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What expenses are tax deductible

TaxBizPro, LLC Posted on: June 15, 2009 10:45

Many clients ask me what they can deduct and what they can’t deduct? So I am providing lists of possible deductions. The lists are only meant to give you an ideas.  These tax deductions are not all-inclusive and not all items are deductible all the time.  Many are subject to limitations, may only apply in certain situations.  Please keep careful records and save your receipts for 3 years in case of audit.

Employee/Self-Employed Business Expenses
Note that most of the Employees expenses are claimed in Schedule A and are called itemized deductions:
Includes expenses for your job for which you weren’t reimbursed, but you only get the amount in excess of 2% of your AGI (adjusted gross income), and only if you can itemize.  For instance, if your AGI is $50,000, you must have at least $1,000 in employee business expenses before you will begin to benefit from the deduction.
Self-Employed:
You are allowed to deduct most business expenses in full.
  • Advertising and Promotion Expenses (Self-employed)
  • Books and Publications
  • Books, trade journals, newspapers and publications for your trade or profession
Dues and Fees:
  • Dues to a professional organization for people in your profession
  • Union dues, initiation fees, and assessments for benefit payments to unemployed union members.
  • Regulatory fees for your profession
  • Dues to chambers of commerce and similar organizations if the membership helps you carry out your job duties (see exceptions).
  • Licenses paid to state or local governments
Education and Research
  • Educational expenses related to your present work that maintains or improves your skills.
  • Research expenses
Equipment and Supplies
  • Business use of computer.
  • Employees:  Must be for the convenience of your employer and required as a condition of your employment.
  • Supplies and tools you use in your work
Home Office
  • Expenses for an office in your home IF part of the home is used regularly and exclusively for your work.  Employees:  the use of your home office must also be for the convenience of your employer.
  • For more information, see IRS Publication 587
Internet
  • Employees:  Must be for the convenience of your employer and required as a condition of your employment.
Job hunting expenses (Employees)
To deduct job hunting expenses, you must be looking for a job in your present line of work or be between jobs (you’re not changing professions or looking for your first job)
  • Resume preparation (drafting, typing, printing, mailing, faxing)
  • Employment agency fees
  • Executive recruiters’ fees
  • Portfolio preparation costs
  • Career counseling to assist you in improving your position
  • Legal and accounting fees you pay in connection with employment contract negotiations and preparation
  • Advertising
  • Transportation costs to job interviews
  • Long distance calls to prospective employers
  • Newspapers you purchase to read the employment ads
  • Other business publications you purchase to read the employment ads
  • Half of your meals you pay for that are directly related to your job search
  • If you take a trip away from home to look for a new job, your expenses for traveling, lodging, meals (50% of the cost), etc. are deductible only if the primary purpose of your trip is to look for a job. To substantiate the purpose of your trip, keep a daily log of your interviews, application efforts, etc.
Meals and Entertainment
  • Meals and Entertaining costs (only 50% of the cost is deductible).  Keep a record of the date, place, amount of expenses, people present, business purpose, and business discussed.  Also keep receipts for expenses over $75.
  • For more information, see IRS Publication 463
 Telephone Charges
  • Business use of cellular phone
  • Cost of long-distance business calls charged to home phone
  • Separate business telephone (home phone line is not deductible)
Travel and Transportation
  • Traveling costs incurred while away from home on business
  • Traveling costs paid in connection with a temporary work assignment
  • Transportation between your home and a temporary work location if you have no regular place of work but you ordinarily work in the metropolitan area where you live and the temporary work location is outside that area
  • Transportation between your home and a temporary work location if you have at least one regular workplace for this employment. It doesn’t matter how far away the temporary location is in this case.
  • Transportation from one job to another if you work two places in one day
  • If you are self-employed and your home is your principal place of business, all business travel is deductible.
  • For more information, see IRS Publication 463
Uniforms and Gear
  • Protective clothing and gear
  • Uniforms (except if you’re full-time active duty in the armed forces)
  • Dry cleaning costs for your uniforms or protective clothing (not for your everyday clothing, though)
  • Specialized clothing designed for your job, as long as it’s not suitable for everyday wear
  • Safety equipment, such as hard hats, safety glasses, safety boots, and gloves
Miscellaneous
  • Gifts, but only up to $25 per recipient (you can also add expenses directly associated with the gift, like a gift rapper)
  • Passport for business travel
  • Postage
  • Office supplies
  • Printing and copying
  • Legal and professional services (accounting & tax service fees)
  • Medical exams required by your employer
  • Occupational taxes if they’re charged at a flat rate by your city or other local government for the privilege of working in that area
  • Business liability insurance premiums
  • Job dismissal insurance premiums
  • Damages you pay to a former employer for a breach of employment contract
  • Employee contributions to state disability funds
Self-Employed Only
  • Interest on business loans
  • Self-Employed health insurance
  • Commissions and fees
  • Business insurance
  • Retirement Plans like Keogh or SEP
  • Rental of business property
  • Office rent and utilities
  • Repairs and maintenance
  • Business taxes and licenses
Miscellaneous Schedule A Expenses
Real estate expenses:

  • Mortgage interest
  • Mortgage prepayment penalties
  • Penalties of early withdrawals
  • Points on principal residence financing
  • Real estate taxes
Auto registration fees-subject to limitations
Charitable contributions (cash and non-cash) made to qualified U.S. charities. (note that you will need an official receipt from the charity for a single donation over $250, or if you have given cash)
Investment expenses:

  • Accounting fees (preparation of tax return)
  • Brokerage fees
  • Investment fees
  • Legal fees
  • Safe deposit box rental
  • Interest on margin accounts
Taxes

  • Certain special assessments
  • Condo or coop maintenance (property tax portion)
  • Disability insurance tax (some states)
  • Foreign taxes
  • Income tax (state and local)
  • Occupational taxes
  • Personal property tax
  • Real property tax
  • State transfer tax
  • Withholding taxes (Local)

Casualty and theft Losses – subject to limitations

Qualified Medical Expenses –

Generally, you can only deduct the excess over 7.5% of Adjusted Gross Income (AGI), and then only if you can itemize on Schedule A.  This means that if you make $50,000, you can only deduct the amount of medical expenses over $3,750.

  • Acupuncture
  • Air conditioner or air purifier necessary for relief from allergies or other respiratory problems
  • Alcoholism treatment
  • Analysis
  • Artificial limbs
  • Artificial teeth
  • Birth control pills prescribed by a doctor
  • Braille books and magazines used by a visually-impaired person
  • A clarinet and lessons to treat the improper alignment of a child’s upper and lower teeth
  • Contact lenses
  • Cosmetic surgery to improve a deformity
  • Dental fees and supplies
  • Diet, special. When prescribed by a doctor, you can deduct the extra cost of purchasing special food to alleviate a specific medical condition.
  • Doctor or physician expenses
  • Drug addiction treatment
  • Elastic hosiery to treat blood circulation problems
  • Exercise program if recommended by doctor to treat a specific condition
  • Extra rent/utilities for a larger apartment required in order to provide space for a nurse/attendant
  • Eye surgery, when it is not for cosmetic purposes only
  • Fertility treatment:  Limited to procedures such as in vitro fertilization (including temporary storage of eggs or sperm) and surgery, including an operation to reverse prior surgery that prevented the person operated on from having children.
  • Guide dog
  • Hospital care
  • Household help for nursing care services only
  • Insurance premiums for medical care coverage
  • Laboratory fees
  • Lead-based paint removal where a child has or had lead poisoning
  • Legal fees paid to authorize treatment for mental illness
  • Lifetime care advance payments
  • Lodging expenses while away from home to receive medical care in a hospital or medical facility
  • Long-term care insurance and long term care expenses (with limitations)
  • Mattresses and boards bought specifically to alleviate an arthritic condition
  • Medical aids. This includes wheelchairs, hearing aids and batteries, eyeglasses, contact lenses, crutches, braces, and guide dogs (including costs paid for their care).
  • Medical conference admission costs and travel expenses for a chronically ill person or a parent of a chronically ill child to learn about new medical treatments.
  • Medicines and prescription drugs
  • Nursing care.
  • Nursing home expenses if the there to obtain medical care.
  • Oxygen and oxygen equipment.
  • Reclining chair bought on a doctor’s advice by a person with a cardiac condition.
  • Special education tuition of mentally impaired or physically disabled person.
  • Smoking cessation programs.
  • Swimming costs, if therapeutic and prescribed by a physician.
  • Telephone cost, repair and equipment for a hearing-impaired person.
  • Television equipment to display the audio part of a TV program for hearing-impaired persons.
  • Transplants of an organ, but not hair transplants.
  • Transportation costs for obtaining medical care.
  • Travel expenses for parents visiting their child in a special school for children with drug problems, where the visits are part of the medical treatment.
  • Weight loss program, if it is recommended by a doctor to treat a specific medical condition or to cure any specific ailment or disease
  • Whirlpool baths prescribed by a doctor.
  • Wig for the mental health of a patient who lost his or her hair due to a disease.
  • X-ray Services

 

Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2017, all rights reserved ©.  

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