What expenses can I deduct as an EMPLOYEE?

You may deduct most "ordinary and necessary" out-of-pocket expenses incurred in connection with your employment ONLY if you are able to itemize your deductions. These include, but are not limited to:

• Professional and union dues (do NOT include dues to social, athletic, meal or entertainment clubs, regardless of the percentage of business use.)

• Publications and subscriptions

• Uniforms and cleaning (Note: This clothing must be UNSUITABLE to wear for personal purposes. For example, a new suit you wear at the office is not deductible, because you could appropriately use it for personal purposes.)

• Small tools and work supplies (major purchases must be capitalized and depreciated)

• Business telephone - You can deduct only separately-incurred business expenses for additional lines or services, long distance calls, etc. You cannot deduct any portion of the basic charge of the first residential telephone line in your home, regardless of the percentage of business use.

• Malpractice insurance

• Professional license renewals

• Business gifts (but no more than $25 per person each year)

• Automobiles (special rules apply)

• Education

• Travel

• Meals & Entertainment (subject to limitations)

• Computers and other peripheral equipment

• Business use of your home (special rules apply)

• Any other expenses unique to your employment.

These expenses are subject to the 2% of adjusted gross income (AGI) limitation.

EXAMPLE: Your AGI is $42,000 and your unreimbursed employee and other miscellaneous expenses are $1,250. You deductible portion will be $410, which is calculated as follows:

EXCEPTIONS: Certain "performance artists" and "Armed Forces reservists" are NOT subject to the 2% AGI limitation. Also, work-related expenses incurred specifically due to a physical or mental disability can be deducted without regard to the 2% limit.

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