The IRS makes it difficult for individuals to take deductions for broad categories of expenditures that the agency characterizes as “miscellaneous deductions.” Some examples are unreimbursed employee business expenses and payments for preparation of returns.
The feds prohibit them from claiming miscellaneous deductions if they use the standard deduction and pass up itemizing on Schedule A of the federal 1040 form. To claim those kinds of write-offs, they must use Schedule A, same as they must for, say, charitable contributions, medical expenses and state income taxes.
On Dec. 22, President Trump signed the Tax Cuts and Job Act, the most comprehensive overhaul of the Internal Revenue Code since the Tax Reform Act of 1986. The legislation includes a provision that suspends deductions for miscellaneous expenses claimed on Schedule A. This provision isn't retroactive to calendar year 2017. It's prospective and applies to returns filed for calendar years 2018 through 2025.
Another limitation is that taxpayers can’t write off all of their miscellaneous deductions for the year in question. They can deduct just the portion that exceeds 2 percent of adjusted gross income.
To illustrate, Zelda’s AGI is $100,000 and she itemizes. Her miscellaneous deductions aggregate $2,500. The 2 percent floor erases any write-off for the first $2,000 (2 percent of $100,000) of the expenses, which leaves her with just a $500 write-off. As soon as Zelda’s AGI surpasses $125,000, she says sayonara to any deduction for the $2,500.
About Julian Block
Attorney and author Julian Block is frequently quoted in the New York Times, Wall Street Journal, and the Washington Post. He has been cited as “a leading tax professional” (New York Times), an “accomplished writer on taxes” (Wall Street Journal), and “an authority on tax planning” (Financial Planning magazine). More information about his books can be found at julianblocktaxexpert.com.