jlzwhite.gif (125550 bytes) Business Tax Tips       
    Posted May 19, 2008                                                                                   JLZ Business Services

Our Business Tax Tips Section provides valuable on-line information for the entrepreneur and business owner.  Browse away ... we're certain you'll find information to make your business more successful. 
Miscellaneous Itemized Tax Deductions
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You can only deduct those miscellaneous itemized deductions that exceed 2 percent of your Adjusted Gross Income (AGI). This tax tip encourages you to consider all of the miscellaneous deductions allowed before dismissing this as another tax break that doesn't apply to your situation.

Have you spent money on career, legal or investment advice? Have you incurred gambling debts? This tax tip reviews major miscellaneous deductions in five areas:

  • Work clothes and uniforms
  • Job-related education
  • Legal advice
  • Investment expenses
  • Gambling losses

As this tax tip demonstrates, a number of taxpayers qualify for this deduction.

Work clothes and uniforms
You can deduct the purchase price and maintenance costs such as cleaning of uniforms and work clothes if:

  • The employer specifically requires them, and
  • They aren't adaptable to general use such that they can take the place of regular clothing.

Some examples are uniforms or work clothes belonging to:

  • Professional athletes
  • Firefighters and police
  • Company logo apparel or any other clothing designed strictly for the workplace

You may also deduct costs for work clothes that haven't been specifically required by the employer, as long as they aren't suitable for ordinary wear. An example is protective work clothes, shoes and gloves.

Job-related education expenses
There is a possibility you can deduct education expenses if the education falls under one of two categories. If your employer or the law requires you return to school to keep your present salary, status or job, the expenses could be deductible. Expenses for education that maintains or improves skills needed in your present work may also be deductible.

However, even if your expenses qualify in one of the categories described above, you can't deduct the costs if one of the following applies:

  • The education helps return you to a job, business or profession;
  • The education meets the minimal requirements for a trade or business; or
  • The education qualifies you for a new job, trade, or business.

Legal fees
You can deduct legal fees for collecting or producing taxable income, keeping a job or obtaining tax advice. These are some instances in which the legal fees are deductible:

  • Fighting a discharge from a former job
  • The tax advice portion of estate planning
  • The tax advice portion of divorce fees
  • Collecting overdue alimony

Ensure the deductibility of the legal fees having your attorney(s) fully itemize your bill and separate the fees by category.

Investment expenses
Exercise discretion when considering investment expenses as miscellaneous deductions. First of all, you can't deduct broker's commissions or other costs directly related to buying or selling an investment. Why? These costs are added to the purchase price of the investment. This reduces the taxable capital gain recognized when the investment is sold. You also can't deduct the costs of attending investment seminars or conventions.

There are investment expenses that are appropriate to consider as miscellaneous deductions. These include:

  • Investment advice fees
  • Tax preparation or advice fees
  • Investment or tax related books or subscriptions
  • Safe deposit boxes
  • IRA or Keogh custodial fees, if paid outside of the IRA or Keogh account
  • Certain investment-related travel and meals and entertainment costs.

Gambling losses
You can deduct gambling losses up to the amount of gambling winnings you report on page 1 of your Form 1040. Unlike the other deductions listed, gambling losses don't have to exceed 2 percent of your AGI. They are deductible in full as long as you otherwise itemize deductions.

You must substantiate these losses to deduct them. Maintain a written log of gambling activities that includes details concerning:

  • Date of gambling
  • Location of gambling
  • Wager amount
  • Type of gambling
  • Winnings and/or losses

You should also keep receipts for ticket purchases such as lottery tickets or bingo, as well as those for travel costs such lodging and airfare for a trip to a casino.

Conclusion
Miscellaneous itemized deductions are deductible only to the extent that they exceed 2 percent of your Adjusted Gross Income (AGI).

Reviewing this tax tip will encourage many taxpayers to consider their own expenses in these areas before assuming they don't qualify for this deduction.