Tax Reform: Elimination of 2% Floor Itemized Deductions
Historically, taxpayers have been afforded the opportunity to include various expenses, in excess of 2 percent of their adjusted gross income (AGI), in the calculation of itemized deductions on their individual income tax returns.
Starting on January 1, 2018 and running through December 31, 2026, individuals will no longer have the ability to deduct the excess expenses listed below as itemized deductions on their 1040s.
Deductible expenses subject to the 2% floor includes:
- Unreimbursed employee business expenses such as:
- Expenses for uniforms and special clothing
- Work-related education expenses to maintain or improve skills required for the position or to meet the demands of the employer
- Job-hunting expenses for a position in the same trade or business
- Dues (Including Union) and Subscriptions
- Educator Expenses above $250
- These expenses also include unreimbursed travel and mileage, as well as the home office deduction.
- Expenses related to the production of income, including Investment Fees
- Tax preparation and accounting fees
- Certain nonbusiness related legal fees
- Safe Deposit Box Fees
Despite the revocation of legal and accounting fees as itemized deductions, taxpayers will still be able to deduct such fees elsewhere on their individual return if they pertain to a specific trade or business that they conduct within the tax year.
TAX PLANNING OPPORTUNITY
Since these will be eliminated starting January 1, 2018, taxpayers that utilize the itemized deduction should pay any applicable expenses that have been assessed before the end of 2017. These deductions are not allowed for AMT purposes, so please consult your tax advisor to determine how you may be impacted specifically.