IRS Releases Publication 529 (2016), Miscellaneous Deductions
Publication 529 (2016)
- Jurisdictions
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What's New
Standard mileage rate. The 2016 rate for business use of a vehicle is 54 cents per mile.
Educator expenses expanded. Beginning in 2016, qualified educator expenses also include those expenses you incur while participating in professional development courses related to the curriculum in which you provide instruction. See Educator Expenses for more information about educator expenses.
Future developments. For the latest information about developments related to Pub. 529, such as legislation enacted after it was published, go to http://www.irs.gov/pub529.
Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
This publication explains which expenses you can claim as miscellaneous itemized deductions on Schedule A (Form 1040 or Form 1040NR). You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. This publication covers the following topics.
• Deductions subject to the 2% limit.
• Deductions not subject to the 2% limit.
• Expenses you can't deduct.
• How to report your deductions.
Some of the deductions previously discussed in this publication are adjustments to income rather than miscellaneous deductions. These include certain employee business expenses that must be listed on Form 2106 or Form 2106-EZ and some that are entered directly on Form 1040. Those deductions, which are discussed in
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Tax questions. If you have a tax question not answered by this publication, check IRS.gov and How To Get Tax Help at the end of this publication.
Useful Items
You may want to see:
Publication
• Publication 525 Taxable and Nontaxable Income
• Publication 535 Business Expenses
• Publication 587 Business Use of Your Home (Including Use by Daycare Providers)
• Publication 946 How To Depreciate Property
Form (and Instructions)
• Schedule A (Form 1040) Itemized Deductions
• Form 2106 Employee Business Expenses
• Form 2106-EZ Unreimbursed Employee Business Expenses
See How To Get Tax Help near the end of this publication for information about getting these publications and forms.
Deductions Subject to the 2% Limit
You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040 or Form 1040NR). 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, or Form 1040NR, line 37.
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 later under Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging) before you apply the 2% limit.
Deductions subject to the 2% limit are discussed in the following three categories.
• Unreimbursed employee expenses (Schedule A (Form 1040), line 21 or Schedule A (Form 1040NR), line 7).
• Tax preparation fees (Schedule A (Form 1040), line 22 or Schedule A (Form 1040NR), line 8).
• Other expenses (Schedule A (Form 1040), line 23 or Schedule A (Form 1040NR), line 9).
Unreimbursed Employee Expenses
Generally, the following expenses are deducted on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7.
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, 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 doesn't have to be required to be considered necessary.
You may be able to deduct the following items as unreimbursed employee expenses.
• Business bad debt of an employee.
• Business liability insurance premiums.
• Damages paid to a former employer for breach of an employment contract.
• Depreciation on a computer your employer requires you to use in your work.
• Dues to a chamber of commerce if membership helps you do your job.
• Dues to professional societies.
• Educator expenses.
• Home office or part of your home used regularly and exclusively in your work.
• Job search expenses in your present occupation.
• Laboratory breakage fees.
• 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.
• Repayment of an income aid payment received under an employer's plan.
• Research expenses of a college professor.
• Rural mail carriers' vehicle expenses.
• Subscriptions to professional journals and trade magazines related to your work.
• Tools and supplies used in your work.
• Travel, transportation, meals, entertainment, gifts, and local lodging related to your work.
• Union dues and expenses.
• Work clothes and uniforms if required and not suitable for everyday use.
• Work-related education.
Business Bad Debt
A business bad debt is a loss from a debt created or acquired in your trade or business. Any other worthless debt is a business bad debt only if there is a very close relationship between the debt and your trade or business when the debt becomes worthless.
A debt has a very close relationship to your trade or business of being an employee if your main motive for incurring the debt is a business reason.
Example. You make a bona fide loan to the corporation you work for. It fails to pay you back. You had to make the loan in order to keep your job. You have a business bad debt as an employee.
More information. For more information on business bad debts, see chapter 10 in Pub. 535. For information on nonbusiness bad debts, see chapter 4 in Pub. 550, Investment Income and Expenses.
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
You 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 the convenience of your employer. This means that your use of the computer is for a substantial business reason of your employer. You must consider all facts in making this determination. Use of your computer during your regular working hours to carry on your employer's business is generally for the convenience of your employer.
Required as a condition of your employment. This means that you can't properly perform your duties without the computer. Whether you can properly perform your duties without it depends on all the facts and circumstances. It isn't necessary that your employer explicitly requires you to use your computer. But neither is it enough that your employer merely states that your use of the item is a condition of your employment.
Example. You are an engineer with an engineering firm. You occasionally take work home at night rather than work late at the office. You own and use a computer that is similar to the one you use at the office to complete your work at home. Since your use of the computer isn't for the convenience of your employer and isn't required as a condition of your employment, you can't claim a depreciation deduction for it.
Which depreciation method to use. The depreciation method you use depends on whether you meet the more-than-50%-use test.
More-than-50%-use test met. You meet this test if you use the computer more than 50% in your work. If you meet this test, you can claim accelerated depreciation under the General Depreciation System (GDS). In addition, you may be able to take the section 179 deduction for the year you place the item in service.
More-than-50%-use test not met. If you don't meet the more-than-50%-use test, you are limited to the straight line method of depreciation under the Alternative Depreciation System (ADS). You also can't claim the section 179 deduction. (But if you use your computer in a home office, see the exception below.)
Investment use. Your use of a computer in connection with investments (described later under Other Expenses) doesn't count as use in your work. However, you can combine your investment use with your work use in figuring your depreciation deduction.
Exception for computer used in a home office. The more-than-50%-use test doesn't apply to a computer used only in a part of your home that meets the requirements described later under Home Office. You can claim accelerated depreciation using GDS for a computer used in a qualifying home office, even if you don't use it more than 50% in your work. You also may be able to take a section 179 deduction for the year you place the computer in service. See Computer used in a home office under How To Report, later.
More information. For more information on depreciation and the section 179 deduction for computers and other items used in a home office, see Business Furniture and Equipment in Pub. 946 has detailed information about the section 179 deduction and depreciation deductions using GDS and ADS.
Reporting your depreciation deduction. See How To Report, later, for information about reporting a deduction for depreciation.
RECORDS: You must keep records to prove your percentage of business and investment use.
Dues to Chambers 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.
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 Lobbying Expenses under Nondeductible Expenses, later.
Educator Expenses
If you were an eligible educator in 2016, you can deduct up to $250 of qualified expenses you paid in 2016 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.
Eligible educator. An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in school for at least 900 hours during a school year.
Qualified expenses. Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. An ordinary expense is one that is common and accepted in your educational field. A necessary expense is one that is helpful and appropriate for your profession as an educator. An expense doesn't have to be required to be considered necessary.
Beginning in 2016, qualified expenses also include those expenses you incur while participating in professional development courses related to the curriculum in which you provide instruction. It also includes those expenses related to those students for whom you provide that instruction.
Qualified expenses don't include expenses for home schooling or for nonathletic supplies for courses in health or physical education. You must reduce your qualified expenses by the following amounts.
• Excludable U.S. series EE and I savings bond interest from Form 8815.
• Nontaxable qualified state tuition program earnings.
• Nontaxable earnings from Coverdell education savings accounts.
• Any reimbursements you received for those expenses that weren't reported to you on your Form W-2, box 1.
Educator expenses over limit. If you were an educator in 2016 and you had qualified expenses that you can't take as an adjustment to gross income, you can deduct the rest as an itemized deduction subject to the 2% limit.
Home Office
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 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.
Principal place of business. If you have more than one place of business, the business part of your home is your principal place of business if:
• You use it regularly and exclusively for administrative or management activities of your trade or business, and
• You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.
Otherwise, the location of your principal place of business generally depends on the relative importance of the activities performed at each location and the time spent at each location.
RECORDS: You should keep records that will give the information needed to figure the deduction according to these rules. Also keep canceled checks, substitute checks, or account statements and receipts of the expenses paid to prove the deductions you claim.
More information. See Pub. 587 for more detailed information and a worksheet for figuring the deduction.
Job Search Expenses
You can deduct certain expenses you have in looking for a new job in your present occupation, even if you don't get a new job. You can't 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.
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 Pub. 525.
Employer pays the employment agency. If your employer pays the fees directly to the employment agency and you aren't responsible for them, you don't include them in your gross income.
Résumé. You 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.
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 is primarily to look for a new job.
Even if you can't 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 2016 rate for business use of a vehicle is 54 cents per mile. See Research Expenses of a College Professor If you are a college professor, you can deduct your 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 can't deduct the cost of travel as a form of education. Rural Mail Carriers' Vehicle Expenses If your expenses to use a vehicle in performing services as a rural mail carrier are more than the amount of your reimbursements, you can deduct the unreimbursed expenses. See chapter 4 of Pub. 946. Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging If you are an employee and have ordinary and necessary business-related expenses for travel away from home, local transportation, entertainment, and gifts, you may be able to deduct these expenses. Generally, you must file Form 2106-EZ to claim these expenses. Travel expenses. Travel expenses are those incurred while traveling away from home for your employer. You can deduct travel expenses paid or incurred in connection with a temporary work assignment. Generally, you can't deduct travel expenses paid or incurred in connection with an indefinite work assignment. Travel expenses may include: • Meals and lodging while away from home, • Taxi fares, • Baggage charges, and • Cleaning and laundry expenses. • In a temporary duty status, and • To investigate, prosecute, or provide support services for the investigation or prosecution of a federal crime.
Armed Forces reservists traveling more than 100 miles from home. If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct some of your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. The balance, if any, is reported on Schedule A.
You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Naval, Marine Corps, Air Force, Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service.
For more information on travel expenses, see • You have at least one regular work location (other than your home) for the same trade or business. (If this applies, the distance between your home and the temporary work location doesn't matter.)
For this purpose, a work location is generally considered temporary if your work there is realistically expected to last (and does in fact last) for 1 year or less. It isn't temporary if your work there is realistically expected to last for more than 1 year, even if it actually lasts for 1 year or less. If your work there initially is realistically expected to last for 1 year or less, but later is realistically expected to last for more than 1 year, the work location is generally considered temporary until the date your realistic expectation changes and not temporary after that date. For more information, see chapter 1 of You can deduct 80% of your business-related meal expenses if you consume the meals during or incident to any period subject to the Department of Transportation's "hours of service" limits. You apply this 80% limit before you apply the 2%-of-adjusted-gross-income limit.
Gift expenses. You can generally deduct up to $25 of business gifts you give to any one individual during the year. The following items don't count toward the $25 limit.
• Identical, widely distributed items costing $4 or less that have your name clearly and permanently imprinted.
• Signs, racks, and promotional materials to be displayed on the business premises of the recipient.
Local lodging. If your employer provides or requires you to obtain lodging while you aren't traveling away from home, you can deduct the cost of the lodging if it is:
• on a temporary basis,
• necessary for you to participate in or be available for a business meeting or employer function, and
• the costs are ordinary and necessary, but not lavish or extravagant.
If your employer provides the lodging or reimburses you for the cost of the lodging, you can deduct the cost only if the value or the reimbursement is included in your gross income because it is reported as wages on your Form W-2.
Additional information. See • The clothes aren't suitable for everyday wear.
CAUTION: It isn't enough that you wear distinctive clothing. The clothing must be specifically required by your employer. Nor is it enough that you don't, 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 aren't 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, isn't 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 aren't deductible.
Protective clothing. You 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.
Military uniforms. You generally can't 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 don't 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 can't deduct the cost of your uniforms if they replace regular clothing. However, you can deduct the cost of insignia, shoulder boards, and related items.
You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school.
Work-Related Education
You can deduct expenses you have for education, even if the education may lead to a degree, if the education meets at least one of the following two tests.
• It maintains or improves skills required in your present work.
• It is required by your employer or the law to keep your salary, status, or job, and the requirement serves a business purpose of your employer.
You can't deduct expenses you have for education, even though one or both of the preceding tests are met, if the education:
• Is needed to meet the minimum educational requirements to qualify you in your trade or business, or
• Is part of a program of study that will lead to qualifying you in a new trade or business.
If your education qualifies, you can deduct expenses for tuition, books, supplies, laboratory fees, and similar items, and certain transportation costs.
If the education qualifies you for a new trade or business, you can't deduct the educational expenses even if you don't intend to enter that trade or business.
Travel as education. You can't deduct the cost of travel that in itself constitutes a form of education. For example, a French teacher who travels to France to maintain general familiarity with the French language and culture can't deduct the cost of the trip as an educational expense.
More information. See Pub. 970, Tax Benefits for Education, for a complete discussion of the deduction for work-related education expenses.
Education Expenses During Unemployment
If you stop working for a year or less in order to get education in order to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work.
Tax Preparation Fees
You can usually deduct tax preparation fees on the return for the year in which you pay them. Thus, on your 2016 return, you can deduct fees paid in 2016 for preparing your 2015 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. See Tax preparation fees under How To Report, later.
Other Expenses
You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2%-of-adjusted-gross-income limit. On Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9, you can deduct the ordinary and necessary expenses that you pay:
1. To produce or collect income that must be included in your gross income,
2. To manage, conserve, or maintain property held for producing such income, or
3. 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 reasonable and closely related to these purposes.
These other expenses include the following items.
• Appraisal fees for a casualty loss or charitable contribution.
• Casualty and theft losses from property used in performing services as an employee.
• Clerical help and office rent in caring for investments.
• Depreciation on home computers used for investments.
• Excess deductions (including administrative expenses) allowed a beneficiary on termination of an estate or trust.
• Fees to collect interest and dividends.
• Hobby expenses, but generally not more than hobby income.
• Indirect miscellaneous deductions from pass-through entities.
• Investment fees and expenses.
• Legal fees related to producing or collecting taxable income or getting tax advice.
• Loss on deposits in an insolvent or bankrupt financial institution.
• Loss on traditional IRAs or Roth IRAs, when all amounts have been distributed to you.
• Repayments of income.
• Repayments of social security benefits.
• Safe deposit box rental, except for storing jewelry and other personal effects.
• Service charges on dividend reinvestment plans.
• Tax advice fees.
• Trustee's fees for your IRA, if separately billed and paid.
If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses, later, under Nondeductible Expenses.
Appraisal Fees
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 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 more information on casualty and theft losses, see Pub. 547, Casualties, Disasters, and Thefts.
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.
Credit or Debit Card Convenience Fees
You 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 on the return for the year in which you paid them. For example, fees charged to payments made in 2016 can be claimed on the 2016 tax return.
Depreciation on Home Computer
You 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 Depreciation on Computers under Unreimbursed Employee Expenses, earlier. For more information on depreciation, see Pub. 946.
Excess Deductions of an Estate
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. Don't 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 Pub. 559, Survivors, Executors, and Administrators.
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 can't 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 can't 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 Schedule D (Form 1040) for information on how to report the fee.
Hobby Expenses
You can generally deduct hobby expenses, but only up to the amount of hobby income. A hobby isn't a business because it isn't carried on to make a profit. See Not-for-Profit Activities in chapter 1 of Pub. 535.
Indirect Deductions of Pass-Through Entities
Pass-through entities include partnerships, S corporations, and mutual funds that aren't 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.
Example. 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 miscellaneous itemized deductions subject to the 2% limit. However, if the investment club partnership has investments that also produce nontaxable income, you can't deduct your share of the partnership's expenses that produce the nontaxable income.
Publicly offered mutual funds. Publicly offered mutual funds don't 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 can't further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount.
Information returns. You should receive information returns from pass-through entities.
Partnerships and S corporations. These entities issue Schedule K-1, which lists the items and amounts you must report, and identifies the tax return schedules and lines to use.
Nonpublicly offered mutual funds. These funds will send you a Form 1099-DIV, 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.
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.
Legal Expenses
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, 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 or Form 1040NR). See Tax Preparation Fees, earlier.
Unlawful discrimination claims. You may be able to deduct, as an adjustment to income on Form 1040, line 36, or Form 1040NR, line 35, rather than as a miscellaneous itemized deduction, attorney fees and court costs for actions settled or decided after October 22, 2004, involving a claim of unlawful discrimination, a claim against the U.S. Government, or a claim made under section Pub. 525 for more information.
Loss on Deposits
A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. If you can reasonably estimate the amount of your loss on money you have on deposit in a financial institution that becomes insolvent or bankrupt, you can generally choose to deduct it in the current year even though its exact amount hasn't been finally determined. If elected, the casualty loss is subject to certain deduction limitations. The election is made on Form 4684. Once you make this choice, you can't change it without IRS approval.
If none of the deposit is federally insured, you can deduct the loss in either of the following ways.
• As an ordinary loss (as a miscellaneous itemized deduction subject to the 2% limit). Write the name of the financial institution and "Insolvent Financial Institution" beside the amount on Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9. This deduction is limited to $20,000 ($10,000 if you are married filing separately) for each financial institution, reduced by any expected state insurance proceeds.
• As a casualty loss. Report it on Form 4684 first and then on Pub. 547 for details.
• As a nonbusiness bad debt. Report it on Schedule D (Form 1040).
If any part of the deposit is federally insured, you can deduct the loss only as a casualty loss.
Exception. You can't make this choice if you are a 1%-or-more owner or an officer of the financial institution, or are related to such owner or officer. For a definition of "related," see Deposit in Insolvent or Bankrupt Financial Institution in chapter 4 of Pub. 550.
Actual loss different from estimated loss. If you make this choice and your actual loss is less than your estimated loss, you must include the excess in income. See Recoveries in Pub. 525. If your actual loss is more than your estimated loss, treat the excess loss as explained under Choice not made, next.
Choice not made. If you don't make this choice (or if you have an excess actual loss after choosing to deduct your estimated loss), treat your loss (or excess loss) as a non-business bad debt (deductible as a short-term capital loss) in the year its amount is finally determined. See Non-business Bad Debts in chapter 4 of Pub. 550.
Loss on IRA
If you have a loss on your traditional IRA (or Roth IRA) investment, you can deduct the loss as a miscellaneous itemized deduction subject to the 2% limit, but only when all the amounts in all your traditional IRA (or Roth IRA) accounts have been distributed to you and the total distributions are less than your unrecovered basis. For more information, see Pub. 590-B, Distributions from Individual Retirement Arrangements (IRAs).
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 was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later.
Repayments of Social Security Benefits
If the total of the amounts in box 5 (net benefits for 2016) of all your Forms SSA-1099, Social Security Benefit Statement, and Forms RRB-1099, Payments By the Railroad Retirement Board, is a negative figure (a figure in parentheses), you may be able to take a miscellaneous itemized deduction subject to the 2% limit. The amount you can deduct is the part of the negative figure that represents an amount you included in gross income in an earlier year.
The amount in box 5 of Form SSA-1099 or RRB-1099 is the net amount of your benefits for the year. It will be a negative figure if the amount of benefits you repaid in 2016 (box 4) is more than the gross amount of benefits paid to you in 2016 (box 3).
CAUTION: If the deduction is more than $3,000, you will have to use a special computation to figure your tax. See Pub. 915, Social Security and Equivalent Railroad Retirement Benefits, for additional information.
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 can't 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 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 for IRA
Trustee's administrative fees that are billed separately and paid by you in connection with your IRA are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit.
Deductions Not Subject to the 2% Limit
You can deduct the items listed below as miscellaneous itemized deductions. They aren't subject to the 2% limit. Report these items on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14.
List of Deductions
• Amortizable premium on taxable bonds.
• Casualty and theft losses from income-producing property.
• Federal estate tax on income in respect of a decedent.
• Gambling losses up to the amount of gambling winnings.
• Impairment-related work expenses of persons with disabilities.
• Loss from other activities from Schedule K-1 (Form 1065-B), box 2.
• Losses from Ponzi-type investment schemes.
• Repayments of more than $3,000 under a claim of right.
• Unrecovered investment in an annuity.
Amortizable Premium on Taxable Bonds
In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. You can elect to amortize the premium on taxable bonds. The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item.
Pre-1998 election to amortize bond premium. Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium doesn't apply to bonds you acquired before 1988.
Bonds acquired after October 22, 1986, and before 1988. The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you chose to treat it as an offset to interest income on the bond.
Bonds acquired before October 23, 1986. The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2% limit.
Deduction for excess premium. On certain bonds (such as bonds that pay a variable rate of interest or that provide for an interest-free period), the amount of bond premium allocable to a period may exceed the amount of stated interest allocable to the period. If this occurs, treat the excess as a miscellaneous itemized deduction that isn't subject to the 2% limit. However, the amount deductible is limited to the amount by which your total interest inclusions on the bond in prior periods exceed the total amount you treated as a bond premium deduction on the bond in prior periods. If any of the excess bond premium can't be deducted because of the limit, this amount is carried forward to the next period and is treated as bond premium allocable to that period.
CAUTION: Pre-1998 choice to amortize bond premium. If you made the choice to amortize the premium on taxable bonds before 1998, you can deduct the bond premium amortization that is more than your interest income only for bonds acquired during 1998 and later years.
More information. For more information on bond premium, see Bond Premium Amortization in chapter 3 of Pub. 550.
Casualty and Theft Losses of Income-Producing Property
You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). First report the loss in Section B of Form 4684. 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 more information on casualty and theft losses, see Pub. 547.
Federal Estate Tax on Income in Respect of a Decedent
You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that wasn't properly includible in the decedent's final income tax return. See Pub. 559 for information about figuring the amount of this deduction.
Gambling Losses Up to the Amount of Gambling Winnings
You must report the full amount of your gambling winnings for the year on Form 1040, line 21. You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. You can't deduct gambling losses that are more than your winnings. Generally, nonresident aliens can't deduct gambling losses on Schedule A (Form 1040NR).
CAUTION: You can't reduce your gambling winnings by your gambling losses and report the difference. You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Therefore, your records should show your winnings separately from your losses.
RECORDS: Diary of winnings and losses. You must keep an accurate diary or similar record of your losses and winnings.
Your diary should contain at least the following information.
• The date and type of your specific wager or wagering activity.
• The name and address or location of the gambling establishment.
• The names of other persons present with you at the gambling establishment.
• The amount(s) you won or lost.
Proof of winnings and losses. In addition to your diary, you should also have other documentation. You can generally prove your winnings and losses through Form W-2G, Certain Gambling Winnings; Form 5754, Statement by Person(s) Receiving Gambling Winnings; wagering tickets; canceled checks; substitute checks; credit records; bank withdrawals; and statements of actual winnings or payment slips provided to you by the gambling establishment.
For specific wagering transactions, you can use the following items to support your winnings and losses.
CAUTION: These recordkeeping suggestions are intended as general guidelines to help you establish your winnings and losses. They aren't all-inclusive. Your tax liability depends on your particular facts and circumstances.
Keno. Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records.
Slot machines. A record of the machine number and all winnings by date and time the machine was played.
Table games (twenty-one (blackjack), craps, poker, baccarat, roulette, wheel of fortune, etc.). The number of the table at which you were playing. Casino credit card data indicating whether the credit was issued in the pit or at the cashier's cage.
Bingo. A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets. Supplemental records include any receipts from the casino, parlor, etc.
Racing (horse, harness, dog, etc.). A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Supplemental records include unredeemed tickets and payment records from the racetrack.
Lotteries. A record of ticket purchases, dates, winnings, and losses. Supplemental records include unredeemed tickets, payment slips, and winnings statements.
Impairment-Related Work Expenses
If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses.
Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and other expenses in connection with your place of work that are necessary for you to be able to work.
Example. You are blind. You must use a reader to do your work. You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. The reader's services are only for your work. You can deduct your expenses for the reader as impairment-related work expenses.
Self-employed. If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses.
See Impairment-related work expenses, later under How To Report.
Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2
If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14 (only if effectively connected with a U.S. trade or business). It isn't subject to the passive activity limitations.
Officials Paid on a Fee Basis
If you are a fee-basis official, you can claim your expenses in performing services in that job as an adjustment to income rather than as a miscellaneous itemized deduction. See Pub. 463 for more information.
Losses From Ponzi-type Investment Schemes
These losses are deductible as theft losses of income-producing property on your tax return for the year the loss was discovered. You figure the deductible loss in Section B of Form 4684. However, if you qualify to use Revenue Procedure 2009-20 (as modified by Revenue Procedure 2011-58) and you choose to follow the procedures in the guidance, complete Section C of Form 4684 before completing Section B. Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. You don't need to complete Appendix A. See the Form 4684 instructions and Pub. 547, Casualties, Disasters, and Thefts, for more information.
Repayments Under Claim of Right
If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid, or take a credit against your tax. See Repayments in Pub. 525 for more information.
Unrecovered Investment in Annuity
A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. See Pub. 575, Pension and Annuity Income, for more information about the tax treatment of pensions and annuities.
You can't deduct the following expenses.
List of Nondeductible Expenses
• Adoption expenses.
• Broker's commissions.
• Burial or funeral expenses, including the cost of a cemetery lot.
• Campaign expenses.
• Capital expenses.
• Check-writing fees.
• Club dues.
• Commuting expenses.
• Fees and licenses, such as car licenses, marriage licenses, and dog tags.
• Fines and penalties, such as parking tickets.
• Health spa expenses.
• Hobby losses--but see Hobby Expenses, earlier.
• Home repairs, insurance, and rent.
• Home security system.
• Illegal bribes and kickbacks--see Bribes and kickbacks in chapter 11 of Pub. 535.
• Investment-related seminars.
• Life insurance premiums paid by the insured.
• Lobbying expenses.
• Losses from the sale of your home, furniture, personal car, etc.
• Lost or misplaced cash or property.
• Lunches with co-workers.
• Meals while working late.
• Medical expenses as business expenses other than medical examinations required by your employer.
• Personal disability insurance premiums.
• Personal legal expenses.
• Personal, living, or family expenses.
• Political contributions.
• Professional accreditation fees.
• Professional reputation, expenses to improve.
• Relief fund contributions.
• Residential telephone line.
• Stockholders' meeting, expenses of attending.
• Tax-exempt income, expenses of earning or collecting.
• The value of wages never received or lost vacation time.
• Travel expenses for another individual.
• Voluntary unemployment benefit fund contributions.
• Wristwatches.
Adoption Expenses
You can't deduct the expenses of adopting a child but you may be able to take a credit for those expenses. For details, see Form 8839, Qualified Adoption Expenses.
Commissions
Commissions paid on the purchase of securities aren't deductible, either as business or nonbusiness expenses. Instead, these fees must be added to the taxpayer's cost of the securities. Commissions paid on the sale are deductible as business expenses only by dealers.
Campaign Expenses
You can't deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. These include qualification and registration fees for primary elections.
Legal fees. You can't deduct legal fees paid to defend charges that arise from participation in a political campaign.
Capital Expenses
You can't currently deduct amounts paid to buy property that has a useful life substantially beyond the tax year or amounts paid to increase the value or prolong the life of property. If you use such property in your work, you may be able to take a depreciation deduction. See Pub. 946. If the property is a car used in your work, also see • Provide members or their guests with access to entertainment facilities.
Dues paid to airline, hotel, and luncheon clubs aren't deductible.
Commuting Expenses
You can't deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). If you haul tools, instruments, or other items in your car to and from work, you can deduct only the additional cost of hauling the items, such as the rent on a trailer to carry the items.
Fines or Penalties
You can't deduct fines or penalties you pay to a governmental unit for violating a law. This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike.
Health Spa Expenses
You can't deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer.
Home Security System
You can't deduct the cost of a home security system as a miscellaneous deduction. However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. See Home Office under Unreimbursed Employee Expenses, earlier, and Pub. 587.
Investment-Related Seminars
You can't deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes.
Life Insurance Premiums
You can't deduct premiums you pay on your life insurance. You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. See Pub. 504, Divorced or Separated Individuals, for information on alimony.
Lobbying Expenses
You generally can't deduct amounts paid or incurred for lobbying expenses. These include expenses to:
1. Influence legislation,
2. Participate, or intervene, in any political campaign for, or against, any candidate for public office,
3. Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or
4. Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials.
Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities.
Covered executive branch official. A covered executive branch official, for the purpose of (4) above, is any of the following officials.
• The President.
• The Vice President.
• Any officer or employee of the White House Office of the Executive Office of the President, and the two most senior level officers of each of the other agencies in the Executive Office.
• Any individual serving in a position in Level I of the Executive Schedule under section 5312 of Title 5, United States Code, any other individual designated by the President as having Cabinet-level status, and any immediate deputy of one of these individuals.
Dues used for lobbying. If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you can't deduct that part.
Exceptions. You can deduct certain lobbying expenses if they are ordinary and necessary expenses of carrying on your trade or business.
• You can deduct expenses for attempting to influence the legislation of any local council or similar governing body (local legislation). An Indian tribal government is considered a local council or similar governing body.
• You can deduct in-house expenses for influencing legislation or communicating directly with a covered executive branch official if the expenses for the tax year aren't more than $2,000 (not counting overhead expenses).
• If you are a professional lobbyist, you can deduct the expenses you incur in the trade or business of lobbying on behalf of another person. Payments by the other person to you for lobbying activities can't be deducted.
Lost or Mislaid Cash or Property
You can't deduct a loss based on the mere disappearance of money or property. However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. See Pub. 547.
Example. A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. The diamond falls from the ring and is never found. The loss of the diamond is a casualty.
Lunches With Co-workers
You can't deduct the expenses of lunches with co-workers, except while traveling away from home on business. See Pub. 463 for information on deductible entertainment expenses and expenses while traveling away from home.
Personal Legal Expenses
You can't deduct personal legal expenses such as those for the following.
• Custody of children.
• Breach of promise to marry suit.
• Civil or criminal charges resulting from a personal relationship.
• Damages for personal injury (except certain whistle-blower claims and unlawful discrimination claims). For more information about unlawful discrimination claims, see Deductions Subject to the 2% Limit, earlier.
• Preparation of a title (or defense or perfection of a title).
• Preparation of a will.
• Property claims or property settlement in a divorce.
You can't deduct these expenses even if a result of the legal proceeding is the loss of income-producing property.
Political Contributions
You can't deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate aren't deductible.
Professional Accreditation Fees
You can't deduct professional accreditation fees such as the following.
• Accounting certificate fees paid for the initial right to practice accounting.
• Bar exam fees and incidental expenses in securing initial admission to the bar.
• Medical and dental license fees paid to get initial licensing.
Professional Reputation
You can't deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation.
Relief Fund Contributions
You can't deduct contributions paid to a private plan that pays benefits to any covered employee who can't work because of any injury or illness not related to the job.
Residential Telephone Service
You can't deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business.
Stockholders' Meetings
You can't deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. You can't deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments.
Tax-Exempt Income Expenses
You can't deduct expenses to produce tax-exempt income. You can't deduct interest on a debt incurred or continued to buy or carry tax-exempt securities.
If you have expenses to produce both taxable and tax-exempt income, but you can't identify the expenses that produce each type of income, you must divide the expenses based on the amount of each type of income to determine the amount that you can deduct.
Example. During the year, you received taxable interest of $4,800 and tax-exempt interest of $1,200. In earning this income, you had total expenses of $500 during the year. You can't identify the amount of each expense item that is for each income item. Therefore, 80% ($4,800/$6,000) of the expense is for the taxable interest and 20% ($1,200/$6,000) is for the tax-exempt interest. You can deduct, subject to the 2% limit, expenses of $400 (80% of $500).
Travel Expenses for Another Individual
You generally can't deduct travel expenses you pay or incur for a spouse, dependent, or other individual who accompanies you (or your employee) on personal or business travel unless the spouse, dependent, or other individual is an employee of the taxpayer, the travel is for a bona fide business purpose, and such expenses would otherwise be deductible by the spouse, dependent, or other individual. See How To Report
You must itemize deductions on Schedule A (Form 1040 or Form 1040NR) to claim miscellaneous deductions.
• Report your miscellaneous deductions subject to the 2% limit on lines 21 through 23 and the total on line 24 for Form 1040, or lines 7 through 9 and the total on line 10 for Form 1040NR.
• Report your miscellaneous deductions not subject to the 2% limit on line 28 for Form 1040, or line 14 for Form 1040NR.
See Instructions for Schedule A in your Form 1040 or Form 1040NR instruction booklet for more information.
Form 2106 and Form 2106-EZ. If you have deductible employee business expenses, you usually must file either Form 2106-EZ.
You must file Form 2106-EZ if any of the following applies to you.
1. You are a qualified performing artist claiming performing-artist-related expenses.
2. You are a fee-basis state or local government official claiming expenses in performing that job.
3. You are an individual with a disability and are claiming impairment-related work expenses. See Impairment-related work expenses, later.
4. You have travel expenses as a member of the Armed Forces reserves that you can deduct as an adjustment to gross income.
5. You are claiming job-related vehicle, travel, transportation, meal, or entertainment expenses. This doesn't apply if either of the following is true.
a. None of your expenses are deductible because of the 2% limit on miscellaneous itemized deductions.
b. Your only entry on Form 2106-EZ is on line 4. If this is true and (a) above isn't true, enter the expenses directly on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7.
1. You aren't reimbursed by your employer for any expenses. (Amounts your employer included as wages on your Form W-2, box 1, aren't considered reimbursements.)
2. Either:
a. You aren't claiming vehicle expense, or
b. You are using the standard mileage rate for your vehicle.
Computer used in a home office. Use Form 4562, Part III, to claim the depreciation deduction for a computer you placed in service during 2016 and used only in your home office. Complete Form 4562, Part I, if you are claiming a section 179 deduction.
Don't use Form 4562 to claim the depreciation deduction for a computer you placed in service before 2016 and used only in your home office, unless you are otherwise required to file Form 4562. Instead, report the depreciation directly on the appropriate form. But if you are otherwise required to file Form 4562, report the depreciation in Part III, line 17.
Impairment-related work expenses. If you are an employee, you enter impairment-related work expenses on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14, that part of the amount on Form 2106, line 10, or Form 2106-EZ, line 6, that is related to your impairment. Enter the amount that is unrelated to your impairment on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7.
If you are self-employed, enter your impairment-related work expenses on the appropriate Form (Schedule C, C-EZ, E, or F) used to report your business income and expenses.
Tax preparation fees. 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 expenses of preparing the remainder of the return on Schedule A (Form 1040), line 22, or Form 1040NR, Schedule A, line 8.
Example
Debra Smith is employed as a salesperson. She isn't a statutory employee. Her adjusted gross income is $40,000, and she didn't receive any reimbursement for her expenses. She has the following qualifying miscellaneous deductions:
Entertainment expenses $500
Transportation expenses 500
Home office expenses 1,100
Tax return preparation 200
Investment counseling 300
Gambling losses (reported $200 as income) 200
Of Debra's deductions, only gambling losses aren't subject to the 2%-of-adjusted-gross-income limit. She enters the gambling losses on Schedule A, line 28. The other items are subject to the 2% limit and are shown on Schedule A, lines 21, 22, and 23.
Debra completes Form 2106-EZ, Part I. She enters the transportation expenses of $500 on line 2. The home office expenses of $1,100 are entered on line 4. The entertainment expenses of $500 are subject to the 50% limit and are entered on line 5. She then completes the rest of the form. The total expenses of $1,850, shown on line 6, are entered on Schedule A, line 21.
Debra's expenses for tax return preparation are entered on Schedule A, line 22. Her expenses for investment counseling are entered on line 23. She then totals the amounts on lines 21, 22, and 23 and enters this total of $2,350 on line 24. She enters $40,000, her adjusted gross income, on line 25. She multiplies this amount by 2% (.02) and enters the result of $800 on line 26. She subtracts the amount on line 26 from the amount on line 24 and enters $1,550, her allowable deduction, on line 27.
If you have questions about a tax issue, need help preparing your tax return, or want to download free publications, forms, or instructions, go to IRS.gov and find resources that can help you right away.
Preparing and filing your tax return. Find free options to prepare and file your return on IRS.gov or in your local community if you qualify.
The Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $54,000 or less, persons with disabilities, the elderly, and limited-English-speaking taxpayers who need help preparing their own tax returns. The Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly those who are 60 years of age and older. TCE volunteers specialize in answering questions about pensions and retirement-related issues unique to seniors.
You can go to IRS.gov and click on the Filing tab to see your options for preparing and filing your return which include the following.
• Free File. Go to IRS.gov/freefile. See if you qualify to use brand-name software to prepare and e-file your federal tax return for free.
• VITA. Go to IRS.gov/vita, download the free IRS2Go app, or call 1-800-906-9887 to find the nearest VITA location for free tax preparation.
• TCE. Go to IRS.gov/tce, download the free IRS2Go app, or call 1-888-227-7669 to find the nearest TCE location for free tax preparation.
Getting answers to your tax law questions. On IRS.gov get answers to your tax questions anytime, anywhere.
• Go to IRS.gov/help or IRS.gov/letushelp pages for a variety of tools that will help you get answers to some of the most common tax questions.
• Go to IRS.gov/ita for the Interactive Tax Assistant, a tool that will ask you questions on a number of tax law topics and provide answers. You can print the entire interview and the final response for your records.
• Go to IRS.gov/pub17 to get Pub. 17, Your Federal Income Tax for Individuals, which features details on tax-saving opportunities, 2016 tax changes, and thousands of interactive links to help you find answers to your questions. View it online in HTML or as a PDF or, better yet, download it to your mobile device to enjoy eBook features.
• You may also be able to access tax law information in your electronic filing software.
Getting tax forms and publications. Go to IRS.gov/forms to view, download, or print all of the forms and publications you may need. You can also download and view popular tax publications and instructions (including the 1040 instructions) on mobile devices as an eBook at no charge. Or, you can go to IRS.gov/orderforms to place an order and have forms mailed to you within 10 business days.
Using direct deposit. The fastest way to receive a tax refund is to combine direct deposit and IRS e-file. Direct deposit securely and electronically transfers your refund directly into your financial account. Eight in 10 taxpayers use direct deposit to receive their refund. IRS issues more than 90% of refunds in less than 21 days.
Delayed refund for returns claiming certain credits. Due to changes in the law, the IRS can't issue refunds before February 15, 2017, for returns that claim the earned income credit (EIC) or the additional child tax credit (ACTC). This applies to the entire refund, not just the portion associated with these credits.
Getting a transcript or copy of a return. The quickest way to get a copy of your tax transcript is to go to IRS.gov/transcripts. Click on either "Get Transcript Online" or "Get Transcript by Mail" to order a copy of your transcript. If you prefer, you can:
• Order your transcript by calling 1-800-908-9946.
• Mail Form 4506-T or Form 4506T-EZ (both available on IRS.gov).
Using online tools to help prepare your return. Go to IRS.gov/tools for the following.
• The Earned Income Tax Credit Assistant (IRS.gov/eic) determines if you are eligible for the EIC.
• The Online EIN Application (IRS.gov/ein) helps you get an employer identification number.
• The IRS Withholding Calculator (IRS.gov/w4app) estimates the amount you should have withheld from your paycheck for federal income tax purposes.
• The First Time Homebuyer Credit Account Look-up (IRS.gov/homebuyer) tool provides information on your repayments and account balance.
• The Sales Tax Deduction Calculator (IRS.gov/salestax) figures the amount you can claim if you itemize deductions on Schedule A (Form 1040), choose not to claim state and local income taxes, and you didn't save your receipts showing the sales tax you paid.
Resolving tax-related identity theft issues.
• The IRS doesn't initiate contact with taxpayers by email or telephone to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.
• Go to IRS.gov/idprotection for information and videos.
• If your SSN has been lost or stolen or you suspect you are a victim of tax-related identity theft, visit IRS.gov/id to learn what steps you should take.
Checking on the status of your refund.
• Go to IRS.gov/refunds.
• Due to changes in the law, the IRS can't issue refunds before February 15, 2017, for returns that claim the EIC or the ACTC. This applies to the entire refund, not just the portion associated with these credits.
• Download the official IRS2Go app to your mobile device to check your refund status.
• Call the automated refund hotline at 1-800-829-1954.
Making a tax payment. The IRS uses the latest encryption technology to ensure your electronic payments are safe and secure. You can make electronic payments on-line, by phone, and from a mobile device using the IRS2Go app. Paying electronically is quick, easy, and faster than mailing in a check or money order. Go to IRS.gov/payments to make a payment using any of the following options.
• IRS Direct Pay: Pay your individual tax bill or estimated tax payment directly from your checking or savings account at no cost to you.
• Debit or credit card: Choose an approved payment processor to pay online, by phone, and by mobile device.
• Electronic Funds Withdrawal: Offered only when filing your federal taxes using tax preparation software or through a tax professional.
• Electronic Federal Tax Payment System: Best option for businesses. Enrollment is required.
• Check or money order: Mail your payment to the address listed on the notice or instructions.
• Cash: If cash is your only option, you may be able to pay your taxes at a participating retail store.
What if I can't pay now? Go to IRS.gov/payments for more information about your options.
• Apply for an online payment agreement (IRS.gov/opa) to meet your tax obligation in monthly installments if you can't pay your taxes in full today. Once you complete the online process, you will receive immediate notification of whether your agreement has been approved.
• Use the Offer in Compromise Pre-Qualifier (IRS.gov/oic) to see if you can settle your tax debt for less than the full amount you owe.
Checking the status of an amended return. Go to IRS.gov and click on Where's My Amended Return? (IRS.gov/wmar) under the "Tools" bar to track the status of Form 1040X amended returns. Please note that it can take up to 3 weeks from the date you mailed your amended return for it show up in our system and processing it can take up to 16 weeks.
Understanding an IRS notice or letter. Go to IRS.gov/notices to find additional information about responding to an IRS notice or letter.
Contacting your local IRS office. Keep in mind, many questions can be resolved on IRS.gov without visiting an IRS Tax Assistance Center (TAC). Go to IRS.gov/letushelp for the topics people ask about most. If you still need help, IRS TACs provide tax help when a tax issue can't be handled online or by phone. All TACs now provide service by appointment so you'll know in advance that you can get the service you need without waiting. Before you visit, go to IRS.gov/taclocator to find the nearest TAC, check hours, available services, and appointment options. Or, on the IRS2Go app, under the Stay Connected tab, choose the Contact Us option and click on "Local Offices."
Watching IRS videos. The IRS Video portal (IRSvideos.gov) contains video and audio presentations for individuals, small businesses, and tax professionals.
Getting tax information in other languages. For taxpayers whose native language isn't English, we have the following resources available. Taxpayers can find information on IRS.gov in the following languages.
• Spanish (IRS.gov/spanish).
• Chinese (IRS.gov/chinese).
• Vietnamese (IRS.gov/vietnamese).
• Korean (IRS.gov/korean).
• Russian (IRS.gov/russian).
The IRS TACs provide over-the-phone interpreter service in over 170 languages, and the service is available free to taxpayers.
The Taxpayer Advocate Service Is Here To Help You
What is the Taxpayer Advocate Service?
The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights under the Taxpayer Bill of Rights.
What Can the Taxpayer Advocate Service Do For You?
We can help you resolve problems that you can't resolve with the IRS. And our service is free. If you qualify for our assistance, you will be assigned to one advocate who will work with you throughout the process and will do everything possible to resolve your issue. TAS can help you if:
• Your problem is causing financial difficulty for you, your family, or your business,
• You face (or your business is facing) an immediate threat of adverse action, or
• You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised.
How Can You Reach Us?
We have offices in every state, the District of Columbia, and Puerto Rico. Your local advocate's number is in your local directory and at taxpayeradvocate.irs.gov. You can also call us at 1-877-777-4778.
How Can You Learn About Your Taxpayer Rights?
The Taxpayer Bill of Rights describes 10 basic rights that all taxpayers have when dealing with the IRS. Our Tax Toolkit at taxpayeradvocate.irs.gov can help you understand what these rights mean to you and how they apply. These are your rights. Know them. Use them.
How Else Does the Taxpayer Advocate Service Help Taxpayers?
TAS works to resolve large-scale problems that affect many taxpayers. If you know of one of these broad issues, please report it to us at IRS.gov/sams.
Low Income Taxpayer Clinics
Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. To find a clinic near you, visit IRS.gov/litc or see IRS Publication 4134, Low Income Taxpayer Clinic List.
