For most employees, out-of-pocket business expenses can only be deducted as miscellaneous itemized deductions. Only the portion of these expenses that exceeds 2% of the taxpayer’s AGI is deductible. That means, in many cases, these deductions are reduced or entirely eliminated.
For public employees, however, you may be able to treat your business expenses as a charitable contribution. This enables you to avoid the 2% limitation. That’s because the IRS includes contributions of cash or goods to the federal government or state agencies (including subdivisions like police departments and school districts) in their list of eligible charitable contributions.
So, for example, if you’re a public school teacher who purchased supplies or materials for your classroom, those can be deducted as a charitable contribution rather than a business expense. As a result, you can deduct expenses without regard for the 2% AGI limitation on business expense deductions.
Keep in mind that if you are a public employee deducting business expenses as charitable contributions, all of the same documentation rules apply as for other types of charitable contributions. You’ll need to get a donation receipt from your school or other agency to ensure you have the substantiating paperwork to back up your tax return.
Taxation Solutions, Inc. offers 40+ years of tax help expertise to local taxpayers, and we can help you interpret IRS rules and regulations to your best advantage. For more information, don’t hesitate to call today!