Employee Deductions
If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses under Nondeductible Expenses. Some expenses maybe be considered special cases and are tax deductible. These include the following items:
Impairment-Related Work Expenses
If you are physically or mentally disabled and are limited in your ability to perform your job (such as performing manual tasks, walking, speaking, breathing, learning, and working) you can deduct any 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.
Where to report. If you are an employee, any impairment-related work expenses can be recorded on Form 2106 or 2106-EZ. Enter on Schedule A (Form 1040), line 27, or Schedule A (Form 1040NR), line 16, 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 20, or Schedule A (Form 1040NR), line 9.
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 27, or Schedule A (Form 1040NR), line 16 (only if effectively connected with a U.S. trade or business). It is not subject to the passive activity limitations.
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. More information about Repayments
Unrecovered Investment in Annuity
A retiree who contributed to an investment in 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 un-recovered investment can be deducted on the retiree's final income tax return. More information about Pension and Annuity Income.
Performing Artists
If you qualify as a performing artist, you can deduct your employee business expenses as an adjustment to income rather than as a miscellaneous itemized deduction. To qualify, you must meet all three of the following requirements:
- You perform performing arts services for at least two employers during your tax year. (You are considered to have performed services in the performing arts for an employer only if that employer paid you $200 or more.)
- Your allowable business expenses related to the performing arts exceed 10% of your gross income from the performing arts.
- Your adjusted gross income is equal to or less than $16,000 before deducting these business expenses.
If you do not meet all of the above requirements, you must deduct your expenses as a miscellaneous itemized deduction subject to the 2% limit.
Special rules for married persons. If you are married, you must file a joint return unless you lived apart from your spouse at all times during the tax year. If you file a joint return, you must figure requirements (1) and (2) above separately for both you and your spouse. However, requirement (3) applies to your and your spouse's combined adjusted gross income.
Where to report. You must first complete Form 2106 or Form 2106-EZ, should you meet all the requirements listed above. You then can include any performing-arts related expenses from Form 2106, line 10, or Form 2106-EZ, line 6, on Form 1040, line 24, or Form 1040NR, line 34 (only if the expenses are effectively connected with a U.S. trade or business).
Officials Paid on a Fee Basis
If you are paid on a fee basis for your services, you can claim expenses in performing services in that job as an adjustment to income rather than as a miscellaneous itemized deduction. In order to qualify under this structure, you must be employed by a state or local government and be paid in whole or in part on a fee basis.
Where to report. If you qualify as a fee-basis official, you should first complete Form 2106 or Form 2106-EZ. Then include your expenses in performing services in that job (Form 2106, line 10, or Form 2106-EZ, line 6) on Form 1040, line 24.
Armed Forces Reservists Traveling More Than 100 Miles From Home
If you are a member of a reserve unit of the Armed Forces of the United States, and travel more than 100 miles away from home to perform your services as a member of the reserves, you can deduct 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. More information about Armed Forces Reservists.
Member of a reserve component. In order to qualify as a member of a reserve unit of the Armed Forces of the United States, you must be in the Army, Naval, Marine Corps, Air Force, or 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.
Where to report. If, as part of your duty as a reservist, you must travel more than 100 miles from home, you should first complete Form 2106 or Form 2106-EZ. Then include your expenses for reserve travel over 100 miles from home, up to the federal rate, from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24. Subtract this amount from the total on Form 2106, line 10, or Form 2106-EZ, line 6, and deduct the balance as an itemized deduction on Schedule A (Form 1040), line 20.
You may not deduct expenses for travel, that does not exceed 100 miles from home, as an adjustment to gross income. Instead, you must complete Form 2106 or 2106-EZ and deduct such expenses as an itemized deduction on Schedule A (Form 1040), line 20.
Sales Tax, Higher Education, and Educator Expense Deductions
eFile tax software has updated its deductions process to include provisions of new tax laws implemented during 2008 and 2009. These updates included deductions for state and local sales tax, higher education tuition and fees, and educator expenses.
eFile will automatically place your tax information in the correct locations on your returns, saving you from the requirement of including any special notations on your e-filed return in order to claim the following deductions:
- The general sales tax deduction instead of the deduction for state and local income tax.
- The deduction for tuition and fees can be claimed.
- Teachers and other educators (including classroom aides, counselors, and principals) can deduct as much as $250 that they spent to purchase classroom supplies last year.
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