Tax Information & Deduction Checklists

Posted: By Author Amador Solis

IRS Publication 17 is the guide for every individual tax filer, check it out to give you a foundational understanding: IRS Publication 17

TAX DEDUCTION CHECKLIST: Some or none of these deductions may apply to you.

Please use common sense when reading and applying this list to your tax situation.

The lists are meant to give you ideas.  It is not all-inclusive and not all items are deductible all the time.  Many are subject to limitations, may only apply in certain situations or are governed by other rules.

Please keep careful records and save your receipts for 6 years in case of an audit.

Residential Rental (income) Property Deductions:  Residential Rental Property

Business Expenses

Employees:  
Includes expenses for your job for which you weren’t reimbursed, but you only get the amount in excess of 2% of your AGI (adjusted gross income), and only if you can itemize.  For instance, if your AGI is $100,000, you must have at least $2,000 in employee business expenses before you will begin to benefit from the deduction.

Self-Employed:
You are allowed to deduct most business expenses in full.

See IRS Publication 535 for more information.

Advertising and Promotion Expenses (Self-employed)

Books and Publications

  • Books, trade journals, newspapers and publications for your trade or profession

Dues and Fees

  • Dues to a professional organization for people in your profession
  • Union dues, initiation fees, and assessments for benefit payments to unemployed union members.
  • Regulatory fees for your profession
  • Dues to chambers of commerce and similar organizations if the membership helps you carry out your job duties (see exceptions).
  • Licenses paid to state or local governments

Education and Research

  • Educational expenses related to your present work that maintains or improves your skills.
  • Research expenses

Equipment and Supplies

  • Business use of computer.  Employees:  Must be for the convenience of your employer and required as a condition of your employment.
  • Supplies and tools you use in your work

Home Office

  • Expenses for an office in your home IF part of the home is used regularly and exclusively for your work.  Employees:  the use of your home office must also be for the convenience of your employer.
  • For more information, see IRS Publication 587

Internet

  • Employees:  Must be for the convenience of your employer and required as a condition of your employment.

Job Hunting Expenses (Employees)

To deduct job hunting expenses, you must be looking for a job in your present line of work (i.e., you’re not changing professions or looking for your first job).  Expenses include: 

  • Resume preparation (drafting, typing, printing, mailing, faxing)
  • Employment agency fees
  • Executive recruiters’ fees
  • Portfolio preparation costs
  • Career counseling to assist you in improving your position
  • Legal and accounting fees you pay in connection with employment contract negotiations and preparation
  • Advertising
  • Transportation costs to job interviews
  • Long distance calls to prospective employers
  • Newspapers you purchase to read the employment ads
  • Other business publications you purchase to read the employment ads
  • Half of your meals you pay for that are directly related to your job search
  • If you take a trip away from home to look for a new job, your expenses for traveling, lodging, meals (50% of the cost), etc. are deductible only if the primary purpose of your trip is to look for a job. To substantiate the purpose of your trip, keep a daily log of your interviews, application efforts, etc.

Meals and Entertainment

  • Meals and Entertaining costs (only 50% of the cost is deductible).  Keep a record of the date, place, amount of expenses, people present, business purpose, and business discussed.  Also keep receipts for expenses in excess of $75.
  • For more information, see IRS Publication 463

Telephone Charges

  • Business use of cellular phone
  • Cost of long-distance business calls charged to home phone
  • Separate business telephone (home phone line is not deductible)

Travel and Transportation

  • Traveling costs incurred while away from home on business
  • Traveling costs paid in connection with a temporary work assignment
  • Transportation between your home and a temporary work location if you have no regular place of work but you ordinarily work in the metropolitan area where you live and the temporary work location is outside that area
  • Transportation between your home and a temporary work location if you have at least one regular workplace for this employment. It doesn’t matter how far away the temporary location is in this case.
  • Transportation from one job to another if you work two places in one day
  • If you are self-employed and your home is your principal place of business, all business travel is deductible.
  • For more information, see IRS Publication 463

Uniforms and Gear

  • Protective clothing and gear
  • Uniforms (except if you’re full-time active duty in the armed forces)
  • Dry cleaning costs for your uniforms or protective clothing (not for your everyday clothing, though)
  • Specialized clothing designed for your job, as long as it’s not suitable for everyday wear
  • Safety equipment, such as hard hats, safety glasses, safety boots, and gloves

Miscellaneous

  • Gifts, but only up to $25 per recipient
  • Passport for business travel
  • Postage
  • Office supplies
  • Printing and copying
  • Legal and professional services (tax preparation fee)
  • Medical exams required by your employer
  • Occupational taxes if they’re charged at a flat rate by your city or other local government for the privilege of working in that area
  • Business liability insurance premiums
  • Job dismissal insurance premiums
  • Damages you pay to a former employer for a breach of employment contract
  • Employee contributions to state disability funds

Self-Employed Only

  • Interest on business loans
  • Self-Employed health insurance (partial)
  • Commissions and fees
  • Business insurance
  • Keogh or SEP contributions
  • Rental of business property
  • Office rent and utilities
  • Repairs and maintenance
  • Business taxes and licenses

 Expenses You Cannot Deduct   People commonly hope to deduct some of the following expenses, but unfortunately they are not deductible.

Non-Deductible Expenses:

  • Expenses that were reimbursed by your employer.
  • Apartment Rent, unless qualified to claim away from home expenses for a business trip expected to last one year or less, or if a portion is used as a home office (special rules apply to both cases).  Also, may be deductible if maintained for the sole purpose of going to school if your education expenses qualify for the business deduction.
  • Clothing that is adaptable to everyday wear (this includes suits, evening wear, etc.).
  • Commuting costs (subways and rail fares, and vehicle use including tolls, gasoline, and parking).  Exception if qualified as being away from home on business or as part of *Temporary Living Expenses.
  • Dues to country clubs, golf and athletic clubs, and airline and hotel clubs.
  • Home phone line
  • Job hunting expenses if you’re looking for your first job, or changing professions.
  • Dry cleaning and laundry (unless you’re on a business trip)
  • Legal fees and closing costs involved in purchasing a property
  • Fees for taking an exam to qualify you in a profession (e.g., Bar Exam, GRE, etc.)
  • Immigration visa expenses, such as for obtaining a Green Card or H-1B visa.
  • Moving expenses that were not associated with your job and were less than 50 miles.
  • Moving expenses if you are claiming temporary living expenses.
  • Meals, unless for business meetings, or while away from home on business.  Also, allowable as part of Temporary Living Expenses.
  • Lunch on the job.
  • Personal expenses, such as grooming and maintenance (gym membership) unless they are directly related to your business (e.g.,  models, actors).
  • Any other personal expenses for which there is no provision for a deduction in the Tax Code.
  • Interest on personal loans.
  • Support of family members, unless they qualify as your dependents.
  • Personal vacations.
  • Cosmetic surgery to improve personal appearance
  • Contributions made to individuals or foreign charities.
  • Student loan interest if adjusted gross income is greater than $75,000 (single) or $150,000 (married).
  • Student loan principal.

Miscellaneous Schedule A Expenses

  • Real estate expenses:
    Mortgage interest
    Mortgage prepayment penalties
    Penalties of early withdrawals
    Points on principal residence financing
    Real estate taxes
  • Auto registration fees
  • Charitable contributions (cash and non-cash) made to qualified U.S. charities.
  • Investment expenses:
    Accounting fees (preparation of tax return)
    Brokerage fees
    Investment fees
    Legal fees
    Safe deposit box rental
    Interest on margin accounts
  • Taxes
    Ad valorem tax
    Certain special assessments
    Condo or coop maintenance (property tax portion)
    Disability insurance tax (some states)
    Foreign taxes
    Income tax (state and local)
    Occupational taxes
    Personal property tax
    Real property tax
    State transfer tax
    Withholding taxes
  • Casualty and theft Losses

Qualified Medical Expenses

Generally, you can only deduct the excess over 7.5% of Adjusted Gross Income, and then only if you can itemize on Schedule A.  This means that if you make $100,000, you can only deduct the amount of medical expenses you spent over $7,500.   Please also refer to IRS Publication 502:  Medical Expenses.

  • Acupuncture
  • Air conditioner necessary for relief from allergies or other respiratory problems
  • Alcoholism treatment
  • Analysis
  • Artificial limbs
  • Artificial teeth
  • Birth control pills prescribed by a doctor
  • Braille books and magazines used by a visually-impaired person
  • A clarinet and lessons to treat the improper alignment of a child’s upper and lower teeth
  • Contact lenses
  • Cosmetic surgery to improve a deformity
  • Dental fees and supplies
  • Diet, special. When prescribed by a doctor, you can deduct the extra cost of purchasing special food to alleviate a specific medical condition.
  • Doctor or physician expenses
  • Drug addiction treatment
  • Elastic hosiery to treat blood circulation problems
  • Exercise program if recommended by doctor to treat a specific condition
  • Extra rent/utilities for a larger apartment required in order to provide space for a nurse/attendant
  • Eye surgery, when it is not for cosmetic purposes only
  • Fertility treatment:  Limited to procedures such as in vitro fertilization (including temporary storage of eggs or sperm) and surgery, including an operation to reverse prior surgery that prevented the person operated on from having children.
  • Guide dog
  • Hospital care
  • Household help for nursing care services only
  • Insurance premiums for medical care coverage
  • Laboratory fees
  • Lead-based paint removal where a child has or had lead poisoning
  • Legal fees paid to authorize treatment for mental illness
  • Lifetime care advance payments
  • Lodging expenses while away from home to receive medical care in a hospital or medical facility
  • Long-term care insurance and long term care expenses (with limitations)
  • Mattresses and boards bought specifically to alleviate an arthritic condition
  • Medical aids. This includes wheelchairs, hearing aids and batteries, eyeglasses, contact lenses, crutches, braces, and guide dogs (including costs paid for their care).
  • Medical conference admission costs and travel expenses for a chronically ill person or a parent of a chronically ill child to learn about new medical treatments.
  • Medicines and prescription drugs
  • Nursing care.
  • Nursing home expenses if the there to obtain medical care.
  • Oxygen and oxygen equipment.
  • Reclining chair bought on a doctor’s advice by a person with a cardiac condition.
  • Special education tuition of mentally impaired or physically disabled person.
  • Smoking cessation programs.
  • Swimming costs, if therapeutic and prescribed by a physician.
  • Telephone cost, repair and equipment for a hearing-impaired person.
  • Television equipment to display the audio part of a TV program for hearing-impaired persons.
  • Transplants of an organ, but not hair transplants.
  • Transportation costs for obtaining medical care.
  • Travel expenses for parents visiting their child in a special school for children with drug problems, where the visits are part of the medical treatment.
  • Weight loss program, if it is recommended by a doctor to treat a specific medical condition or to cure any specific ailment or disease
  • Whirlpool baths prescribed by a doctor.
  • Wig for the mental health of a patient who lost his or her hair due to a disease.
  • X-ray services.

Temporary Living Expenses


What are temporary living expenses?  Temporary living expenses are travel expenses incurred during an extended business trip or temporary work assignment that was intended to last one year or less.  The expenses may only be claimed for a stay for business.  Personal or school stay expenses generally are not deductible.  Temporary living expenses also have no relation to having alien status.  A U.S. citizen working temporarily in another city can also claim them.  However, the time limitation of the visa makes it easier for a foreigner to claim that he is “away from home” on a business trip if he intends to work in the new location for less than a year.  Temporary living expenses include hotel lodging (or apartment rent for longer stays), meals, and local transportation.  Meals may be estimated using federal per diem rates.  For example, the IRS allows $46 per day for a high cost locality (e.g., New York City).  On the tax return, temporary living expenses are deducted as unreimbursed employee business expenses.

What are the rules for taking temporary living expenses?
1.  A person must be working at a location on a temporary assignment (defined below); and
2.  A person’s tax home (defined below) must be in a foreign country, or in another state beyond commuting distance.

Temporary Assignment:  The IRS states that if you expect your employment away from home in a single location to last, and it does last, for 1 year or less, it is temporary unless facts and circumstances indicate otherwise.  If you expect it to last for more than 1 year, it is indefinite.  However, if you expect your employment away from home to last for 1 year or less, but at some later date you expect it to last longer than 1 year, it is temporary (in the absence of facts and circumstances indicating otherwise) until your expectation changes.  Starting with the date your expectation changes, travel expenses will no longer be deductible.  (IRS Publication 54, page 12).  What determines a temporary versus an indefinite assignment is the intent of the taxpayer.  If assignment contracts can be made to last a year or less, this makes it much easier to document and support the position that your job was temporary in the uncommon event of an audit (see below).

Tax Home:  The IRS defines your tax home as the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home.  In addition, the IRS states that your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual.  If you are not a U.S. citizen or Green Card holder and you claim temporary living expenses, you will be asserting that your tax home is in your home country, and not in the U.S. because your stay is limited to the length of your visa.  Since you have no regular place of work (the U.S. assignment is only for a limited period), your regular place of abode (where you normally live) is your tax home.

Does being present in the U.S. before working  (e.g., as a student) cause the U.S. to be my tax home?
No, as a student your tax home would still be where you last worked.  If you didn’t work before, it will be your permanent home (e.g., parent’s home).  However, if you start working in the U.S., the IRS may presume the U.S. to be your tax home, since you did not establish a career in your home country.  The rebuttal could be that the U.S. cannot be your tax home since it would have to be your regular place of business.  Since you are limited by the length of your visa, it is not possible for the U.S. business to be “regular.”

Chance of audit:  Temporary living expenses are treated as unreimbursed employee business expenses on your tax return.  You are more at risk for being audited on the temporary living expense deduction if your expenses are high relative to income.  This would be the case if your rent is very high relative to income, and/or if you are claiming other large business expenses such as tuition.  Nevertheless, chance of audit remains low.  I have only had one client audited.  A few other clients were disallowed the expense automatically without audit, and additional tax was taken out of their refunds.

Substantiating temporary living expenses, if audited:  Documentation is critical to support the position that an assignment is expected to last less than a year, especially when the assignment is later extended.  An assignment letter stating the employee’s temporary job location and expected assignment duration should be sufficient if done contemporaneously with the start of the assignment.  If you are audited and the IRS decides to disallow your claim for temporary living expenses, you will be assessed interest at the prevailing rate from the date you filed or the due date of the return, which is later, plus late payment penalties of 1/2% of the balance due per month.

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