Mike incurs the following employment-related expenses in the current year: Actua
ID: 2443528 • Letter: M
Question
Mike incurs the following employment-related expensesin the current year:
Actual automobile expenses $2,500
Moving expenses (deductible under Sec. 217) $4,000
Entertainment expenses $1,500
Travel expenses (including $500 of business meals) $2,500
Professional dues and subscriptions $500
Total $11,000
Mike’s AGI is $120,000 before any of the above expenses are deducted. None of the expenses listed above are reimbursed by Mike’s employer. He has no other miscellaneous itemized deductions and does not use the standard deduction.
a. What is the amount of Mike’s deduction for employment-related expenses?
b. How are these items reported in Mike’s tax return?
Explanation / Answer
You have to find 2% of your AGI which is $2,400 to find your misc expense deductions floor. You then subtract the $2,400 from your employee related expenses. However, note that you are only able to deduct half of your business meals. Therefore, your deduction amount for employee related expenses is $8,350 (10,750-2,400). The items are reported as deductions FROM AGI.