Previous Page: Publication 529 - Miscellaneous Deductions - Miscellaneous Deductions Next Page: Publication 529 - Miscellaneous Deductions - Nondeductible Expenses Use   to find additional instances of index items.

Taxmap/pubs/p529-001.htm#TXMP7f06dd76 Deductions Not Subject   to the 2% Limit

Itemized Deduction, 2% limit

You can deduct the items listed below as miscellaneous itemized deductions. They are not subject to the 2% limit. Report these items on line 27, Schedule A (Form 1040).

Taxmap/pubs/p529-001.htm#TXMP2da72f18 List of Deductions

Deduction, List

• Amortizable premium on taxable bonds.
• Casualty and theft losses from income-producing property.
• Federal estate tax on income in respect of a decedent.
• Gambling losses up to the amount of gambling winnings.
• Impairment-related work expenses of persons with disabilities.
• Repayments of more than $3,000 under a claim of right.
• Unrecovered investment in an annuity.

Taxmap/pubs/p529-001.htm#TXMP182ddff8 Amortizable Premium   on Taxable Bonds

Amortizable Premium on Taxable Bonds

In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. You can elect to amortize the premium on taxable bonds. The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item.

Taxmap/pubs/p529-001.htm#TXMP50984327 Pre-1998 election to amortize bond premium.

Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988.

Taxmap/pubs/p529-001.htm#TXMP315398ac Bonds acquired before October 23, 1986.

The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2% limit.

Taxmap/pubs/p529-001.htm#TXMP38e13afe Bonds acquired after October 22, 1986, and before 1988.

The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you chose to treat it as an offset to interest income on the bond.

Taxmap/pubs/p529-001.htm#TXMP6939e208 Deduction for excess premium.

On certain bonds (such as bonds that pay a variable rate of interest or that provide for an interest-free period), the amount of bond premium allocable to a period may exceed the amount of stated interest allocable to the period. If this occurs, treat the excess as a miscellaneous itemized deduction that is not subject to the 2% limit. However, the amount deductible is limited to the amount by which your total interest inclusions on the bond in prior periods exceed the total amount you treated as a bond premium deduction on the bond in prior periods. If any of the excess bond premium cannot be deducted because of the limit, this amount is carried forward to the next period and is treated as bond premium allocable to that period.

Pre-1998 choice to amortize bond premium. If you made the choice to amortize the premium on taxable bonds before 1998, you can deduct the bond premium amortization that is more than your interest income only for bonds acquired during 1998 and later years.

Taxmap/pubs/p529-001.htm#TXMP6179c004 More information.

For more information on bond premium, see Bond Premium Amortization in chapter 3 of Publication 550.

Taxmap/pubs/p529-001.htm#TXMP27e559b9 Casualty and Theft Losses of   Income-Producing Property

Casualty and Theft Losses of Income-Producing Property

You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). First report the loss in Section B of Form 4684. You may also have to include the loss on Form 4797 if you are otherwise required to file that form. To figure your deduction, add all casualty or theft losses from this type of property included on line 32 of Form 4684, line 38b of Form 4684, or line 18a of Form 4797. For more information on casualty and theft losses, see Publication 547.

Taxmap/pubs/p529-001.htm#TXMP0c5f81ac Federal Estate Tax on Income   in Respect of a Decedent

Federal Estate Tax on Income in Respect of a Decedent

You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. See Publication 559 for information about figuring the amount of this deduction.

Taxmap/pubs/p529-001.htm#TXMP146d2448 Gambling Losses Up to the   Amount of Gambling Winnings

Gambling

You must report the full amount of your gambling winnings for the year on line 21, Form 1040. You deduct your gambling losses for the year on line 27, Schedule A (Form 1040). You cannot deduct gambling losses that are more than your winnings.

You cannot reduce your gambling winnings by your gambling losses and report the difference. You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Therefore, your records should show your winnings separately from your losses.

Diary of winnings and losses. You must keep an accurate diary or similar record of your losses and winnings. Your diary should contain at least the following information. The date and type of your specific wager or wagering activity. The name and address or location of the gambling establishment. The names of other persons present with you at the gambling establishment. The amount(s) you won or lost.

Taxmap/pubs/p529-001.htm#TXMP61f38570 Proof of winnings and losses.

In addition to your diary, you should also have other documentation. You can generally prove your winnings and losses through Form W-2G, Certain Gambling Winnings, Form 5754, Statement by Person(s) Receiving Gambling Winnings, wagering tickets, canceled checks, substitute checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment.

For specific wagering transactions, you can use the following items to support your winnings and losses.

• Keno: Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records.
• Slot machines: A record of the machine number and all winnings by date and time the machine was played.
• Table games (twentyone, blackjack, craps, poker, baccarat, roulette, wheel of fortune, etc.): The number of the table at which you were playing. Casino credit card data indicating whether the credit was issued in the pit or at the cashier's cage.
• Bingo: A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets. Supplemental records include any receipts from the casino, parlor, etc.
• Racing (horse, harness, dog, etc.): A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Supplemental records include unredeemed tickets and payment records from the racetrack.
• Lotteries: A record of ticket purchases, dates, winnings, and losses. Supplemental records include unredeemed tickets, payment slips, and winnings statements.

These recordkeeping suggestions are intended as general guidelines to help you establish your winnings and losses. They are not all-inclusive. Your tax liability depends on your particular facts and circumstances.

Taxmap/pubs/p529-001.htm#TXMP5e0b3519 Impairment-Related Work Expenses

Impairment-Related Work Expenses

If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses.

Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and other expenses in connection with your place of work that are necessary for you to be able to work.

Taxmap/pubs/p529-001.htm#TXMP3ec6ce27 Where to report.

If you are an employee, you enter impairment-related work expenses on Form 2106 or 2106-EZ. Enter on line 27, Schedule A (Form 1040) that part of the amount on line 10 of Form 2106, or line 6 of Form 2106-EZ, that is related to your impairment. Enter the amount that is unrelated to your impairment on line 20, Schedule A (Form 1040).

Taxmap/pubs/p529-001.htm#TXMP264295c7 Repayments Under Claim of Right

Repayments Under Claim of Right

If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid, or take a credit against your tax. See Repayments in Publication 525 for more information.

Taxmap/pubs/p529-001.htm#TXMP0e7f8957 Unrecovered Investment in Annuity

Unrecovered Investment in Annuity

A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. See Publication 575, Pension and Annuity Income, for more information about the tax treatment of pensions and annuities.

Taxmap/pubs/p529-001.htm#TXMP549daa20

Taxmap/pubs/p529-001.htm#TXMP1a115ceb Performing Artists

Performing Artists

If you are a qualified performing artist, you can deduct your employee business expenses as an adjustment to income rather than as a miscellaneous itemized deduction. To qualify, you must meet all three of the following requirements.

1. You perform services in the performing arts for at least two employers during your tax year. (You are considered to have performed services in the performing arts for an employer only if that employer paid you $200 or more.)
2. Your allowable business expenses related to the performing arts are more than 10% of your gross income from the performing arts.
3. Your adjusted gross income is not more than $16,000 before deducting these business expenses.

If you do not meet all of the above requirements, you must deduct your expenses as a miscellaneous itemized deduction subject to the 2% limit.

Taxmap/pubs/p529-001.htm#TXMP01a35fe1 Special rules for married persons.

If you are married, you must file a joint return unless you lived apart from your spouse at all times during the tax year.

If you file a joint return, you must figure requirements (1) and (2) above separately for both you and your spouse. However, requirement (3) applies to your and your spouse's combined adjusted gross income.

Taxmap/pubs/p529-001.htm#TXMP6248a081 Where to report.

If you meet all of the above requirements, you should first complete Form 2106 or Form 2106-EZ. Then you include your performing-arts related expenses from line 10 of Form 2106 or from line 6 of Form 2106-EZ on line 24 of Form 1040. Then enter "QPA" and the amount of your performing-arts related expenses next to line 24 (Form 1040).

Taxmap/pubs/p529-001.htm#TXMP45af828b Officials Paid on a Fee Basis

Officials Paid on a Fee Basis

If you are a fee-basis official, you can claim your expenses in performing services in that job as an adjustment to income rather than as a miscellaneous itemized deduction. To qualify as a fee-basis official, you must be employed by a state or local government and be paid in whole or in part on a fee basis.

Taxmap/pubs/p529-001.htm#TXMP20c39d78 Where to report.

If you qualify as a fee-basis official, you should first complete Form 2106 or Form 2106-EZ. Then include your expenses in performing services in that job (line 10 of Form 2106 or line 6 of Form 2106-EZ) on line 24 of Form 1040. Then enter "FBO" and the amount of those expenses next to line 24 (Form 1040).

Taxmap/pubs/p529-001.htm#TXMP7830fb36 Armed Forces Reservists Traveling More Than 100 Miles From Home

Armed Forces Reservists

If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. For more information see Publication 463.

Taxmap/pubs/p529-001.htm#TXMP61b9e488 Member of a reserve component.

You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Naval, Marine Corps, Air Force, or Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service.

Taxmap/pubs/p529-001.htm#TXMP21e184e3 Where to report.

If you have reserve-related travel that takes you more than 100 miles from home, you should first complete Form 2106 or Form 2106-EZ. Then include your expenses for reserve travel over 100 miles from home, up to the federal rate, from line 10 of Form 2106 or line 6 of Form 2106-EZ in the total on line 24 of Form 1040. Enter "RC" and the amount of these expenses in the space to the left of line 24 of Form 1040. Subtract this amount from the total on line 10 of Form 2106 or line 6 of Form 2106-EZ and deduct the balance as an itemized deduction on line 20 of Schedule A (Form 1040).

You cannot deduct expenses of travel that does not take you more than 100 miles from home as an adjustment to gross income. Instead, you must complete Form 2106 or 2106-EZ and deduct those expenses as an itemized deduction on line 20 of Schedule A (Form 1040).

Taxmap/pubs/p529-001.htm#TXMP08183d05 Educator Expenses

Educator Expenses

If you were an eligible educator in 2004, you can deduct up to $250 of qualified expenses you paid in 2004 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. If you file Form 1040A, you can deduct these expenses on line 16. If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. However, neither spouse can deduct more than $250 of his or her qualified expenses.

Taxmap/pubs/p529-001.htm#TXMP5d4723b0 Eligible educator.

An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year.

Taxmap/pubs/p529-001.htm#TXMP77184c16 Qualified expenses.

Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment, (including computer equipment, software, and services), and other materials used in the classroom. An ordinary expense is one that is common and accepted in your educational field. A necessary expense is one that is helpful and appropriate for your profession as an educator. An expense does not have to be required to be considered necessary.

Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. You must reduce your qualified expenses by the following amounts.

1. Excludable U.S. series EE and I savings bond interest from Form 8815.
2. Nontaxable qualified state tuition program earnings.
3. Nontaxable earnings from Coverdell education savings accounts.
4. Any reimbursements you received for these expenses that were not reported to you in box 1 of your Form W-2.

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