Tax Deductions: Job Related Deductions

• Job Search Expenses
• Travel Expenses
• Sales Tax, Higher Education, Educator Expense Deductions

Please browse through this list and see if you find deductions that might apply to you.

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Deductions subject to the 2% limit are discussed in the three categories in which you report them on Schedule A:

• Unreimbursed employee expenses
• Tax preparation fees
• Other expenses

Exceptions to 2% limit. The following paragraphs describe certain employee business expenses that are not subject to the 2% limit. Certain legal fees not subject to the 2% limit are also discussed.

Armed Forces reservists. 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 may be able to deduct some of your reserve-related travel costs as an adjustment to gross income rather than as an itemized deduction. For more information, see Armed Forces Reservists Traveling More Than 100 Miles From Home, under Deductions Not Subject to the 2% Limit, later. Impairment-related work expenses. If you have a physical or mental disability, certain expenses you incur that allow you to work may not be subject to the 2% limit. See Impairment-Related Work Expenses under Deductions Not Subject to the 2% Limit, later.

Performing artists. If you are a qualified performing artist, you may be able to deduct your employee business expenses as an adjustment to income rather than as a miscellaneous itemized deduction. See Performing Artists under Deductions Not Subject to the 2% Limit, later.

State and local government officials paid on a fee basis. If you performed services as an employee of a state or local government and you were paid in whole or in part on a fee basis, you can claim your trade or business expenses in performing those services as an adjustment to income, rather than as a miscellaneous deduction. See Officials Paid on a Fee Basis under Deductions Not Subject to the 2% Limit, later.

Unlawful discrimination claims legal fees. You may be able to deduct attorney fees and court costs for actions involving a claim of unlawful discrimination, a claim against the U. S. Government, or a claim made under section 1862(b)(3)(A) of the Social Security Act, as an adjustment to income on Form 1040, line 36, or Form 1040NR, line 34, rather than as a miscellaneous itemized deduction. See Legal Expenses under Other Expenses, later.

Unreimbursed Employee Expenses

Routinely, as an employee or business owner you will be faced with certain expenses throughout the year that are necessary to your status as an employee or a business owner. According to IRS Publication 529 you may deduct only unreimbursed employee expenses that are:

1. Paid or incurred during the current tax year.
2. A necessary expense for your employment or business status.
3. Ordinary and necessary expenses related to routine business.

Expenses that are ordinary and necessary normally are expenses that are common and accepted in your trade, business, or profession, or helpful in conducting a successful business practice. Note that an expense does not have to be required to be considered necessary.

Below is a list of expenses that may be deductible and classified as an unreimbursed employee expenses (all bullets can anchor to the related content below):

• 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 or cell phone 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.
• 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, entertainment, and gift expenses related to your work.
• Union dues and expenses.
• Work clothes and uniforms if required and not suitable for everyday use.
• Work-related education.

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Business Bad Debt

A business bad debt is a loss incurred from a debt acquired in your trade or business. Any additional bad debt is classified as such only if there is a close relationship between the debt and your trade or business. There must be a business reason for incurring the debt in order for it to be classified as related to your trade or employment status.

Example. You make a bona fide loan to the corporation you work for as a requirement to maintain your employment. If you do not receive proper reimbursement for such loan, it is classified as a business bad debt.

More information.For more information on business bad debts, see chapter 10 in IRS Publication 535. For information on non-business bad debts, see chapter 4 in Publication 550, Investment Income and Expenses.

Business Liability Insurance

Insurance premiums payments paid for protection against personal liability for wrongful acts on the job are tax deductible.

Damages for Breach of Employment Contract

If you break an employment contract, you may deduct any damages you pay your former employer if the damages are attributable to the pay you received from that employer.

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Depreciation on Computers or Cell Phones

You can claim a depreciation deduction for a computer or cell phone that you use in your work as an employee if its use is:

1. For the convenience of your employer, and
2. Required as a condition of your employment.

For the convenience of your employer. Use of your computer or cell phone 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.Equipment is required if you cannot properly perform your duties without such equipment. Whether you can properly perform your duties without it depends on all the facts and circumstances. It is not necessary that your employer explicitly requires you to use your computer or cell phone, and it is not 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 is not for the convenience of your employer and is not required as a condition of your employment, you cannot claim a depreciation deduction for it.

Which depreciation method to use. Equipment depreciation depends on whether you meet the more-than-50%-use test.

More-than-50%-use. This requirement is met if you use your equipment more than 50% of the time in your work. If you meet this test, you can claim accelerated depreciation under the General Depreciation System (GDS). Additionally, you may be able to apply section 179 deduction for the year you place the item in service.

More-than-50%-use. If you do not meet the more-than-50%-use requirement, you are limited to the straight line method of depreciation under the Alternative Depreciation System (ADS). You also cannot claim the section 179 deduction. (But if you use your computer in a home office, see the exception listed below.)

Investment use. Use of a computer or cell phone in connection with personal investments (reference Other Expenses section for more information) is not considered under work-related use. However, you may combine your investment use with your work use in calculating your depreciation deduction.

Exception for computer used in a home office. The more-than-50%-use rule is not applicable to a computer used only in a part of your home that meets the Home Office use requirement (see Home Office section). You can claim accelerated depreciation using GDS for a computer used in a qualifying home office, even if you do not use it more than 50% in your work. You also may be able to take a section 179 deduction for the year that the computer is in service.

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 Publication 587. Also see chapter 5 of Publication 946. Publication 946 has detailed information about the section 179 deduction and depreciation deductions using GDS and ADS

Reporting your depreciation deduction. Use Part V of Form 4562 – Depreciation and Amortization – to claim the depreciation deduction for a cell phone or for a computer that you did not use only in your home office. Complete Form 4562, Part I, if you are claiming a section 179 deduction. However, if you file Form 2106 or 2106-EZ, claim your depreciation deduction on that form rather than Form 4562.

Computer used in a home office. Use Form 4562, Part III, to claim the depreciation deduction for a computer you placed in service during 2007 and used only in your home office. Complete Form 4562, Part I, if you are claiming a section 179 deduction.

Do not use Form 4562 to claim the depreciation deduction for a computer you placed in service before 2007 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.

You must keep records to prove your percentage of business and investment use.

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Dues to Chambers of Commerce and Professional Societies

Membership in an organization is normally viewed as a valuable resource in accomplishing your job. As such, you may be able to deduct any dues or fees 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 or grow your own business. Applicable organizations include:

• Boards of trade,
• Business leagues,
• Civic or public service organizations,
• Real estate boards, and
• Trade associations

Dues that are not deductible include dues paid to an organization whose main purposes is to:

1. Conduct entertainment activities for members or their guests, or
2. Provide members or their guests with access to entertainment facilities.

These include dues paid to airline, hotel, and luncheon clubs. See Club Dues under Nondeductible Expenses section for more information.

Lobbying and political activities. Dues and contribution for certain lobbying and political activities may not be deductible. See Lobbying Expenses section under Nondeductible Expenses for more information.

Work-Related Education

You may deduct education expenses, regardless whether they lead to a degree or not, if the education meets at least one of the following two requirements.

1. The education helps you maintain or improve skills required in your present occupation.
2. The education is required by your employer or by the law to maintain your salary, status, or position, and the requirement serves a business purpose of your employer.

If your education meets either of these requirements, expenses for tuition, books, supplies, laboratory fees, and similar items, and certain transportation costs, are deductible.
If the education expense leads to either of the following two scenarios, you cannot deduct these expenses for the education:

1. The education is needed to meet the minimum educational requirements to qualify you in your work or business, or;
2. The education will help to qualify you in achieving a new trade or business.

If the education qualifies you for a new trade or business, you cannot deduct the educational expenses even if you do not originally intend to enter such trade or business.

Travel as education. Travel that in itself constitutes a form of education is not a deductible form of education expense. For example, a French teacher who travels to France to maintain general familiarity with the French language and culture cannot deduct the cost of the trip as an educational expense.

More information. See chapter 11 of Publication 970 for a complete discussion of the deduction for work-related education expenses.

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Educator Expenses

If you were an eligible educator in 2007, you can deduct up to $250 of qualified expenses you paid in 2007 as an adjustment to gross income, rather than as a miscellaneous itemized deduction. This provision, which had expired for tax years after 2005, has been extended through tax year 2007. 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 who worked in a 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 does not have to be required to be considered necessary.
Qualified expenses do not include expenses for home schooling or for non-athletic 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 tuition program earnings.
• Nontaxable earnings from Coverdell education savings accounts.
• Any reimbursements you received for these expenses that were not reported to you in box 1 of your Form W-2.

How the deduction is claimed. You must file Form 1040 (or Form 1040NR) to take this deduction. The deduction is claimed on Form 1040, line 23 (or Form 1040NR, line 24), “Archer MSA Deduction.” Enter “E” on the dotted line to the left of that line entry if claiming educator expenses, or “B” if claiming both an Archer MSA deduction and the deduction for educator expenses. If entering “B,” you must attach a statement with a breakdown of the amount claimed for each deduction.

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:

1. As your principal place of business for any trade or business,
2. As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or;
3. 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 location of business if:

1. You use it regularly and exclusively for administrative or management activities of your trade or business, and;
2. 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.
You should keep records that will give the information needed to calculate 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 Publication 587 for more detailed information and a worksheet for figuring the deduction.

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Job Search Expenses

A job search can generate a substantial amount of expense when you start adding up printing costs, travel costs, and any expenses resulting from networking. According to IRS regulations you can deduct certain expenses you incur while looking for a new job even if presently employed. In order to deduct these expenses you don’t necessarily need to be offered a new job. In this realm however, you cannot deduct such expenses if:

1. You are looking for a job in a new/different profession.
2. There was a substantial break between the end of your last job and your search for a new one.
3. You are on the job market for the first time.

Employment and outplacement agency fees. You may deduct any agency fees you pay while searching for a new job in your current profession.

Employer pays you back. Should your employer repay you for employment agency fees at a later date, you must include any amount received in your gross income up to the amount of your tax benefit in the earlier year. See Recoveries in Publication 525.
Employer pays the employment agency – If your new employer pays the fees for your recruitment directly to the employment agency, you should not include them in your gross income.

Employer pays the employment agency. 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.

Résumé. You may claim a deduction on any expenses incurred while preparing and mailing copies of a résumé to prospective employers, only if you are looking for a new position in your current profession.

Travel and transportation expenses. If, while traveling to another area, you are searching for a new position in your current occupation, you may be able to deduct the expense of traveling to and from the area. However, you may only deduct the travel expenses if the trip is primarily related to a new job search. The amount of time spent on personal activity compared to the amount of time spent searching for work will determine whether the trip is primarily a personal or a job searching trip. Should the trip turn out to be non-deductible, you may be able to deduct the expenses directly related to searching for a new job in your present occupation while in the area. In order to calculate any car-related expenses, you may use the standard mileage rate. The rate for business use of a vehicle for 2007 is 48.5 cents per mile. See Revenue Procedure 2006-49 for additional information on these standard mileage rates.

Legal Fees

You may deduct any legal fees related to performing or maintaining your current position.

Licenses and Regulatory Fees

You can deduct the amount of license and regulatory fees that you pay each year to a state or a local government related to your trade, business, or profession.

Occupational Taxes

You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting business in such locality. If you are an employee of such locality, you may claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; note that you cannot claim them as a deduction for taxes elsewhere on your returns.

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Repayment of Income Aid Payment

An "income aid payment" is a payment received through an employer's plan to help employees who have been downsized due to lack of work. If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you may deduct the repayment on your returns..

Research Expenses of a College Professor

As a college professor any expenses incurred due to research are deductible. This includes travel expenses for teaching, lecturing, or writing and publishing on topics related to your subject matter. Such deductible expenses must be in relation to the duties expected of a professor and without expectation of profit. Note that you may not deduct the cost of travel as a form of education.

Rural Mail Carriers' Vehicle Expenses

If your expenses to use a vehicle while performing your duties exceed the amount of your reimbursements, you can deduct any unreimbursed expenses. For more information see chapter 4 of Publication 463.

Tools Used in Your Work

Tools used while performing your work generally fall under depreciation. However, you may deduct any tool expense relative to accomplishing your job if the tools wear out and are disposed of within one 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.

Travel, Transportation, Meal, Entertainment, and Gift Expenses

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 or 2106-EZ to claim these expenses.

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Travel expenses.

Travel expenses are sustained when traveling on business away from home for your employer. While you may deduct travel expenses incurred in connection with a temporary work assignment, you cannot deduct travel expenses paid in relation to an indefinite work assignment.

Travel expenses include the following:

• The cost of getting to and from your business destination (air, rail, bus, car, etc.)
• Meals and lodging while on travel.
• Taxi fares.
• Baggage charges.
• Cleaning and laundry expenses.

Travel expenses are discussed more fully in chapter 1 of Publication 463.

Temporary work assignment. A job is temporary if your assignment or job away from home in a single location is expected to last (and does in fact last) for one year or less. This is the case unless there are facts and circumstances that indicate that the job is not temporary.

Indefinite work assignment. A job is indefinite if your assignment or job away from home in a single location lasts for more than one year. This is the case whether the job lasts for more than one year or not. Please note that employment that is initially temporary may become indefinite due to changed circumstances.

Federal crime investigation and prosecution. If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the one-year rule for deducting temporary travel expenses. This means that you may be able to deduct travel expenses even if you are away from your tax home for more than one year.

To qualify for this deduction, the Attorney General must certify that you are traveling for the following purposes:

1. Traveling performing duties for the Federal Government.
2. Performing duties for the Federal Government on a temporary duty status.
3. Providing support services to the Federal Government for the investigation or prosecution of a federal crime.

Local transportation expenses. Local transportation expenses are expenses incurred while traveling from one workplace to another when you are not traveling away from home. They include the cost of transportation by air, rail, bus, taxi, and the cost of using your car. You can choose to use the standard mileage rate to figure your car expenses. The rate for business use of a vehicle for 2007 is 48.5 cents per mile.

Work at two places in a day. If you perform work at two separate locations in a day, whether or not for the same employer, you can generally deduct any travel expenses incurred while traveling between the two locations.

Temporary work location. You can deduct expenses incurred while traveling between your home and a temporary work location if at least one of the following applies:

1. The work location is outside the metropolitan area where you live and normally work.
2. 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 is irrelevant.)

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 is not 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 one 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.

Home office. You can deduct expenses incurred while traveling between your home and workplace, if your home is your principal place of business for the same trade or business. (In this situation, it is irrelevant whether the workplace is temporary or full-time.) See Publication 587 for more information about Home Office use.

Meals and entertainment.You may deduct entertainment expenses (including entertainment-related meals) only if they are directly related to the active conduct of your trade or business. However, the expense only needs to be associated with the active conduct of your trade or business if it directly precedes or follows a substantial and bona fide business-related discussion.

You can deduct only 50% of your business-related meal and entertainment expenses unless the expenses meet certain exceptions. You apply this 50% limit before you apply the 2%-of-adjusted-gross-income limit.

Meals when subject to "hours of service" limits. You can deduct 75% 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 75% limit before you apply the 2%-of-adjusted-gross-income limit.

Gift expenses. You can deduct up to $25 worth of business gifts you offer to an individual during the year. The following items do not count toward the $25 limit:

• Identical, widely distributed items of $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.

Additional information. See Publication 463 for more information concerning expense reimbursements on travel, transportation, meal, entertainment, and gift expenses.

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Union Dues and Expenses

Dues paid for an initiation fee into a union are tax deductible. You may also deduct assessments for benefit payments to unemployed union members. Union expenses that are non-deductible include payments or contributions that provide funds for the payment of sick, accident, or death benefits, and any contributions made into a union pension fund even if the union requires you to make such contributions. Additionally, you cannot deduct any contributions made to a union that are related to certain lobbying and political activities.

Work Clothes and Uniforms

You may deduct expenses related to the cost and upkeep of work clothes if you meet the following requirements:

1. Uniform or specific clothes must be worn as a condition of your employment.
2. Uniform or work clothes are not suitable for everyday wear.

In order to be tax deductible, the clothing must be specifically required by your employer. Additionally, the clothing must not be suitable for taking the place of your regular wardrobe.
Examples of professions that may be able to deduct the cost of work clothes include:

1. Delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc.).
2. Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for wear outside of a performance setting.

However, please note that any 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 purchasing and maintaining blue work clothes worn by a welder at the request of a foreman, are not deductible.

Protective clothing. Any protective clothing that is required by your employer in order to accomplish your job properly (such as safety boots, safety goggles, hard hats, gloves, etc.) is a deductible expense.

Examples of workers who may be required to wear safety clothing/items included: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers.

Military uniforms. If you are a member of the armed forces on full-time duty, you generally cannot deduct the cost of maintaining your uniforms. Members of reserve units, however, can deduct any expenses incurred in maintaining/purchasing the uniform if military regulations restrict wearing of the uniform except while on duty as a reservist.

In determining any deductions related to your uniform, you must decrease the cost by any amount of nontaxable allowance you may receive for these expenses. If local military rules do not allow you to wear any military uniforms while off duty, you can deduct any amount related to the cost of purchasing and maintaining these uniforms that is above the uniform allowance that you receive. If you are a student at an armed forces academy, you cannot deduct the cost of your uniforms if they replace regular clothing. However, you may deduct the cost of any items related to your uniform (such as insignia, shoulder boards, and other related items). Professionals who are members of the civilian staff at a military school can deduct the cost of their uniforms.

You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school.

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Other Expenses

You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2%-of-adjusted-gross- income limit. These are expenses 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 reasonably 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 of pass-through entities.
• Investment fees and expenses.
• Legal fees related to producing or collecting taxable income or getting tax advice.
• Loss on traditional IRAs or Roth IRAs, when all amounts have been distributed to you.
• Loss on deposits in an insolvent or bankrupt financial institution.
• Repayments of income.
• Repayments of social security benefits.
• Safe deposit box rental.
• 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.

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 35 and 41b, or Form 4797, line 18a. For more information on casualty and theft losses, see Publication 547, Casualties, Disasters, and Thefts.

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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.

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. See Repayments in Publication 525 for more information.

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. See Publication 575, Pension and Annuity Income, for more information about the tax treatment of pensions and annuities.

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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:

1. 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.)
2. Your allowable business expenses related to the performing arts exceed 10% of your gross income from the performing arts.
3. 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. For more information see Publication 463.

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 of travel that don’t 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.

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Sales Tax, Higher Education, Educator Expense Deductions

eFile tax software updated its deductions process in late 2007 to include provisions of new tax laws implemented during 2007. These included claiming 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.