Itemized Deductions

To figure your taxable income, you must subtract either your standard deduction or your itemized deductions from adjusted gross income. For information on the standard deduction, get Publication 501.

Itemized deductions are figured on Schedule A (Form 1040). This chapter discusses itemized deductions of particular interest to members of the Armed Forces. For information on other itemized deductions, get the publications listed below.

• Publication 502, Medical and Dental Expenses
• Publication 526, Charitable Contributions
• Publication 547, Casualties, Disasters, and Thefts (Business and Nonbusiness)
• Publication 550, Investment Income and Expenses

Miscellaneous Itemized Deductions

You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. For information on deductions that are not subject to the 2% limit, get Publication 529.

Employee Business Expenses

Deductible employee business expenses are miscellaneous itemized deductions subject to the 2% limit.For information on employee business expenses, get Publication 463.

Generally, you must file Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses, to claim these expenses. You do not have to file Form 2106 or Form 2106-EZ if you are claiming only unreimbursed expenses for uniforms, professional society dues, and work-related educational expenses (all discussed later). You can deduct these expenses directly on Schedule A (Form 1040).

Reimbursement. Generally, to receive advances, reimbursements, or other allowances from the government, you must adequately account for your expenses and return any excess reimbursement. Amounts that are not excess reimbursements that you receive under an accountable plan are not included on your Form W-2. Your reimbursed expenses are not deductible.

If your expenses are more than your reimbursement, the excess expenses are deductible (subject to the 2% limit) if you can prove them. You must file Form 2106 to report these expenses.

You can use the shorter Form 2106-EZ if you meet both of the following conditions.

1. You were not reimbursed for your expenses, or, if you were reimbursed, the amount you received was included in your income in box 1 of your Form W-2.
2. If you claim car expenses, you use the standard mileage rate.

For 2000, the standard mileage rate is 32.5 cents a mile for all business miles driven. This rate is adjusted periodically for inflation.

Travel expenses. You can deduct unreimbursed travel expenses only if they are incurred while you are traveling away from home. To be deductible, your travel expenses must be work related. You cannot deduct any expenses for personal travel, such as visits to family while on furlough, leave, or liberty.

Away from home. Home is your permanent duty station (which can be a ship or base), regardless of where you or your family live. You are away from home if you are away from your permanent duty station substantially longer than an ordinary day's work and you need to get sleep or rest to meet the demands of your work while away from home.

Examples of deductible travel expenses include:

• Expenses for business-related meals (generally limited to 50% of your unreimbursed cost), lodging, taxicabs, business telephone calls, tips, laundry, and dry cleaning while you are away from home on temporary duty or temporary additional duty, and
• Expenses of carrying out official business while on "No Cost" orders.

You cannot deduct any expenses for travel away from your tax home if the period of temporary employment is for more than one year. This rule may not apply if you are participating in a federal crime investigation or prosecution. For more information, see Publication 463 and the Form 2106 instructions.

Reservists. You can deduct travel expenses if you are under competent orders, with or without pay, and away from your main place of business overnight to perform drills and training duty.

If you are called to active duty, you can deduct travel expenses if you keep your regular job while on active duty, return to your job after release, and are stationed away from the general area of your regular job or business. However, you can deduct these expenses only if you pay for them at your official military post and only to the extent the expenses exceed BAH and BAS.

Local transportation expenses. Local transportation expenses are the ordinary and necessary costs you have to get from one workplace to another while not traveling away from home and for certain other business-related local transportation. For example, these expenses include the costs of transportation by air, bus, rail, taxi, and driving and maintaining your car, but do not include meals and lodging. If you must go from one workplace to another while on duty (for example, as a courier or to attend meetings) without being away from home, your unreimbursed transportation expenses are deductible. However, the expenses of getting to and from your regular place of work (commuting) are not deductible.

Temporary work location. If you have a regular place of business and commute to a temporary work location, you can deduct daily transportation expenses for travel between:

• Your home and any temporary work location within the city or general area where you normally work (your tax home) or outside that area,
• Your home office and any other work location (regular or temporary) in the same trade or business if your home office qualifies as your principal place of business (tax home).

Generally, if your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary. If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes.

If you do not have a regular place of business, but you ordinarily work in the metropolitan area where you live, you can deduct daily transportation expenses between your home and a temporary work site outside your metropolitan area. However, you cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area.

Uniforms. You usually cannot deduct the expenses for uniform cost and upkeep. Generally, you must wear uniforms when on duty and you are allowed to wear them when off duty.

If military regulations prohibit you from wearing certain uniforms off duty, you can deduct the cost and upkeep of the uniforms, but you must reduce your expenses by any allowance or reimbursement you receive.

Expenses for the cost and upkeep of the following articles are deductible.

• Military battle dress uniforms and utility uniforms if you cannot wear them off duty.
• Articles not replacing regular clothing, including insignia of rank, corps devices, epaulets, aiguillettes, and swords.
• Reservists' uniforms if you can wear the uniform only while performing duties as a reservist.

Professional dues. You can deduct dues paid to professional societies directly related to your military position. However, you cannot deduct amounts paid to an officers' club or a noncommissioned officers' club.

Example. Lieutenant Margaret Allen, an electrical engineer at Maxwell Air Force Base, can deduct professional dues paid to the American Society of Electrical Engineers.

Educational expenses. You can deduct work-related educational expenses if they meet certain rules.

Qualifications. You can deduct the costs of qualifying education. This is education that meets at least one of the following two tests.

1. The education is required by your employer or the law to keep your present salary, status, or job. The required education must serve a bona fide business purpose of your employer.
2. The education maintains or improves skills required in your present work.

Even if the above requirements are met, you cannot deduct expenses for education necessary to meet the minimum educational requirements of your present trade or business. Also, you cannot deduct expenses for a program of study that can qualify you for a new trade or business.

Example 1. Lieutenant Colonel Mason has a degree in financial management and is in charge of base finances at her post of duty. She took an advanced finance course. She already meets the minimum qualifications for her job. By taking the course, she is improving skills in her current position. The course does not qualify her for a new trade or business. She can deduct educational expenses that are more than the educational allowance she received.

Example 2. Major Williams worked in the military base legal office as a legal intern. He was placed in "excess leave status" by his employer to attend law school. He paid all his educational expenses and was not reimbursed. After obtaining his law degree, he passed the state bar exam and worked as a judge advocate. His educational expenses are not deductible because the law degree qualified him for a new trade or business, even though the education maintained and improved his skills in his work.

Travel expenses. You cannot deduct the cost of travel that is itself a form of education, even if it is directly related to your duties in your work or business. However, if your educational expenses qualify as a deduction, travel for that education, including transportation, meals (subject to the 50% limit), and lodging, can be deducted. Educational services provided in kind, such as base-provided transportation to or from class, are not deductible.

If you need more information on educational expenses, get Publication 508.

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