Miscellaneous Itemized Deductions

The following are ten unusual deductions that are subject to the 2% of adjusted gross income threshold that you may not know about:
1. IRA fees paid with funds outside of the IRA account
2. Loss on deposits in an insolvent bank
3. Cost of installing a safe in your home
4. Appraisal fees for determining income taxes such as the value of charitable donations
5. Hobby expenses up to the amount of hobby income
6. Job related education expenses
7. Protective clothing such as safety boots, safety glasses, and hard hats
8. Special theatrical clothing if not suitable for everyday wear
9. Books, magazines , and newspapers dealing with investments and taxes
10. Trips to look after investment property not including shareholder meetings, seminars or conventions.

Repay Income Reported in the Previous year

For example, in 2014 you are required to pay back $2,000 of unemployment compensation that was reported as income on your 2013 tax return. What do you do on your 2014 tax return? You have to claim a miscellaneous itemized deduction subject to the 2% of adjusted gross limitation (AGI) for $2,000. This is the rule for repayments of $3,000 or less. If the amount you paid back was greater than $3,000, you have much better options of either claiming a miscellaneous itemized deduction not subject to the 2% AGI limitation or claiming a tax credit on the 2014 return equal to difference between the recomputed 2013 tax as if the income had not been reported and the original tax.

Mortgage Interest on a Third Home

Mortgage interest on a third home is nondeductible personal expense. If you are considering buying a third home, the best tax approach is to buy it without taking out a mortgage loan. Mortgage interest on investment property is deductible as investment interest to the extent of investment income. Any nondeductible excess is carried over to future years. However, the expectation of profit on the sale of a residence does not convert the property to investment property.

Nondeductible Miscellaneous Expenses

The following expenses are never deductible: country club dues, political contributions, parking tickets, speeding tickets, homeowner association fees for your personal residence (if no office in the home), life insurance, loss from the sale of your personal residence, and telephone expenses for residential service for the first landline into your home.

Mortgage Interest on a Qualified Residence

Mortgage interest on your main home and a second home is tax deductible subject to a debt limitation of $1.1 million. But what is a qualified residence according to the IRS? A qualified residence is property that has sleeping, cooking, and toilet facilities so a boat and a mobile home can qualify.