The Tax Cuts and Jobs Act is no longer allowing (suspending) the deduction for miscellaneous itemized deductions.

Prior Law

Through December 31, 2017

Individuals who itemize their deductions can deduct certain miscellaneous itemized deductions to the extent that the aggregate of those deductions exceed 2% of AGI. Miscellaneous itemized deductions subject to the 2%-of-AGI floor include the following: unreimbursed employee business expenses (filed on Form 2106 or 2106-EZ), unreimbursed vehicle expenses for rural mail carriers, investment expenses and expenses for the production and collection of income, tax determination (tax preparation) expenses, and expenses allowed under the “hobby loss” rules.

New Law

Effective for tax years beginning after December 31, 2017, and before January 1, 2026

Miscellaneous itemized deductions subject to 2%-of-AGI are no longer allowed for tax years 2018-2025.

Commentary

Certain other itemized deductions are not subject to the 2%-of-AGI floor. Examples include: amortizable bond premium, gambling losses (only to the extent of gambling winnings reported on Form 1040, line 21), impairment-related work expenses, and deduction for repayment of amounts under a claim of right if over $3,000. These deductions are still allowed under the rules of the Tax Cuts and Jobs Act. Over-the-road truck drivers and traveling construction workers and their respective employers may be significantly impacted by these tax law changes, depending on the expense reimbursement policy, if any, that may be in place to reimburse employees for work-related travel expenses.

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Curt Bach
I joined Hawkins Ash CPAs in August 2010, and am currently a manager in the firm’s Medford office. I provide a variety of tax services, including trust and estate tax preparation and planning. I have more than nine years of experience providing audit and tax services to nonprofit organizations, governmental entities and small businesses. I am a member of our firm’s tax committee and not-for-profit service group.

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