Ah, the allure of the deduction.
Come tax time, it's so appealing to dream about all the different ways you could have the government foot the bill. Isn't there some way you can claim your cable bill? What about all the work clothes you had to buy when the office banned jeans? And didn't your sister-in-law's aunt tell you once that she wrote off the entire cost of a new car?
If it all sounds too good to be true -- say it with me now -- it probably is. Sure, there are a lot of deductions out there, but there's one big caveat: If you're itemizing your deductions -- and that means you're not just taking the standard deduction the government gives you -- you can only claim whatever deductions are over 2 percent of your adjusted gross income (AGI). So say your AGI is $40,000. Two percent of your income is $800. So, you have to find a way to get your deductions over $800 before you begin writing them off.
Of course, many of us aren't going to be able to write off more than the standard deduction, particularly if we don't have big-ticket deductions like mortgage interest to factor in. That's set at $6,300 if you're single, $12,600 for married couples and $9,250 for heads of household in tax year 2015 [source: IRS].
But we aren't here to discourage. Let's begin finding some common miscellaneous expenses you can shove at Uncle Sam.
Traveling for work is a lot more fun if you get paid to do it. But if your company isn't footing the bill for a work-related trip, you still might be in luck. If you're itemizing your deductions, add in the expenses of the trip to help lower that tax bill. Transportation, meals, lodging -- go ahead and put 'em all in.
But the IRS does have some rules about these deductions. First of all, don't think you can write off an indefinite work assignment. In other words, if your boss sends you to Saudi Arabia for "as long as it takes to seal the deal," forget writing off that luxury condo and first-class airfare. More specifically, the assignment must be expected to last less than a year. But other than that, there's quite a bit to list as a deduction, including things like dry cleaning or the cost of business phone calls.
In general, you can only deduct 50 percent of your meals, or you can take the standard meal allowance [source: IRS]. That will let you take a flat amount for the "going rate" of meals in the area.
We all want to deduct the cost of our computers because we all totally use them to check our work email accounts, right? Surely that counts as work!
Wishful thinking, perhaps. But if you meet certain requirements, it's a terrific idea to write off your computer. Do note that unless you meet some pretty strict rules (i.e., your computer is almost strictly for your business), you do have to list it as an item of depreciation. That means you have to write off a portion of it over the course of a few years instead of writing the entire cost off in one year.
Go ahead and take the deduction if the computer you bought is for the convenience of your employer (like if you need to use your computer for work), or if it's a requirement for your employment. Unfortunately, occasionally using your computer for work at home -- when it's not required -- isn't going to get you a write-off [source: IRS]. Of course, if you're self-employed and use your own computer for business, you can also write it off.
Don't forget there are loads of dues you can claim as miscellaneous expense deductions. Some are more obvious than others; union dues, for instance, should absolutely be deducted. (And don't forget to include initiation fees.)
But it doesn't stop there. If you belong to professional, civic or public service organizations, you can deduct your fees as well. Lawyers can deduct their bar fees and doctors their medical association dues, for instance. But quite a few other organizations also fall under the umbrella of dues you can deduct. If you belong to trade organizations -- or any professional group that helps you carry out your job -- you can feel comfortable deducting fees.
Now don't think you can join the country club and call it business dues. The IRS does know the difference between social or entertainment clubs and professional ones. You're not going to find Uncle Sam paying to help improve that chip shot.
Let's get one thing straight: If you're doing The New York Times crossword puzzle in the bathroom at work, you can't write off your daily Times subscription on your taxes as a professional expense. But it is actually possible to write off magazine subscriptions or trade publications as an itemized deduction, if you're actually using them for business development. (And while a daily subscription to the Times is a bit broad to meet the criteria, it might be possible to claim it if you can argue it's necessary to keep up with developments in your profession.)
Mostly, you'll want to make sure the publications are quite specific to your line of work. There are some rather obvious ones: If you're a scientist, you can easily write off journals or publications that cover your field. But professional dog walkers could just as legitimately write off their monthly bills from Modern Dog. (Or maybe even Cat Fancy: Know your competition, and all that.) Just remember to keep receipts and bills, and don't try to get too cute when justifying "professional and trade publications" with the IRS: They know that reading Maxim every month isn't really making you a better graphic designer.
A lot of people have to use tools or supplies in their work that aren't provided for by an employer. Consider contractors: While they might rent a lot of heavy equipment, it certainly behooves them to have a good supply of their own tools around. If your equipment reaches its useful life before the year is out, you can write it off wholly on your taxes. If not, you'll have to depreciate the purchase over its useful lifetime. (That means you'll need to write off a fraction of the cost over the course of a few years.)
Even if you're not self-employed, you can still write off some tools and supplies if you're buying them out of your own pocket. Teachers or educators, for instance, can deduct up to $250 of their adjusted gross income for supplies they bought for their classrooms that were not reimbursed [source: IRS]. You can also deduct uniform costs if wearing one is part of your job requirement.
OK, so this might not actually be "common," but perhaps it's time we made it so: You can actually deduct gambling losses if you're itemizing. And that doesn't mean that you can only deduct losses if you're a professional gambler with a nickname like "The Scarlett Kid." (It's mine. I claimed it.)
Even casual gamblers can deduct their losses on a miscellaneous expense report; you just have to make sure the losses you claim don't exceed the amount of gambling income you report on your return. So, if you win $10,000 but lose $13,000, your deduction is limited to $10,000.
Don't think for a second, however, that the IRS won't be interested in your miscellaneous gambling loss claim: They make it very clear that you'd be prudent to keep all receipts, tickets and any other records in case they need to verify your claims [source: IRS]. In other words, trying to deduct those gambling losses might be a crapshoot.
If you've lost your job in the past year, you might be a little depressed come tax time. But those out of work might also be in luck, because it's perfectly acceptable to write off the costs of trying to find a new job. "Huzzah!" you might exclaim. "Now is the perfect time for me to ditch this lame computer programming gig and write off the cost of trying to become a paleo nutritionist to the stars."
Not so fast. The IRS is not in the business of paying for your dreams. First off, you can only write off the cost of a job search in your current occupation. It also has to be a reasonable period of time between switching jobs -- no big breaks to travel to Thailand and "just chill to get in a good headspace." First jobs don't count either; you're not going to get away with deducting your expenses from the age of 12, when you first decided you wanted to be a paleontologist.
But as long as you meet the requirements, there are quite a few items to expense. If you're working for a temp firm while you're trying to find work, you can deduct any fees. You can even deduct the cost of putting together your resume. Even travel expenses are subject to deduction if you're scouting for a new job in your current occupation while you're in the area.
Hobbies can be expensive. The Nicki Minaj shrine you've carefully curated into a prime roadside attraction for your county? Those wigs cost bank. So it will almost seem too good to be true to hear that your hobbies are tax-deductible.
Unfortunately, it isn't really that easy. You certainly can't write off your hobby expenses willy-nilly, as there are a few strict requirements in place to ensure you're not actually running a business. One of the rules is pretty strict: You can only deduct the expenses of your hobby up to the amount of money you make on it. So if you love drawing and occasionally make a few bucks creating caricatures of tourists, you can write off the costs of your supplies and expenses up to the amount tourists fork over throughout the year.
What you can't do is spend thousands of dollars on a jealously guarded paper doll collection that makes no profit and proceed to attempt a write-off. (Also, don't spend that much money on paper dolls. I'll sell you one for way cheaper.)
The IRS isn't known for surprisingly nice acts. There's not any time in history where the IRS was like, "Hey, everybody did their best this year -- everybody gets a credit for trying to be a good citizen." Likewise, it occasionally feels like they're punishing us for trying, like when they tax Social Security benefits. Weren't those taxed once already?
But one common miscellaneous expense deduction is a downright sweet gesture from old Uncle Sam. We can actually deduct the cost of our tax preparation. It feels like a nice token, doesn't it? And don't think you have to meet face to face with a human person for your taxes to get the break: Even tax preparation software is deductible. You can write off the cost of e-filing, in general. The only caveat is that you have to write off the expenses for the year before. So if it's 2015 and you're filing your 2014 tax return, you can include the cost of preparing your 2013 return. (Since, ostensibly, you paid the cost in 2014.) That's one miscellaneous expense deduction nearly all of us can take advantage of.
Ah, the home office. Many have tried to claim it, and many have failed.
That might be kind of an exaggeration. Maybe a more accurate statement would be, "A lot of people wish they could claim it, and sometimes they can." But you have to give people credit for trying: We all want to assume that the closet-sized, windowless room in our house serves a higher purpose than merely storing our extra dining chairs.
But this is no attempt to discourage you. If you can, by all means you should be claiming your home office. You just have to meet a certain criteria for doing it, and that includes using it regularly and exclusively as your principal place of business and as a place to meet with clients or associates. From there, the IRS offers a couple different ways to calculate your deduction: One method requires an algorithm to figure out a prorated amount based on your square footage, while the other "simplified" method offers a flat fee of $5 per square foot (up to $1,500) [source: Eisenberg].
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Author's Note: 10 Common Miscellaneous Expense Deductions
I would suggest really taking a good look if you think it's worth it to itemize your deductions. The standard deduction is far simpler to take, and it really will relieve a good part of your tax bill.
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- IRS. "Publication 17." 2013. (October 4, 2014) http://www.irs.gov/publications/p17/ch28.html#en_US_2013_publink1000174104
- IRS. "Publication 463." 2013. (November 1, 2014) http://www.irs.gov/pub/irs-pdf/p463.pdf
- IRS. "Publication 529." 2013. (October 4, 2014) http://www.irs.gov/publications/p529/ar02.html
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- IRS. "Topic 149." Aug. 19, 2014. (Oct. 4, 2014) http://www.irs.gov/taxtopics/tc419.html
- Kim, Susanna. "7 Tax Deductions That Set off Alarms." ABCNews. April 16, 2012. (Oct. 4, 2014) http://abcnews.go.com/Business/tax-deductions-set-off-alarms/story?id=16134151
- Phillips Erb, Kelly. "Back to School 2014." Forbes. Sept. 8, 2014. (October 4, 2014) http://www.forbes.com/sites/kellyphillipserb/2014/09/08/back-to-school-2014-expired-educator-expenses-unreimbursed-employee-expenses/
- Phillips Erb, Kelly. "IRS Announces 2014 Tax Brackets, Standard Deduction Amounts and More." Forbes. Oct. 31, 2013. (Oct. 4, 2014) http://www.forbes.com/sites/kellyphillipserb/2013/10/31/irs-announces-2014-tax-brackets-standard-deduction-amounts-and-more/