Publication 17
taxmap/pub17/p17-152.htm#en_us_publink1000174068taxmap/pub17/p17-152.htm#en_us_publink1000174071The 2012 rate for business use of a vehicle is 551/2 cents per mile.
This chapter explains which expenses you can claim as miscellaneous itemized deductions on Schedule A (Form 1040). You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. This chapter covers the following topics.
- Deductions subject to the 2% limit.
- Deductions not subject to the 2% limit.
- Expenses you cannot deduct.
 | You must keep records to verify your deductions. You should keep receipts, canceled checks, substitute checks, financial account statements, and other documentary evidence. For more information on recordkeeping, get Publication 552, Recordkeeping for Individuals.
|
taxmap/pub17/p17-152.htm#TXMP5801de24Useful items
You may want to see:
Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions
535 Business Expenses
587 Business Use of Your Home (Including Use by Daycare Providers)
946 How To Depreciate Property
Form (and Instructions) Schedule A (Form 1040):
Itemized Deductions 2106:
Employee Business Expenses
2106-EZ:
Unreimbursed Employee Business Expenses
taxmap/pub17/p17-152.htm#en_us_publink1000174073You can deduct certain 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 by subtracting 2% of your adjusted gross income from the total amount of these expenses. Your adjusted gross income is the amount on Form 1040, line 38.
Generally, you apply the 2% limit after you apply any other deduction limit. For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed in
chapter 26) before you apply the 2% limit.
Deductions subject to the 2% limit are discussed in the three categories in which you report them on Schedule A (Form
1040).
- Unreimbursed employee expenses (line 21).
- Tax preparation fees (line 22).
- Other expenses (line 23).
Generally, you can deduct on Schedule A (Form 1040), line 21, unreimbursed employee expenses that
are:
- Paid or incurred during your tax year,
- For carrying on your trade or business of being an employee,
and
- Ordinary and necessary.
An expense is ordinary if it is common and accepted in your trade, business, or
profession. An expense is necessary if it is appropriate and helpful to your
business. An expense does not have to be required to be considered necessary.
Examples of unreimbursed employee expenses are listed next. The list is followed by discussions of additional unreimbursed employee expenses.
- Business bad debt of an employee.
- Education that is work related. (See chapter 27.)
- Legal fees related to your job.
- Licenses and regulatory fees.
- Malpractice insurance premiums.
- Medical examinations required by an employer.
- Occupational taxes.
- Passport for a business trip.
- Subscriptions to professional journals and trade magazines related to your work.
- Travel, transportation, entertainment, and gifts related to your work. (See
chapter 26.)
You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job.
taxmap/pub17/p17-152.htm#en_us_publink1000174078If you break an employment contract, you can deduct damages you pay your former employer that are attributable to the pay you received from that employer.
taxmap/pub17/p17-152.htm#en_us_publink1000174079You can claim a depreciation deduction for a computer that you use in your work as an employee if its use
is:
- 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, see Publication
529.
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 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
Nondeductible Expenses,
later.
If you were an eligible educator in 2012, you can deduct up to $250 of qualified expenses you paid in 2012 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. If you file Form 1040A, you can deduct these expenses on line 16. If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. However, neither spouse can deduct more than $250 of his or her qualified expenses.
taxmap/pub17/p17-152.htm#en_us_publink1000174084If 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 can claim this deduction 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,
- As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business,
or
- In the case of a separate structure not attached to your home, in connection with 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. See Publication
587 for more detailed information and a worksheet.
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,
- There was a substantial break between the ending of your last job and your looking for a new one,
or
- You are looking for a job for the first time.
You can deduct employment and outplacement agency fees you pay in looking for a new job in your present
occupation.
taxmap/pub17/p17-152.htm#en_us_publink1000174087If, 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 12.)
If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross
income.
taxmap/pub17/p17-152.htm#en_us_publink1000174090You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation.
taxmap/pub17/p17-152.htm#en_us_publink1000174091If 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 is primarily 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.
You can choose to use the standard mileage rate to figure your car expenses. The 2012 rate for business use of a vehicle is
55
1/
2 cents per mile. See
chapter 26 for more information.
You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession.
taxmap/pub17/p17-152.htm#en_us_publink1000174094You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your
return.
taxmap/pub17/p17-152.htm#en_us_publink1000174095An "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 repayment.
taxmap/pub17/p17-152.htm#en_us_publink1000174096If 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 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.
taxmap/pub17/p17-152.htm#en_us_publink1000174097Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. You can depreciate the cost of tools that have a useful life substantially beyond the tax year. For more information about depreciation, see Publication
946.
You can deduct dues and initiation fees you pay for union membership.
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 the 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,
later.
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.
- The clothes 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 clothing.
|
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 that 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.
taxmap/pub17/p17-152.htm#en_us_publink1000174102You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves.
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.
taxmap/pub17/p17-152.htm#en_us_publink1000174103You 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 expenses.
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.
You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school.
taxmap/pub17/p17-152.htm#en_us_publink1000174104You can usually deduct tax preparation fees in the year you pay them. Thus, on your 2012 return, you can deduct fees paid in 2012 for preparing your 2011 return. These fees include the cost of tax preparation software programs and tax publications. They also include any fee you paid for electronic filing of your return.
taxmap/pub17/p17-152.htm#en_us_publink1000174105You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2% limit. On Schedule A (Form 1040), line 23, you can deduct expenses that you pay:
- To produce or collect income that must be included in your gross
income,
- To manage, conserve, or maintain property held for producing such income,
or
- To determine, contest, pay, or claim a refund of any tax.
You can deduct 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 discussions.
If the expenses you pay produce income that is only partially taxable, see
Tax-Exempt Income Expenses, later, under
Nondeductible Expenses.You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property.
taxmap/pub17/p17-152.htm#en_us_publink1000174108You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. First report the loss in Section B of Form 4684, Casualties and Thefts. You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. For other casualty and theft losses, see
chapter 25.
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.
taxmap/pub17/p17-152.htm#en_us_publink1000234768You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. The fees are deductible in the year paid.
taxmap/pub17/p17-152.htm#en_us_publink1000174111You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. But if you work as an employee and also use the computer in that work, see Publication
946.
If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's 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
Termination of Estate
in Publication
559, Survivors, Executors, and Administrators.
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. You can use the fee only to figure gain or loss from the sale. See the instructions for Form 8949 for information on how to report the fee.
taxmap/pub17/p17-152.htm#en_us_publink1000174114You 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 12 under
Other Income.
Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. Deductions of pass-through entities are passed through to the partners or shareholders. The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit.
taxmap/pub17/p17-152.htm#en_us_publink1000174117You 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 miscellaneous itemized deductions 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.
taxmap/pub17/p17-152.htm#en_us_publink1000174118Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. A mutual fund is "publicly offered" if it
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 tax
year.
A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, 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 return as income. You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount.
taxmap/pub17/p17-152.htm#en_us_publink1000174119You should receive information returns from pass-through entities.
taxmap/pub17/p17-152.htm#en_us_publink1000174120These entities issue Schedule K-1, which lists the items and amounts you must report and identifies the tax return schedules and lines to
use.
taxmap/pub17/p17-152.htm#en_us_publink1000174121These 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.
taxmap/pub17/p17-152.htm#en_us_publink1000174122You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income.
taxmap/pub17/p17-152.htm#en_us_publink1000174123You 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, or
- To collect taxable alimony.
You can 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 expenses of resolving nonbusiness tax issues on Schedule A (Form 1040). See
Tax Preparation Fees, earlier.
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
chapter 25.
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 was more than $3,000, see
Repayments Under Claim of Right under
Deductions Not Subject to the 2% Limit,
later.
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.
taxmap/pub17/p17-152.htm#en_us_publink1000174132You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. These service charges include payments
for:
- Holding shares acquired through a plan,
- Collecting and reinvesting cash dividends, and
- Keeping individual records and providing detailed statements of
accounts.
Trustee's administrative fees that are billed separately and paid by you in connection with your individual retirement arrangement (IRA) are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. For more information about IRAs, see
chapter 17.
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