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3 Lesser-Known Expenses You Can Deduct from Your Taxes

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When it comes to tax deductions, most taxpayers focus on items that have the most impact, such as mortgage interest and state income or sales taxes. Yet lesser-known tax breaks can also help you boost your itemized deductions.

Let's take a look at three miscellaneous deductions that many people don't even know exist, as well as the overarching limitation on how much you can deduct.

1. Unreimbursed Employee Expenses

Many employees have to pay work-related costs out of pocket without getting reimbursed. Tax laws allow you to deduct certain expenses that you pay in connection with your work as an employee as long as they're ordinary and necessary to your job. The way these rules get applied differs depending on your profession, but the general idea is that if an expense is commonly accepted in your business and is appropriate and helpful for you to get your work done, it can qualify for a deduction.

The Internal Revenue Service gives several examples. Some of the most common include business liability insurance, depreciation on computer equipment that you pay for, professional dues, home-office expenses and travel expenses. Work-related education and job-search expenses in your current line can also be deductible.

2. Tax Preparation Fees

If you pay to have your tax returns prepared or to help you prepare your own taxes, then you're allowed to treat those expenses as a miscellaneous deduction. That includes paying an accountant, tax attorney or other professional to do your taxes and buying tax-preparation software or guides to do your own return.

These expenses are deductible in the year you pay them, not the year of the tax return in question. So on your 2013 tax return, you'd deduct expenses you paid last year -- which for most people means what they spent getting their 2012 taxes prepared.

3. Other Miscellaneous Deductions

A catch-all category includes many deductions for expenses connected with activities that produce taxable income or have an impact on your taxes. Some of the most common are investment expenses and fees, such as brokerage commission charges; legal expenses related to collect income or determine tax liability; and safe deposit box rentals.

In order to claim the Child and Dependent Care Credit, you need to fill out IRS Form 2441.
On the form, you need to provide the name and address of the person or organization that provided the child care, as well as the Social Security number or Employer Identification Number. By doing so, the IRS can match your claim against the records that some child-care organizations are required to provide, and it can also check to make sure that whoever you pay to provide child-care services actually reports those payments as income and pays taxes of their own.

There's one exception. If a tax-exempt organization provides the care, then you only need to write in "tax-exempt" in the box on Form 2441 that asks for an EIN.

Unfortunately, there's a limit on how much of these expenses you can deduct. You can only deduct the amount by which the total of eligible miscellaneous deductions exceeds 2 percent of your adjusted gross income. So if you earn $50,000, you're not allowed to deduct the first $1,000 of miscellaneous deductions; only the extra amount is eligible.

The full list of eligible miscellaneous deductions is on Publication 529.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google Plus.‚Äč

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Iselin007

What good is a surplus of grads trained for a future of less jobs?

April 08 2014 at 3:06 PM Report abuse -1 rate up rate down Reply
Iselin007

Visa's foster a jobs scam. As the jobs shrink the growing numbers of people will find they are the smartest unemployed ever.

April 08 2014 at 2:57 PM Report abuse -1 rate up rate down Reply
Iselin007

Right fees from the visa's goes toward educating the students for the future but meanwhile the visas are displacing more Americans. In the future the grads will keep looking for jobs that don't exist because the visas just just create an under ground railroad for even more extra people.

April 08 2014 at 2:53 PM Report abuse rate up rate down Reply
wilson727

Its all about the government. Everybody should know that by now.It doesnt matter that you dont make alot of money. As long as they can get into your pockets whose going to stop them.

April 07 2014 at 4:50 PM Report abuse -1 rate up rate down Reply
pwanless

The problem is that if you elect to do your taxes this way, then you can't take the standard deduction. So unless you are spending a LOT on all these extras, as in over about 5% of your salary, you're usually much better off with the standard.

April 07 2014 at 3:18 PM Report abuse rate up rate down Reply
martinru2

So who earns $50,000 or more? not me. ---I have a minimum wage job, and only work part time. ---need to get another job to make up after they take taxes away. ----So who wins here?

April 04 2014 at 6:08 PM Report abuse rate up rate down Reply
1 reply to martinru2's comment
Iselin007

The scheduling of workers often makes it hard to find any 2nd job. Your lucky to find and keep one job. Too many out of work turns the recovery into the next down turn.

You can't even find a real web site these days to air your complaints!

April 08 2014 at 2:42 PM Report abuse rate up rate down Reply