Tax Tip: Deduct Your Miscellaneous Expenses

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You can deduct as a “Miscellaneous Expense” on Schedule A expenses incurred for the production, collection and protection of income.

You are allowed to deduct most Miscellaneous Expenses only if the total exceeds 2% of your AGI.

These expenses generally fall into four categories:

•    Employee business expenses
•    Investment expenses
•    Tax preparation
•    Legal fees to collect income

We looked at deducting tax preparation costs yesterday.

Deductible investment expenses include:

•    Appraisal fees for claiming a deduction for charitable contributions and casualty losses.

•    Clerical help for conservation and management of investments.

•    Custodial and maintenance fees for investment accounts, including fees for IRA accounts if billed and paid separately and not deducted from the account balance. 

•    Fees to collect dividends and interest (often reported on Form 1099-DIV).  

•    Fees paid to investment advisors, plus round-trip travel to their office using the standard mileage allowance for business travel.

•    Hobby expenses (to the extent of hobby income)

•    Home computer costs, if you use the computer to manage investment activities, and software used for managing investments. 

•    Insurance premiums on policies that protect investments.

•    Investment charts, newsletters, publications and services.

•    Investment expenses passed through to partners and shareholders and final year excess deductions passed through to beneficiaries via Form K-1.

•    Losses on IRA investments (if all IRAs have been liquidated and the total received is less than the “tax basis”).

•    Losses on deposits in insolvent or bankrupt financial institutions.

•    The cost of renting a safe deposit box to protect investment documents.

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