A very commonly missed deduction is the unreimbursed employee business expense. You can deduct anything that is required by your job that you personally have to pay for and don’t get reimbursed for. There are more things in this category than you might think that could be deductible. The most common are transportation, travel, and meals and entertainment. Here are a few others you might not know about:
- Business use of your home if it is required by your employer.
- Certain educational expenses to improve your existing profession.
- Legal fees related to your job.
- Damages paid to a former employer for breach of an employee contract.
One thing that is really important to know about unreimbursed employee business expenses are that they are limited to over 2% of your income. For example, if you earned $50,000 then 2% of your income would be $1000. That means the first $1000 of your unreimbursed employee business expense is not deductible. So if you spend $1500 in this situation, $500 would be deductible.
Sometimes people get really close to the 2% limit but they aren’t quite there. Well, there is not need to give up because there are some other things you can add to the 2% limitation that aren’t business related. So if you don’t think you have enough business expense to count, you may have some of the following expenses that will still give you a deduction:
- Legal fees related to producing or collecting taxable income.
- Legal fees related to doing or keeping your job.
- Legal fees related to divorce as long as the bill specifies the amount.
- Cost of managing and maintaining income producing investments including investment fees, custodial fees, clerical help, office rent, and any other expenses.
- Appraisal fees for determining a casualty loss or the value of a charitable contribution.
- Safety deposit box.
- Tax preparation and tax advice fees.
We can’t cover everything in with unreimbursed employee expenses in this post because the unreimbursed deduction can be pretty confusing. Check out www.avoidbeingaudited.com to learn a more about it!