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Five Rules to Taking Deductions that you Can Defend to the Internal Revenue Service

Feb 23, 2016 | Tax



‘Tis the season to be worried.  Meditating over your shoebox of receipts.  Making piles and (hopefully) entering them into spreadsheets.

You sit there – at your desk or cross legged on the floor, and wonder:Taxdeductions

Deductible or not?

Business or personal?

Penalized or lower the taxes?

   A tiny voice begs… “help me.”

 That voice is you.

Take a breath, take another, and follow these simple rules for business deductions:

If you paid for work-related expenses out of your own pocket, you may be able to deduct those costs. In most cases, you claim allowable expenses on Schedule A, Itemized Deductions. Here are five tax tips that you should know about this deduction.

1. Ordinary and Necessary. You can only deduct unreimbursed expenses that are ordinary and necessary to your work as an employee. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is appropriate and helpful to your business.

2. Expense Examples. Some deductible costs may include:

Required work clothes or uniforms that are not appropriate for everyday use.

  • Supplies and tools you use on the job.
  • Business use of your car.
  • Business meals and entertainment.
  • Business travel away from home.
  • Business use of your home.
  • Work-related education.

This list is not all-inclusive. Special rules apply if your employer reimbursed you for your expenses. To learn more, check out Publication 529, Miscellaneous Deductions. You should also refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses.

3. Forms to Use. In most cases you report your expenses on Form 2106 or Form 2106-EZ. After you figure your allowable expenses, you then list the total on Schedule A as a miscellaneous deduction. You can deduct the amount that is more than two percent of your adjusted gross income.

4. Educator Expenses. If you are a K-through-12 teacher or educator, you may be able to deduct up to $250 of certain expenses you paid for in 2015. These may include books, supplies, equipment, and other materials used in the classroom. You claim this deduction as an adjustment on your tax return, rather than as an itemized deduction. For more on this topic see Publication 529.

5. Keep Records. You must keep records to prove the expenses you deduct. For what records to keep, see Publication 17, Your Federal Income Tax.

Tax Laws are complex.  It is very easy to make mistakes that can incur penalties. Contact us if you have a Tax Question.


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