trade or business. An expense is necessary
if it is appropriate and helpful to your trade or business.
You may be able to deduct the following unreimbursed business
- Business bad debt of employee.
- Education that is employment related (see chapter 29).
- Laboratory breakage fees.
- Licenses and regulatory fees.
- Malpractice insurance premiums.
- Medical examinations required by employer.
- Occupational taxes.
- Passport for business trip.
- Subscriptions to professional journals and trade magazines
related to your work.
- Travel, transportation, entertainment, gift, and car
expenses related to your work (see chapter 28).
Business Liability Insurance
You can deduct insurance premiums you paid for protection against
personal liability for wrongful acts on the job.
Damages for Breach
of Employment Contract
If you break an employment contract, you can deduct damages you pay
your former employer if the damages are attributable to the pay you
received from that employer.
Depreciation on Computers
or Cellular Telephones
If you purchased a computer or cellular telephone, you can claim a
depreciation deduction if you use these items in your work as an
employee and you meet the following two tests. Your use of these items
- For the convenience of your employer, and
- Required as a condition of your employment.
For more information about the rules and exceptions to the rules
affecting the allowable deductions for a home computer or cellular
telephone, see Publication 529.
Dues to Chamber of Commerce and Professional Societies
You may be able to deduct dues paid to professional organizations
(such as bar associations and medical associations) and to chambers of
commerce, and similar organizations, if membership helps you carry out
the duties of your job. Similar organizations include:
- Boards of trade,
- Business leagues,
- Civic or public service organizations,
- Real estate boards, and
- Trade associations.
You cannot deduct dues paid to an organization if one of
its main purposes is to:
- Conduct entertainment activities for members or their
- Provide members or their guests with access to entertainment
See Club Dues under Nondeductible Expenses
for more information.
Dues paid to airline, hotel, and luncheon clubs are not deductible.
Lobbying and political activities.
You may not be able to deduct that part of your dues that is for
certain lobbying and political activities. See Dues used for
lobbying, under Lobbying Expenses, later.
If you use a part of your home regularly and exclusively for
business purposes, you may be able to deduct a part of the operating
expenses and depreciation of your home. You cannot deduct any part of
your personal expenses that are for family household purposes.
Requirements for employees claiming the deduction.
You can deduct certain expenses for the business use of a part of
your home only if you use that part of your home regularly
and exclusively as:
- Your principal place of business for any trade or business
in which you engage, or
- A place to meet or deal with your patients, clients, or
customers in the normal course of your trade or business.
You can also deduct certain expenses for a separate structure
not attached to your home if you use it regularly and exclusively for
your trade or business.
The regular and exclusive business use must be for the
convenience of your employer and not just appropriate and
helpful in your job. Get Publication 587
for more detailed information
and a worksheet.
Job Search Expenses
You can deduct certain expenses you have in looking for a new job
in your present occupation, even if you do not get a new job. You
cannot deduct these expenses if:
- You are looking for a job in a new occupation, or
- There was a substantial break between the ending of your
last job and your looking for a new one.
You cannot deduct your expenses if you are seeking employment for
the first time.
Employment and outplacement agency fees.
You can deduct employment and outplacement agency fees you pay in
looking for a new job in your present occupation.
Employer pays you back.
If, in a later year, your employer pays you back for employment
agency fees, you must include the amount you receive in your gross
income up to the amount of your tax benefit in the earlier year (see
Recoveries in chapter 13).
Employer pays the employment agency.
If your employer pays the fees directly to the employment agency
and you were not responsible for them, you do not include them in your
You can deduct amounts you spend for typing, printing, and mailing
copies of a resum‚ to prospective employers if you were looking for a
new job in your present occupation.
Travel and transportation expenses.
If you travel to an area and, while there, you look for a new job
in your present occupation, you may be able to deduct travel expenses
to and from the area. You can deduct the travel expenses if the trip
is primarily to look for a new job. The amount of time you spend on
personal activity compared to the amount of time you spend in looking
for work is important in determining whether the trip is primarily
personal or to look for a new job.
Even if you cannot deduct the travel expenses to and from an area,
you can deduct the expenses of looking for a new job in your present
occupation, while in the area.
If you use the standard mileage rate to figure your car expenses,
use 32.5 cents per mile. See chapter 28
for more information.
Licenses and Regulatory Fees
You can deduct the amount you pay each year to state or local
governments for licenses and regulatory fees for your trade, business,
Income Aid Payment
An "income aid payment" is one that is received under an
employer's plan to aid employees who lose their jobs because of lack
of work. If you repay a lump-sum income aid payment that you received
and included in income in an earlier year, you can deduct the
Research Expenses of
a College Professor
If you are a college professor, you can deduct research expenses,
including travel expenses, for teaching, lecturing, or writing and
publishing on subjects that relate directly to the field of your
teaching duties. You must have undertaken the research as a means of
carrying out the duties expected of a professor and without
expectation of profit apart from salary. However, you cannot deduct
the cost of travel as a form of education.
Tools Used in Your Work
Generally, you can deduct amounts you spend for tools used in your
work if the tools wear out and are thrown away within one year from
the date of purchase. You can depreciate the cost of tools expected to
last more than a year. For more information about depreciation, get
Union Dues and Expenses
You can deduct dues and initiation fees you pay for union
You can also deduct assessments
for benefit payments to
unemployed union members. However, you cannot deduct the part of the
assessments or contributions that provides funds for the payment of
sick, accident, or death benefits. Also, you cannot deduct
contributions to a pension fund, even if the union requires you to
make such contributions.
You may not be able to deduct amounts you pay to the union that are
related to certain lobbying and political activities. See
Lobbying Expenses under Nondeductible Expenses,
Work Clothes and Uniforms
You can deduct the cost and upkeep of work clothes if the following
two requirements are met.
- You must wear them as a condition of your employment.
- They are not suitable for everyday wear.
It is not enough that you wear distinctive clothing. The clothing
must be specifically required by your employer. Nor is it enough that
you do not, in fact, wear your work clothes away from work. The
clothing must not be suitable for taking the place of your regular
Examples of workers who may be able to deduct the cost and upkeep
of work clothes are: delivery workers, firefighters, health care
workers, law enforcement officers, letter carriers, professional
athletes, and transportation workers (air, rail, bus, etc.).
Musicians and entertainers can deduct the cost of theatrical
clothing and accessories if they are not suitable for everyday wear.
However, work clothing consisting of white cap, white shirt or
white jacket, white bib overalls, and standard work shoes, which a
painter is required by his union to wear on the job, is not
distinctive in character or in the nature of a uniform. Similarly, the
costs of buying and maintaining blue work clothes worn by a welder at
the request of a foreman are not deductible.
You can deduct the cost of protective clothing required in your
work, such as safety shoes or boots, safety glasses, hard hats, and
Examples of workers who may be required to wear safety items are:
carpenters, cement workers, chemical workers, electricians, fishing
boat crew members, machinists, oil field workers, pipe fitters,
steamfitters, and truck drivers.
You generally cannot deduct the cost of your uniforms if you are on
full-time active duty in the armed forces. However, if you are an
armed forces reservist, you can deduct the unreimbursed cost of your
uniform if military regulations restrict you from wearing it except
while on duty as a reservist. In figuring the deduction, you must
reduce the cost by any nontaxable allowance you receive for these
If local military rules do not allow you to wear fatigue uniforms
when you are off duty, you can deduct the amount by which the cost of
buying and keeping up these uniforms is more than the uniform
allowance you receive.
If you are a student at an armed forces academy, you cannot deduct
the cost of your uniforms if they replace regular clothing. However,
you can deduct the cost of insignia, shoulder boards, and related
You can deduct the cost of your uniforms if you are a civilian
faculty or staff member of a military school.
You can deduct certain other expenses as miscellaneous itemized
deductions subject to the 2%-of-adjusted-gross-income limit. These are
expenses you pay:
- To produce or collect income that must be included in your
- To manage, conserve, or maintain property held for producing
such income, or
- To determine, contest, pay, or claim a refund of any
You can deduct other expenses you pay for the purposes in (1)
and (2) above only if they are reasonably and closely related to these
purposes. Some of these other expenses are explained in the following
If the expenses you pay produce income that is only partially
taxable, see Tax-Exempt Income Expenses, later, under
You can deduct appraisal fees if you pay them to figure a casualty
loss or the fair market value of donated property.
Casualty and Theft Losses
You can deduct casualty and theft losses from property used in
performing services as an employee.
Clerical Help and Office Rent
You can deduct office expenses, such as rent and clerical help,
that you have in connection with your investments and collecting the
taxable income on them.
You can deduct depreciation on your home computer if you use it to
produce income (for example, managing your investments that produce
taxable income). If you work as an employee and use the computer in
that work, see Publication 946.
Excess Deductions of an Estate
If the total deductions in the estate's last tax year are more than
the estate's gross income for that year, the beneficiaries succeeding
to the estate's property can claim such excess as a miscellaneous
deduction. Do not include deductions for personal exemptions and
charitable contributions when figuring the total deductions. The
beneficiaries can claim the deduction only for the tax year in which
or with which the estate terminates, whether the year of termination
is a normal year or a short tax year. For more information, see
Fees to Collect
Interest and Dividends
You can deduct fees you pay to a broker, bank, trustee, or similar
agent to collect your taxable bond interest or dividends on shares of
stock. But you cannot deduct a fee you pay to a broker to buy
investment property, such as stocks or bonds. You must add the fee to
the cost of the property.
You cannot deduct the fee you pay to a broker to sell securities
unless you are a dealer in securities. You must offset the fee against
the selling price.
You can generally deduct hobby expenses, but only up to the amount
of hobby income. A hobby is not a business because it is not carried
on to make a profit. See Activity not for profit in chapter 13
under Miscellaneous Taxable Income.
Indirect Deductions of
Pass-through entities include partnerships, S corporations, and
mutual funds. Deductions of pass-through entities are passed through
to the partners or shareholders. If the deductions are miscellaneous
itemized deductions, they are generally subject to the 2% limit.
You should receive information returns from pass-through entities.
Partnerships and S corporations issue Schedule K-1,
which lists the items and amounts you must report, and
identifies the tax return schedules and lines to use.
You are a member of an investment club that is formed solely to
invest in securities. The club is treated as a partnership. The
partnership's income is solely from taxable dividends, interest, and
gains from sales of securities. In this case, you can deduct your
share of the partnership's operating expenses as a miscellaneous
itemized deduction subject to the 2% limit. However, if the investment
club partnership has investments that also produce nontaxable income,
you cannot deduct your share of the partnership's expenses that
produce the nontaxable income. You should receive a copy of Schedule
K-1 (Form 1065), Partner's Share of Income, Credits,
Allocated expenses of mutual funds.
The allocable investment expenses of nonpublicly offered mutual
funds are subject to the 2% limit. Publicly offered mutual funds do
not pass investment expenses through to shareholders.
A "publicly offered" mutual fund is one that is:
- Continuously offered pursuant to a public offering,
- Regularly traded on an established securities market, or
- Held by or for at least 500 persons at all times during the
Contact your mutual fund if you are not sure if your fund is
Nonpublicly offered mutual funds.
These funds will send you a Form 1099-DIV, Dividends and
Distributions, or a substitute form, showing your share of gross
income and investment expenses. You can claim the expenses only as a
miscellaneous itemized deduction subject to the 2% limit.
Publicly offered mutual funds.
These funds will send you a Form 1099-DIV, or a substitute
form, showing the net amount of dividend income (gross dividends minus
investment expenses). This net figure is the amount you report on your
Investment Fees and Expenses
You can deduct investment fees, custodial fees, trust
administration fees, and other expenses you paid for managing your
investments that produce taxable income.
You can usually deduct legal expenses that you incur in attempting
to produce or collect taxable income or that you pay in connection
with the determination, collection, or refund of any tax.
You can also deduct legal expenses that are:
- Related to either doing or keeping your job, such as those
you paid to defend yourself against criminal charges arising out of
your trade or business,
- For tax advice related to a divorce if the bill specifies
how much is for tax advice and it is determined in a reasonable way,
- To collect taxable alimony.
You deduct expenses of resolving tax issues relating to profit or
loss from business (Schedule C or C-EZ), rentals or royalties
(Schedule E), or farm income and expenses (Schedule F), on the
appropriate schedule. You deduct the expenses of resolving nonbusiness
tax issues on Schedule A (Form 1040).
Loss on Deposits in an Insolvent
or Bankrupt Financial Institution
For information on whether, and if so, how you may deduct a loss on
your deposit in a qualified financial institution, see Loss on
deposits in an insolvent or bankrupt financial institution in
Repayments of Income
If you had to repay an amount that you included in income in an
earlier year, you may be able to deduct the amount you repaid. If the
amount you had to repay was ordinary income of $3,000 or less, the
deduction is subject to the 2% limit. If it is more than $3,000, see
Repayments Under Claim of Right under Deductions Not
Subject to the 2% Limit, later.
Social Security Benefits
For information on how to deduct your repayments of certain social
security benefits, see Repayments More Than Gross Benefits
in chapter 12.
Safe Deposit Box Rent
You can deduct safe deposit box rent if you use the box to store
taxable income-producing stocks, bonds, or investment-related papers
and documents. You cannot deduct the rent if you use the box only for
jewelry, other personal items, or tax-exempt securities.
Service Charges on
Dividend Reinvestment Plans
You can deduct service charges you pay as a subscriber in a
dividend reinvestment plan. These service charges include payments
- Holding shares acquired through a plan,
- Collecting and reinvesting cash dividends, and
- Keeping individual records and providing detailed statements
Tax Preparation Fees
You can usually deduct tax preparation fees in the year you pay
them. Thus, on your 1998 return, you can deduct fees paid in 1998 for
preparing your 1997 return.
These fees include the cost of tax preparation software programs
and tax publications. It also includes any fee you paid for electronic
filing of your return.
Deduct expenses of preparing tax schedules relating to profit or
loss from business (Schedule C or C-EZ), rentals or royalties
(Schedule E), or farm income and expenses (Schedule F) on the
appropriate schedule. Deduct the expenses of preparing the remainder
of the return on line 21, Schedule A (Form 1040).
Fees for IRA
You can deduct an IRA trustee's administrative fees that are billed
separately and that you paid in connection with your individual
retirement arrangement (IRA). They are deductible (if they are
ordinary and necessary) as a miscellaneous deduction on Schedule A
(Form 1040). For more information about IRAs, see chapter 18.
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