You're correct that you can claim your unreimbursed professional expenses as a miscellaneous itemized deduction, which are only deductible to the extent they exceed 2% of your adjusted gross income.

And, in theory, there is no limit on the professional expenses you can claim. If you get audited by the IRS, however, you would need to show:

1. Proof that you paid for each item you're deducting, such as a cancelled check or a credit card statement.

2. Proof that the item is "ordinary and necessary" in connection with your profession. While a palm pilot probably qualifies, a Coach carrying case might not.


We currently have a client being audited by the IRS, and they are looking specifically at the professional expenses they claimed on their tax return. What they are looking for is third party verification of the expenses incurred, especially for CME and related travel expenses. Items they want to see are letters or some other proof documenting attendance to a CME course or some other business activity.

So our advice to you is simple. Keep good records, including documentation that you spent the money, and proof that the expenditure qualifies as "ordinary and necessary" for someone in your profession. The IRS is ramping up their audits, so having a file with this information could come in handy if you're selected for audit.

Zip Code: cpa@mdtaxes.com

One addition to Andrew's comments. Your level of income can have a dramatic effect on the benefit you can get from Miscellaneous Itemized Deductions. We have a physician who makes about $400,000/year. On Schedule A, he gets a $32,000 Miscellaneous Itemized Deduction for all his unreimbursed business expenes.

The problem is that he is subject to the Alternative Minimum Tax. Consequently, he get NO BENEFIT what so ever for his $32,000. If his business expenses were $-0-, his total tax doesn't change a dime. The mix of his regular tax and the AMT tax changes, but not the total.

Good luck!

Gary

Zip Code: garyd@davisandbrandel.com