|Legitimate ways to reduce your tax bill
Job expenses and certain miscellaneous deductions
The next section of Schedule A lets you take into
account money you spent in connection with your job
search, as well as a variety of miscellaneous expenses.
This overall amount, however, must exceed 2 percent
of your AGI. For a taxpayer making $40,000, that would
mean these costs must go over $800 before they can
Some of the items you can count to exceed the deduction threshold are professional memberships and journal subscriptions, uniforms you buy and the cost of keeping them clean, as well as expenses of looking for another job in the same field. You can also deduct the cost of tax-preparation software programs and any fee you paid for electronic filing or charges paid a professional tax preparer to complete your return.
One other consideration here is that you might have to file and attach Form 2106 (pdf), Employee Business Expenses, especially if you claim any travel, transportation, meal or entertainment expenses.
The "miscellaneous expenses" that can be deducted in this section include investment management costs. These refer to custodial and trust administration fees, accounting charges, safe deposit box rentals if you keep investment-related material in it, subscriptions to financial publications and fees reported on the Form 1099-DIV issued in connection with the investment.
Other miscellaneous deductions
This is a "catch-all" section for expenses that are not limited by your income. One of the most common deductions here is gambling losses.
Keep in mind, however, that while your
gambling losses aren't restricted by a percentage
of your AGI, they are limited by your good luck. You
can only deduct losses of up to how much you won.
That is, if you won $1,000 and had losses of $1,700,
you can only deduct $1,000.
Other miscellaneous deductions that can be claimed here are casualty and theft losses from income-producing property, amortizable bond premiums on some bonds, certain unrecovered investment losses in a pension, impairment-related work expenses of a disabled person and some other obscure expenses. IRS Publication 529 (pdf), Miscellaneous Deductions, has details on these specific deductions.
Once you've completed these seven Schedule
A sections, tally your total itemized deductions.
If the amount is greater than your standard deduction
amount, you'll be able to reduce your tax bill or
possibly get a larger refund.