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Miscellaneous Itemized Deductions

By Smart Money
Published | Updated

The first thing to know about miscellaneous itemized deductions is that if they're small, you probably won't benefit from them. If all you have in your miscellaneous category is a random work-related magazine subscription, forget about it. The only way you're allowed to deduct miscellaneous items is if they total more than 2% of your adjusted gross income (AGI). You can then deduct anything in excess of that 2%.

Confused? Let's say your AGI is $50,000. Two percent of that is $1,000. So your total miscellaneous itemized deductions must exceed $1,000 in order for you to claim a penny. But if you have miscellaneous expenses of $1,500, you'll only get to deduct $500, or $1,500 minus $1,000. Bear in mind that if your 2005 AGI is more than $145,950 ($72,975 if you're married, filing separately), you're subject to even further reductions. (For 2004, the AGI numbers are $142,700 and $71,350, respectively.)

Next comes the somewhat inexact science of defining what qualifies for a miscellaneous deduction. These include business expenses that you're not reimbursed for, such as dues paid to a union or other professional society, uniforms if they're not appropriate for wear outside of the workplace, courses you take to improve your job skills (but not to get you a job in a new field), and the expense of looking for a new job. Other examples of miscellaneous expenses include some home-office deductions, investment and legal fees if they helped you produce taxable income and the expense of hiring an accountant to help you master your 1040. (See "Writing Off Your Investment Costs" and "Home Office Deductions.") For a complete list of what qualifies, check out the IRS Web site.

If you're close to meeting the 2% floor one year, try bunching some of next year's expenses into that year. For example, rather than wait until January to enroll in that continuing education class, pay your tuition in December. That way, maybe you can get some tax savings from your miscellaneous deductions at least every other year.