Taxpayers generally can deduct the items listed below as miscellaneous itemized deductions. They are not subject to the 2% limit.
Amortizable Premium on Taxable Bonds - If the amount a taxpayer pays for a bond is greater than its principal amount, the excess is considered bond premium. If the taxpayer elects to amortize the premium on taxable bonds, the amortization of the premium can be deducted to offset interest income on the bond.
Click here for IRS Publication 529 descriptions on what bond premiums can be deducted. - In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. You can elect to amortize the premium on taxable bonds. The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item.
Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988.
- Pre-1998 election to amortize bond premium. Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988.
- Bonds acquired after October 22, 1986, and before 1988. The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you chose to treat it as an offset to interest income on the bond.
- Bonds acquired before October 23, 1986. The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2% limit.
- Deduction for excess premium. On certain bonds (such as bonds that pay a variable rate of interest or that provide for an interest-free period), the amount of bond premium allocable to a period may exceed the amount of stated interest allocable to the period. If this occurs, treat the excess as a miscellaneous itemized deduction that is not subject to the 2% limit. However, the amount deductible is limited to the amount by which your total interest inclusions on the bond in prior periods exceed the total amount you treated as a bond premium deduction on the bond in prior periods. If any of the excess bond premium cannot be deducted because of the limit, this amount is carried forward to the next period and is treated as bond premium allocable to that period.
- Pre-1998 choice to amortize bond premium. If you made the choice to amortize the premium on taxable bonds before 1998, you can deduct the bond premium amortization that is more than your interest income only for bonds acquired during 1998 and later years.
Fed Estate Tax on Income in Respect of a Decedent
- Taxpayers can deduct the federal estate tax attributable to income in respect of a decedent that as the beneficiary was included in their gross income. See Publication 559 for information about figuring the amount of this deduction.
Impairment-Related Work Expenses - Taxpayers with a physical or mental disability that limits employment, or substantially limits one or more major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, impairment-related work expenses can be deducted if:
- the item or service enables the taxpayer to work
- the item is needed because of the taxpayer's disabling impairment
- the cost is paid by the taxpayer and not reimbursed
- the expense is reasonable; the taxpayer paid the standard charge for the item or service
- the expense was paid in a month in which the taxpayer was working
- If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses.
Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and other expenses in connection with your place of work that are necessary for you to be able to work.
Repayment under Claim of Right
- If the taxpayer repaid more than $3,000 that was included in their income in an earlier year, they may be able to deduct the amount that was repaid, or take a credit against their tax. See Repayments in Publication 525 for more information. - If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid, or take a credit against your tax. See Repayments in Publication 525 for more information.
From the Main Menu of the Tax Return (Form 1040) select:
- Itemized Deductions Menu
- Other Miscellaneous Deductions