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Tax Tip of the Week | Miscellaneous Itemized Deductions Are Now Gone September 5, 2018

Posted by bradstreetblogger in : Deductions, General, tax changes, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes, Uncategorized , trackback

Tax Tip of the Week
Sept 5, 2018 
 

Keep the Common Misconceptions coming, we have had wonderful feedback, thank you!  Let us know via email, what are common business misconceptions that you have come across; markb@bradstreetcpas.com?   

As discussed before, the new tax law has nixed miscellaneous itemized deductions. They are no longer a part of your itemized deductions on Schedule A. These include your unreimbursed employee business expenses such as mileage, meals, travel, uniforms and other expenses such as tax prep fees, brokerage fees, etc. Some of the aforementioned expenses are still deductible as business expenses – that hasn’t changed.

Many people are upset about the loss of these tax deductions. Before deciding if a person has the right to be upset, some questions must first be answered. First, how much income tax did you save as a result of these deductions? Well, if you were ineligible to itemize your deductions, you didn’t miss out on anything – nada. And, even if you were able to itemize, the total miscellaneous deductions must exceed 2% of adjusted gross income (AGI) before any benefit is realized. Lastly, even If you cleared these first two hurdles, you may still flunk because of additional Alternative Minimum Tax (AMT) being created.

So, let’s walk through a real-life example – your AGI is $150,000 and itemizing your deductions is to your benefit.  More good news – you are not subject to AMT. The grand total of your miscellaneous tax deductions is $4,000. Now, remember that only the portion that exceeds 2% of the $150,000 AGI or a $3,000 floor is of any value at all. Yes, in this case, we have a $1,000 additional deduction or tax savings of roughly $275. Better than nothing – but not worth writing home about. Also, no benefit exists on either the Ohio or School District returns. Sometimes, the unreimbursed employee business expenses are deductible to a taxing city but they almost always generate tax correspondence which takes away most of that fun.

So, at the end of the day, the press is making a big to do about taking away something most people never had anyway!

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.

This week’s author – Mark Bradstreet, CPA

–until next week.

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