BusinessAccountant is in the process of compiling a complete list. Currently please find entries for letters A-K.

A B C D E F G H I J K L M N O P Q R S T U V W

A

Abandonment

A loss resulting from abandonment of business or investment property is deductible as an ordinary loss, even if the property is a capital asset. The amount of the loss is the property’s adjusted basis at the time of abandonment.

Abortion

The cost of legal abortion is deductible as a medical expense.

Accidental breakage

Accidentally breaking articles such as glassware or china under normal conditions does not give rise to a deductible casualty loss.

Accidents

A car accident may result in a deductible casualty loss, unless the accident is caused by the willful negligence of the taxpayer or another person operating the taxpayer’s car.

Accounting certificate fees

No deduction is allowed for professional accreditation fees such as accounting certificate fees paid for the initial right to practice accounting, bar exam fees, and medical and dental licensing fees paid to get initial licensing.

Accounting fees

. An individual taxpayer can deduct, as miscellaneous itemized deductions subject to the 2 percent floor, accounting fees that are paid or incurred for the production or collection of income; for the management, conservation, or maintenance of property held for the production of income; or in connection with the determination, collection, or refund of any tax.

Acupuncture

The cost of acupuncture services may be deductible as a medical expense.

Admission – Charitable benefit event

If a taxpayer pays a qualified charitable organization more than the fair market value for the right to attend a charity ball, banquet, show, sporting event, or other benefit event, the taxpayer may deduct the amount paid above the fair market value of the privileges or other benefits received.

Admission – Political event

No deduction is allowed for the cost of admission to any dinner or program, if any part of the proceeds of such event directly or indirectly inures to or for the use of a political party or a political candidate.

Adoption expenses.

Adoption expenses are non-deductible personal expenses. Although an adoption services agency may be a qualified charitable organization, amounts paid to the agency for services rendered by the agency to the payers are not deductible charitable contributions.

Advertising display on car.

Putting display material that advertises a business on the taxpayer’s car does not change the use of the car from personal to business use; thus, personal use of the car such as commuting still is non-deductible.

Advice on investments.

Fees paid for counsel and advice about investments that produce taxable income, including investment advisory services, are deductible investment expenses subject to the 2 percent floor on miscellaneous itemized deductions.

Air cleaner

The cost of installing and operating an electronic air cleaner pursuant to a doctor’s recommendation for the alleviation of an illness, such as allergies, may constitute a deductible medical expense only to the extent that the cost exceeds the amount that would be required in the absence of the medical condition.

Air conditioning

An air-conditioning device that has been installed in the taxpayer’s residence for the alleviation of an illness is deductible as a medical expense, as long as it is purchased only for the use of the sick person and does not become a permanent part of the dwelling. A permanent central air conditioning unit installed for medical reasons is deductible only to the extent that its cost exceeds the increase in value to the home.

Airplane crash

An airplane crash can cause a deductible personal casualty loss.

Airplane fares—Business travel.

The costs of air, rail, and bus transportation incurred in a taxpayer’s work may be deductible unreimbursed employee travel expenses subject to the 2 percent floor on miscellaneous itemized deductions.

Airplane fares—Medical transportation.

Transportation primarily for, and essential to, medical care may be deductible as a medical expense.

Airport limousine.

A taxpayer traveling away from home for business purposes may deduct as unreimbursed employee travel expenses subject to the 2 percent floor on miscellaneous itemized deductions the cost of traveling by taxi, commuter bus, airport limousine, or other transport services between the airport or station and the taxpayer’s hotel.

Alcohol abuse treatment.

The cost of treatment, including meals and lodging, at a therapeutic center for alcoholism is a medical expense

Transportation costs paid to attend local meetings of an Alcoholics Anonymous club are deductible as medical expenses if the taxpayer’s attendance is pursuant to medical advice that membership in Alcoholics Anonymous is necessary for the treatment of a disease involving the excessive use of alcohol.

Alimony.

Attorney fees and other legal expenses incurred to collect taxable alimony are deductible subject to the 2 percent floor on miscellaneous itemized deductions.

Ambulance.

The cost of ambulance hire essential to the receipt of medical services is deductible as a medical expense.

Animals.

The cost and care of guide dogs and other animals aiding the blind, deaf, and disabled are deductible as a medical expense.

Annuity.

If the cost of a taxpayer’s annuity has not been fully recovered by the time of the taxpayer’s (or survivor annuitant’s) death, the unrecovered investment can be deducted on the taxpayer’s final income tax return as a miscellaneous itemized deduction not subject to the 2 percent floor.

Antiques.

A taxpayer who donates antiques to a qualified organization may claim a charitable contribution deduction for the fair market value of the antiques, provided that deductions in excess of $5,000 are supported by a written appraisal from a qualified and reputable source.

Apartment rental.

The cost of renting an apartment for the taxpayer’s son, upon the advice of a psychiatrist that it would be therapeutic for him to have the responsibility of caring for himself, is not deductible as a medical expense.

Appraisal fees.

Appraisal fees are deductible subject to the 2 percent floor on miscellaneous itemized deductions if paid to figure a casualty loss or the fair market value of property donated to a charitable organization.

Archeological dig.

A taxpayer who works for several hours each morning on an archeological dig sponsored by a charitable organization, with the rest of the day free for recreation and sightseeing, cannot take a charitable contribution deduction because no charitable contribution deduction for travel expenses incurred while away from home performing services for a charitable organization is permitted if there is a significant element of personal pleasure, recreation, or vacation in the travel or if the taxpayer’s duties are nominal.

Architectural expenses.

A taxpayer may elect to deduct up to $15,000 per year of architectural and transportation barrier removal expenses incurred for the purpose of making any facility or public transportation vehicle owned or leased by the taxpayer for use in his trade or business more accessible to and usable by handicapped and elderly individuals.

Artificial limbs.

The cost of an artificial limb is deductible as a medical expense.

Automobile Insurance.

The cost of automobile insurance for an automobile used in a taxpayer's work or business is deductible in most cases. For an employee the deduction can only be taken as an unreimbursed employee business expense subject to the 2 percent floor.

Artificial teeth.

The cost of artificial teeth is a deductible medical expense.

B

Babysitting.

The cost of babysitting services in order to enable the taxpayer to do unpaid volunteer or charity work is not deductible. The cost of child care is not deductible as a medical expense even if the expense is necessary in order for the taxpayer to receive medical or dental treatment.

Bad Debt

Business bad debts may be fully deductible against ordinary income. Non- Business bad debts are deductible as short term capital losses.

The cost of sending baggage and sample or display material between regular and temporary work locations is deductible as an unreimbursed employee expense subject to the 2 percent floor on miscellaneous itemized deductions.

Bandages

The cost of bandages may qualify as a deductible medical expense.

Bank fees.

Fees charged by a bank for the privilege of writing checks on a personal checking account cannot be deducted, even if the account pays interest. However, a taxpayer may deduct the monthly service charges paid to a bank to participate in an automatic investment service plan as expenses for the production and collection of income subject to the 2 percent floor on miscellaneous itemized deductions.

Bar exam fees.

The original costs of obtaining a business license required for doing business such as the costs of the bar exam required to be admitted to the practice of law, are non-deductible capital expenditures.

Bar review course.

The costs of review courses designed to prepare the taxpayer for the bar exam are non-deductible personal expenses.

Bed

The expense of purchasing a hospital bed, which was prescribed by the taxpayer’s doctor for the relief of osteoporosis of the spine, qualifies as a deductible medical expense.

Birth control pills.

Birth control pills are deductible as a medical expense when prescribed by a doctor.

Blindness

Payments made to a reader for the blind for services performed in connection with the conduct of a blind employee’s work are deductible as impairment-related employee expenses, which are not subject to the 2 percent floor on miscellaneous itemized deductions. Amounts a parent paid to a person to accompany his blind child throughout the school day to guide the child while walking are deductible as medical expenses.

Boats

The fair market value of a boat donated to a qualified organization may be deducted as a charitable contribution. A boat that has sleeping,cooking, and toilet facilities is treated as a home for purposes of the home mortgage interest deduction.

Books

The cost of books and supplies required for education that is required by the taxpayer’s employer or the law or that maintains or improves skills needed in the taxpayer’s present work is deductible as a work-related educational expense.

Bottled water.

The cost of bottled water does not constitute a deductible medical expense.

Boy Scouts of America.

Donations to a nonprofit educational organization such as the Boy Scouts are deductible as charitable contributions unless the contribution is a substitute for tuition or other enrollment fees.

Breach of promise to marry.

Amounts paid as damages for breach of a promise to marry, and attorney’s fees and other costs of a suit to recover such damages, are non-deductible personal expenses.

Breakage

Accidentally breaking articles such as glassware or china under normal conditions does not give rise to a deductible casualty loss.

Bribes

Illegal bribes and kickbacks are not deductible.

Burglary

The loss of money or property through burglary may be deductible as a theft or casualty loss.

Burial expenses.

Burial or funeral expenses, including the cost of a cemetery lot, are non-deductible personal expenses.

Bus fare.

The costs of air, rail, and bus transportation may be deductible as unreimbursed employee expenses subject to the 2 percent floor on miscellaneous itemized deductions. The cost of transportation incurred primarily for, and essential to, medical care is deductible as a medical expense.

C

Campaign expenses.

The expenses of seeking political office are non-deductible on the ground that they relate to office-seeking activities rather than to activities normally engaged in by officeholders, even if the candidate is running for re-election to the office and it represents his primary or sole employment.

Cars

The fair market value of a car, boat, or aircraft donated to a qualified organization may be deducted as a charitable contribution. The costs of shipping the taxpayer’s car from his former home to a new home in a move connected with the start of work in a new location is deductible as a moving

Cars—Business travel

The costs of operating and maintaining a car attributable to a taxpayer’s use of the car in her work may qualify as deductible unreimbursed employee expenses subject to the 2 percent floor on miscellaneous itemized deductions if the automobile is used for business purposes. A taxpayer can use his actual expenses to determine his deduction or use the standard mileage rate. The standard mileage rate for determining the deductible costs of operating an automobile for business purposes is 36 cents per mile for 2003 and 37.5 cents per mile for 2004. Actual automobile expenses that can be deducted include depreciation, licenses, gas, oil, tolls, lease payments, insurance, garage rent, parking fees, registration fees, repairs, and tires. If a taxpayer’s car is furnished by his employer, he can only deduct his actual unreimbursed car expenses and cannot use the standard mileage rate.

Cars—Expenses incurred on behalf of a charity.

Out-of-pocket automobile expenses incurred by a taxpayer while performing gratuitous services for a qualified charitable organization qualify for the charitable contribution deduction. The taxpayer may use a standard mileage rate to determine the amount of the deduction. The standard mileage rate for charitable deduction purposes is 14 cents per mile for 2004.

Cars—Medical transportation.

Out-of-pocket automobile expenses such as gas and oil, are deductible medical expenses when incurred for medical reasons. Depreciation, insurance, general repair, or maintenance expenses do not qualify for the medical expense deduction. The standard mileage rate may be used instead of actual expenses. The standard mileage rate allowed for out-of-pocket expenses for a taxpayer’s use of his car for medical reasons is 12 cents a mile for 2003 and 14 cents per mile for 2004.

Car pools.

A taxpayer cannot deduct the expenses of using his car in a non-profit car pool. However, any payments received from passengers are treated as reimbursement of the taxpayer’s expenses and do not have to be included in the taxpayer’s income.

Car registration.

State and local taxes on the registration or licensing of highway motor vehicles are deductible as personal property taxes only if the tax is ad valorem, or substantially in proportion to the value of the motor vehicle, and is imposed on an annual basis. Vehicle license and registration fees may be deducted as unreimbursed employee expenses subject to the 2 percent floor on miscellaneous itemized deductions if they are incurred in the course of the taxpayer’s work.

Cellular telephone.

An employee may take an unreimbursed employee expense deduction subject to the 2 percent floor on miscellaneous itemized deductions for depreciation on a cellular telephone used in her work if its use is for the convenience of the employer and required as a condition of her employment.

Charity to Individuals

Donations to individuals are not deductible as charitable contributions.

Child care.

The cost of babysitting services in order to enable the taxpayer to do charity work is not deductible. The cost of child care is not deductible as a medical expense even if the expense enables the taxpayer to get medical or dental treatment.

Child support.

Child support payments are neither deductible by the payer nor taxable to the payee.

Chiropractor

Fees paid to a chiropractor for medical care are deductible as medical expenses.

Church building fund assessments

Church building fund assessments are deductible as charitable contributions.

Church dues.

Periodic church dues are deductible as charitable contributions.

Clothing

Although the cost of clothing generally is a non-deductible personal expense, the cost and upkeep of work clothes and uniforms is deductible if the taxpayer must wear them as a condition of employment and the clothes are not suitable for everyday wear.

Clothing donations.

The fair market value of used clothing donated to a qualified organization is deductible as a charitable contribution.

College tuition.

College tuition is generally a non-deductible personal expense. Tuition for a work-related educational program may be deductible as an unreimbursed employee expense subject to the 2 percent floor on miscellaneous itemized deductions.

Comic books.

A high school teacher who sponsored the school’s extracurricular comic book club cannot deduct the cost of comic books purchased for use by the club and subsequently add to his own collection.

Community chest.

A community chest (a general fund set up to receive donations to help pay for a community’s charity and social welfare needs) is a qualified organization for purposes of the charitable deduction.

Commuting expenses.

The expenses of traveling between the taxpayer’s home and principal place of business are non-deductible personal expenses. Even if a taxpayer suffers from a medical condition that requires him to use a special mode of transportation to travel between his home and place of employment, the transportation expenses are not considered essential to the receipt of medical care and, thus, constitute non-deductible commuting expenses rather than deductible medical expenses.Similarly, a taxpayer with a slight disability resulting in his inability to drive could not deduct the portion of his wife’s costs incurred in taking him to work as a medical expense.Commuting expenses to a temporary work location, however, are deductible travel expenses.

Computer rental fees

A taxpayer traveling away from home for business purposes may be able to deduct the cost of renting a computer while away from home as an unreimbursed employee expense subject to the 2 percent floor on miscellaneous itemized deductions.

Computer—Used in taxpayer's work.

A taxpayer may deduct, as an unreimbursed employee expense, depreciation (computed under the straight line method), on a computer used in her work if its use is for the convenience of the employer and required as a condition of her employment. A taxpayer who satisfies the employer convenience and condition of employment tests can claim an accelerated depreciation deduction and a Code Section 179 deduction if she uses the home computer more than 50 percent of the time in her work. However, the 50 percent test does not apply to a computer used only in a part of the home that meets the requirements for taking a home office deduction.

Computer—Used to produce income.

An individual may deduct depreciation on his home computer if he uses it to produce income, for example, to manage his investments that produce taxable income.

Conditional gift.

If a charitable contribution is a conditional gift that depends on a future act or event that may not take place, the donor can take an immediate deduction only if there is merely a negligible chance that the act or event will not take place.

Condominiums

Condominium dues or fees paid on a condominium the taxpayer uses as a principal residence are not deductible.  Mortgage interest is deductible under the same rules as other mortgage interest.

Contact lens insurance.

The cost of a policy that provides for the replacement of lost or damaged contact lenses is a deductible medical expense.

Contact lenses.

Amounts paid for contact lenses needed for medical reasons are deductible as a medical expense, as is the cost of equipment and materials required for using contact lenses such as saline solution and enzyme cleaner.

Continuing education.

Education that maintains or improves skills needed in the taxpayer’s present work such as refresher courses, courses on current developments, and academic or vocational courses, is deductible work-related education, subject to the 2 percent floor on miscellaneous itemized deductions.

Controlled substances.

Amounts paid to obtain a controlled substance such as marijuana, in violation of federal law, are not deductible medical expenses even if state law permits the use of the substance when purchased with a physician’s prescription.

Conventions.

The expenses of attending a convention are deductible as unreimbursed employee expenses subject to the 2 percent floor on miscellaneous itemized deductions if the taxpayer can show that attendance benefits his trade or business.

Cosmetic surgery.

Surgery for purely cosmetic reasons that is directed at improving the taxpayer’s appearance and does not meaningfully promote the proper function of the body or prevent or treat an illness or disease is not deductible as a medical expense. However, the IRS has privately ruled that the cost of treatment to correct a facial deformity that arose from, or is directly related to, congenital abnormalities is a deductible medical expense.

Counseling.

The cost of spiritual guidance or counseling is not deductible as a medical expense.

Country clubs.

No deduction is permitted for amounts paid or incurred for membership in any club organized for business, pleasure, recreation, or other social purposes. Clubs organized for business, pleasure, or other social purposes include but are not limited to country clubs, golf and athletic clubs, airline clubs, hotel clubs, and clubs operated to provide meals under circumstances generally considered to be conducive to business discussion.

Cover charges.

A taxpayer may deduct, as employee expenses subject to the 2 percent floor on miscellaneous itemized deductions, 50 percent of cover charges for admission to a nightclub if the entertainment is associated with or directly related to the taxpayer’s business.

CPA review course.

The cost of review courses to prepare the taxpayer for the certified public accountant examination is not deductible because the courses are part of a program of study that can qualify the taxpayer for a new profession.

Criminal activity.

Deductions arising out of criminal activity generally are disallowed when allowing the deductions would severely frustrate public policy, although deductions may be allowed for expenses that also would be incurred in a legitimate activity.

Cruise ship.

The costs of attending a convention, seminar, or similar meeting held on a cruise ship are not deductible as an unreimbursed employee business expense unless the taxpayer can establish that the meeting was directly related to the active conduct of the taxpayer’s trade or business and that the cruise ship is registered in the United States and all ports of call are located

in the United States or its possessions. If these conditions are satisfied, a taxpayer may deduct up to $2,000 per year in expenses of attending conventions on cruise ships, subject to the 2 percent floor on miscellaneous itemized deductions.

The cost of traveling on a cruise ship is not deductible as a medical expense, even if the trip is beneficial to the taxpayer’s general health and wellbeing, if it is not undertaken primarily for and essential to the taxpayer’s medical care.

Crutches

Amounts paid to buy or rent crutches are deductible as a medical expense.

Custodian fees.

Custodian fees charged by a broker that are related to investments that produce taxable income are deductible investment expenses subject to the 2 percent floor on miscellaneous itemized deductions.

D

Damages for breach of employment contract.

A taxpayer who breaks an employment contract may deduct, as a miscellaneous itemized deduction subject to the 2 percent floor, damages paid to the former employer if the damages are attributable to the pay received and reported by the taxpayer from that employer.

Dancing lessons.

The cost of ballet training for an individual suffering from scoliosis is not deductible as a medical expense, even if recommended by the taxpayer’s physician and beneficial to the taxpayer’s health, unless the expenses would not otherwise have been incurred for non-medical reasons.

The cost of ballroom dance lessons recommended by the taxpayer’s doctor as a form of therapy for arthritis and to alleviate nervous tension is not deductible as a medical expense because it is not proximately related to the taxpayer’s medical care.

No deduction is allowed for the costs of child care. The cost of babysitting services in order to enable the taxpayer to do charity work is not deductible. The cost of child care is not deductible as a medical expense even if the expense enables the taxpayer to get medical or dental treatment.

Daycare center—Qualified charitable organization.

A daycare center may be a qualified charitable organization if it is operated exclusively for educational purposes. Educational purposes includes the providing of care of children away from their homes if substantially all of the care provided by the organization is for purposes of enabling individuals to be gainfully employed, and the services

provided by the organization are available to the general public.

A taxpayer can deduct as a charitable contribution any unreimbursed expenses he has while in a permanent diaconate program established by his church. These expenses include the cost of vestments, books, and transportation required to serve in the program as either a deacon candidate or as an ordained deacon.

Deafness

The cost of special education, such as sign language or lip reading, designed to alleviate the effects of deafness is deductible as a medical expense, as is the cost of a “note taker” to take notes in class for a deaf college student. The cost of special equipment that allows a deaf person to communicate by telephone is deductible as a medical expense. Similarly, the cost of equipment that displays the audio part of television programs as subtitles for hearing-impaired persons is deductible as a medical expense.

Deformity.

The cost of cosmetic surgery to improve a taxpayer’s facial deformity that arose from, or is directly related to, congenital abnormalities is a deductible medical expense.

Demolition expenses.

The owner of a structure generally cannot claim a deduction for any amount expended for the demolition of the structure or any loss sustained on account of the demolition.

Demolition expenses—Loss incurred before demolition.

A loss sustained before a building’s demolition will not be treated as having been sustained on account of the demolition of the building and therefore will not be disallowed.

Demolition expenses—Government-ordered demolition.

The government-ordered demolition or relocation of a home that is unsafe to use because of a disaster may give rise to a deductible casualty loss.

Demonstrators

If a direct seller uses his company’s products himself, the cost of the products is a non-deductible personal expense even if he keeps the products on hand to show to potential customers. If the seller uses a product as a demonstrator for one year or less and the demonstrator itself is not available for purchase by customers, its cost is a deductible business expense. If the demonstrator itself can be bought by customers, the seller must include it in inventory.

Dental licensing fees.

No deduction is allowed for professional accreditation fees paid to get initial licensing.

Dental treatment.

Amounts paid for dental treatment, including fees paid to dentists for x-rays, fillings, braces, extractions, and dentures are deductible as medical expenses.

Dentures

The cost of artificial teeth is a deductible medical expense.

Dependents

An individual taxpayer may claim an exemption for his child and for other dependents.

Depreciation—Automobile.

A taxpayer can deduct the portion of depreciation expense for an automobile that is attributable to the use of the automobile in his work as an unreimbursed employee expense subject to the 2 percent floor on miscellaneous itemized deductions if the taxpayer chooses to deduct actual expenses.

Depreciation—Computer or cell phone.

A taxpayer may deduct, as an unreimbursed employee expense, depreciation (computed under the straight line method), on a computer or cellular telephone used in her work if its use is for the convenience of the employer and required as a condition of her employment. A taxpayer who satisfies the employer convenience and condition of employment tests can claim an accelerated depreciation deduction and a Code Section 179 deduction if she uses the computer or cell phone more than 50 percent of the time in her work. However, the 50 percent test does not apply to a computer used only in a part of the home that meets the requirements for taking a home office deduction.

Losses incurred as a result of progressive deterioration of property through a steadily operating cause are not due to a sudden identifiable event and thus are not deductible as casualty losses.

Diagnostic devices.

The cost of diagnostic equipment such as blood sugar test kits can be deducted as a medical expense if the device is used for the diagnosis, cure, mitigation, treatment, or prevention of disease, or the purpose of affecting any structure or function of the body.

Diagnostic services.

The cost of a diagnostic service qualifies as a deductible medical expense.

Diamond ring.

The accidental loss or disappearance of property may be deductible as a casualty loss if it results from a sudden, unusual, or unexpected event such as the loss of a diamond from a ring when a car door is slammed on the taxpayer’s hand.

Diaper service.

Diaper service for normal babies is considered a personal expense rather than a deductible medical expense. However, the IRS has allowed a deduction for diaper services in the case of a severely brain-damaged child who had to be diapered.

Disabled access.

A taxpayer may elect to treat up to $15,000 of qualified expenditures for the purpose of making any facility or public transportation vehicle owned or leased by the taxpayer for use in his trade or business more accessible to and usable by handicapped and elderly individuals as a deduction rather than as a charge to a capital account for any taxable year.

Disabled dependent care expenses may be treated as deductible medical expenses, or alternatively as work-related expenses for purposes of claiming the credit for household and dependent care services necessary for gainful employment, but not as both.

Disaster

The government-ordered demolition or relocation of a home that is unsafe to use because of a disaster may give rise to a deductible casualty loss.

Disaster relief contributions.

Although contributions earmarked for the relief of a particular individual or family cannot be deducted, taxpayers may deduct contributions made to a qualified organization and earmarked for flood relief, hurricane relief, or other disaster relief.

Discount points—Home mortgage.

Points paid by a borrower to obtain a home mortgage are deductible as home mortgage interest in the year paid if payment of points is an established business practice in the area in which such indebtedness is incurred, and the amount of such payment does not exceed the amount generally charged in such area.

Disease

The death of livestock from disease is not a deductible casualty loss. The death of trees or other plants by disease is also not a deductible casualty loss.

Baggage charges and transportation costs for sample or display materials may be deductible as unreimbursed employee expenses subject to the 2 percent floor on miscellaneous itemized deductions.

E

Ear piercing.

The cost of ear piercing is a not a deductible medical expense.

Earthquake

An earthquake may give rise to a deductible casualty loss.

Egg donor.

A medical expense deduction can be taken for egg donor fees and other expenses of obtaining an egg donor so that a taxpayer may attempt pregnancy, including fees paid to a coordinating agency for procuring donor, fees paid to the donor for time and expense, the expenses of medical and psychological testing of the donor, insurance fees to cover medical or psychological needs of the donor, and legal expenses for the preparation of the contract between the taxpayer and the egg donor.

Elastic stockings

The cost of elastic stockings is deductible as a medical expense.

Electrolysis.

The cost of removing unwanted facial hair by methods such as electrolysis, where the removal is due to the taxpayer’s personal preference, is not deductible as a medical expense.

Elevator.

The installation of an elevator, on a doctor’s advice, qualifies as a medical care expense, but the medical expense deduction is limited to the cost of the elevator, less the increase in value to the home attributable to the elevator.

Embezzlement.

A deductible theft loss may arise when money or property is taken from a taxpayer through embezzlement.

Emergency Energy Programs.

Donations to a utility company’s emergency energy program are deductible as charitable contributions if the utility company is an agent for a charitable organization that assists individuals with emergency energy needs.

Employee expenses.

Unreimbursed employee expenses, which are ordinary and necessary expenses paid during the tax year for carrying on the taxpayer’s trade or business of being an employee that are not reimbursed by the taxpayer’s employer, are deductible as miscellaneous itemized deductions subject to the 2 percent floor.

Employment agency fees.

Employment and outplacement agency fees paid in looking for a new job in the taxpayer’s present occupation are deductible as unreimbursed employee expenses subject to the 2 percent floor on miscellaneous itemized deductions.

Employment taxes—Household employees.

The employment taxes paid for household employees are not deductible because they are not taxes imposed on the taxpayer.

Entertainment

A deduction for entertainment expenses is allowed only if the entertainment is either directly related to or associated with the active conduct of a trade or business. The deduction is limited to 50 percent of the taxpayer’s otherwise deductible business-related entertainment expenses.

Entertainment facilities.

Generally no deduction is allowed for the costs of using an entertainment facility such as a yacht, hunting lodge, fishing camp, swimming pool, tennis court, bowling alley, apartment, hotel suite, or home in a vacation resort.

Equipment.

The cost of equipment such as crutches, can be deducted as a medical expense if the equipment is used for the diagnosis, cure, mitigation, treatment, or prevention of disease, or the purpose of affecting any structure or function of the body.

Eye exams.

Fees paid for eye examinations are deductible as medical expenses.

Eye surgery.

The cost of radial keratotomy or LASIK eye surgery is a deductible medical expense.

Eyeglasses

Amounts paid for eyeglasses needed for medical reasons are deductible as a medical expense. Eyeglasses are considered a personal item and thus are not deductible as a business expense even if their use is necessary in the taxpayer’s business.

F

False teeth.

The cost of false teeth is deductible as a medical expense.

Federal crime investigation.

Although travel expenses generally are not deductible if the taxpayer’s new assignment is realistically expected to last for more than one year, a federal employee participating in a federal crime investigation or prosecution is not subject to the one-year rule and thus may deduct travel expenses even if she is away from her home for more than one year.

Federal taxes.

No deduction is allowed for federal taxes, including the federal income tax, federal estate tax, FICA tax, and federal war profits and excess profits taxes.

Fees and licenses.

Fees and licenses such as car licenses, marriage licenses, and dog tags are not deductible.

Feminine hygiene products

The costs of feminine hygiene supplies are not deductible medical expenses.

Fertility enhancement procedures.

The cost of fertility treatments, including procedures such as fertilization (including temporary storage of eggs or sperm), and surgery, including an operation to reverse prior surgery that prevents having children, is deductible as a medical expense.

Fines or penalties

No deduction is allowed for fines or penalties paid to a governmental unit for violating a law, or for any amount paid in settlement of actual or potential liability for a civil or criminal fine or penalty.

Fire companies

. Donations by a taxpayer to a non-profit volunteer fire companies are deductible as charitable contributions if the company promotes the common good and general welfare of the community through its primary activity of providing fire and ambulance service, even if the company serves the area in which the taxpayer resides.

Fire engine.

The donation of a mere right to use the taxpayer’s property such as allowing a municipality fire department to house a fire engine in the taxpayer’s garage, does not qualify as a deductible charitable contribution because the right to use property does not constitute an undivided portion of the taxpayer’s entire interest in the property.

Fire

A fire may result in a deductible casualty loss, unless the taxpayer either willfully set the fire or paid someone else to set it.

Fishing trip.

The cost of entertaining guests on a hunting or fishing trip may be deductible as an unreimbursed employee expense subject to the 2 percent floor on miscellaneous itemized deductions if the entertainment is associated with or directly related to the taxpayer’s work.

Flood

Flood damage may be deductible as a casualty loss.

Food—Entertainment expense.

Any item that can be treated as either a gift or entertainment generally will be considered entertainment and as such may be deductible as an unreimbursed employee expense subject to the 2 percent floor on miscellaneous itemized deductions if it is either associated with or directly related to the taxpayer’s work.However, if the taxpayer gives a customer prepackaged food or beverages for the customer to use at a later date, the food or beverage is treated as a gift.

If special food or beverage is used by an individual with a medical problem merely as a substitute for food or beverage normally consumed to satisfy nutritional requirements, the cost of such food or beverage is a personal expense. If certain foods are medically prescribed for the individual to meet special dietary needs caused by a medical problem, rather than merely to satisfy normal nutritional needs, the excess of the cost of the special food over comparable regular food is a deductible medical expense. While amounts paid by a taxpayer to participate in a weight-loss program as treatment for a specific disease or diseases (including obesity) diagnosed by a physician are expenses for medical care are deductible, the cost of purchasing diet food items is not deductible.

Foreclosure.

The foreclosure or repossession of property, due to the taxpayer’s failure to make payments on a loan secured by the property, is treated as a sale or exchange that may give rise to gain or loss. No deduction is allowed for a loss on the sale of property used for personal reasons such as the taxpayer’s personal residence.

Foreclosure—Casualty or theft loss.

Where the taxpayer looses his home and furnishings in an eviction and foreclosure sale, the loss is not caused by any sudden, unexpected, and external event, but by his failure to make the proper payments on the mortgage loan, and thus does not give rise to a deductible casualty loss. Where the eviction is pursuant to court order, the eviction does not give rise to a deductible theft loss.

Foreign charitable organizations.

Although contributions to a foreign church or charitable organization generally are not deductible, donations to certain Canadian, Israeli, and Mexican charitable organizations may be deducted as charitable contributions.

Foreign government.

The confiscation of a taxpayer’s property by a foreign government or foreign officials acting under color of legal authority is a personal loss and does not entitle the taxpayer to a theft or casualty loss deduction. However, a taxpayer’s loss of household goods in a city that fell to enemy troops during war is deductible as a casualty loss even if the taxpayer cannot specify exactly how the property was destroyed.

Foreign housing.

A self-employed individual living abroad, who does not receive housing expenses from an employer, can deduct housing costs in arriving at adjusted gross income. The housing cost deduction for the self-employed individual is limited to the excess of his foreign earned income for the taxable year over the foreign earned income exclusion for the taxable year.

Foreign taxes.

Foreign real property taxes and income taxes paid during the year are deductible, but only if the taxpayer does not elect to claim the foreign tax credit. If the taxpayer uses the foreign earned income exclusion, he cannot also claim the foreign tax credit or the deduction for foreign income tax paid on that income.

Forgery

The loss of property due to forgery such as a third party forging the taxpayer’s signature on a check, may be deducted as a theft loss.

Foster parents.

Taxpayers may deduct some of the costs of being a foster parent or foster care provider if the child is placed with the taxpayer by a qualified agency and the taxpayer has no profit motive in providing the care and does not in fact make a profit. However, if the foster parent is able to claim a dependency exemption for the foster child, no charitable contribution deduction is allowed with respect to that child.

Franchise fee.

A taxpayer who entered into a franchise agreement with the intention of making a profit and paid a nonrefundable franchise fee, but was forced to terminate the franchise agreement when the franchisor failed to provide support, training, and materials, can claim a loss deduction for the amount of the franchise fee.

Fraud.

The taking of money from a taxpayer through fraud or misrepresentation may give rise to a deductible theft loss if the fraud or misrepresentation is illegal under state or local law.

Free food.

The expense of distributing free food and beverages to the general public is fully deductible (not subject to the general 50 percent limitation on meal and entertainment expenses), if the taxpayer is providing meals or entertainment to the general public as a means of advertising  or promoting goodwill in the community.

Fundraisers.

Where consideration in the form of admissions or other privileges or benefits is received in connection with payments by patrons of fund-raising affairs, the taxpayer has the burden of establishing that part of the payment qualifies as a tax-deductible charitable contribution rather than as the purchase of privileges or benefits.

Fuel taxes.

Federal excise taxes that are imposed on certain fuels cannot be deducted by the

Funeral expenses.

Burial or funeral expenses, including the cost of a cemetery lot, are non-deductible personal expenses for which no deduction is allowed for federal income tax purposes.

Future income.

No deduction is available for the loss of anticipated income or potential gain that the taxpayer had hoped to realize at a future date.

G

Gambling losses.

Gambling losses, up to the amount of gambling winnings, are deductible as a miscellaneous itemized deduction not subject to the 2 percent floor.

Gas and oil expenses.

Out-of-pocket car expenses such as gas and oil, are deductible as medical expenses when the car is used for medical reasons or may be unreimbursed employee expenses subject to the 2 percent floor on miscellaneous itemized deductions when the car is used for business purposes. A taxpayer may use the standard mileage rate instead of his actual expenses for purposes of both the medical and the unreimbursed employee expense deductions. The standard mileage rate for the medical expense deduction is 14 cents per mile for 2004 and 12 cents per mile for 2003. The standard mileage rate for determining the deductible costs of operating an automobile for business purposes is 37.5 cents per mile for 2004 and 36 cents per mile for 2003.

Gifts related to a business are deductible only if the gifts are ordinary and necessary business expenses and do not exceed $25 and only if the gifts are ordinary and necessary business expenses. Costs that do not add value to a gift such as gift wrapping, packaging, insuring and mailing, are generally not included in determining the $25 limit.

Donations to the Girl Scouts of America are deductible as charitable contributions.

The expenses of playing golf, including transportation to the golf course, are not deductible as medical expenses even if the taxpayer's physician recommends golf as beneficial to the taxpayer's general health.

No deduction is permitted for amounts paid or incurred for Golf club membership.

Donations of money or property to Goodwill Industries are deductible as charitable contributions. IRS Publication 526, Charitable Contributions.

The government-ordered demolition or relocation of a home may be considered a deductible casualty loss.

Money or property donated to federal, state, and local governments is deductible as a charitable contribution if the contribution is solely for public purposes such as a gift to reduce the public debt.

The cost of a grave stone is not deductible as a medical expense.

The cost and care of guide dogs and other animals aiding the blind, deaf, and disabled are deductible as medical

H

Hair transplant

The cost of a hair transplant is not a deductible medical expense because the procedure is directed at improving the patient's appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease.

The cost of removing the taxpayer's unwanted facial hair due to the taxpayer's personal preference is not deductible as a medical expense.

The expenses of belonging to a health club generally are not deductible as medical expenses, even if the taxpayer's job requires him to stay in excellent physical condition or if the taxpayer's doctor recommends it for his general health.

Medical and hospital insurance premiums are deductible as a medical expense. A self-employed individual may deduct 100 percent of his or her health insurance expenses as an adjustment to income.

The cost of a hearing aid is deductible as a medical expense.

The expenses of a hobby activities are deductible up to the amount of income from the hobby.

Expenses incurred in the place of hospitalization are generally deductible as medical expenses.

Mortgage interest on a loans of up to $1,000,000 and Interest paid on a home equity loans of up to $100,000 are generally deductible as an Itemized deductions.

If a taxpayer uses a portion of the home regularly and exclusively for work part of the operating expenses and depreciation of the home can usually be deducted.

Amounts paid for homeowner's insurance premiums are nondeductible personal expenses.

Donations to a non-profit hospital are deductible as charitable contributions.

Fees for medically required hospital services are generally deductible as a medical expenses.

A taxpayer whose business trip is long enough that the taxpayer must stop for sleep to properly perform may deduct the cost of a hotel room as an unreimbursed employee expense subject to the 2 percent floor on miscellaneous itemized deductions.

A boat that has sleeping, cooking, and toilet facilities is treated as a home and qualifies for home related deductions.

Damage caused by a hurricane may be deductible as a casualty loss.

I

Illegal bribes

No deduction is allowed for any illegal payment to a government official or any other person.

Permanent improvements made to increase the value of property are capital expenses and are generally not deductible. In some situations a taxpayer may elect to deduct the entire cost of the property.

Amounts paid to reimburse a county for the expenses of the upkeep and maintenance of the taxpayer's child while incarcerated in a juvenile detention center are non-deductible personal expenses rather than personal property or other deductible taxes.

A taxpayer can deduct the federal estate tax attributable to income in respect of a decedent that the taxpayer, as beneficiary, includes in her gross income. The deduction would be a miscellaneous itemized deduction not subject to the 2 percent limitation.

A taxpayer who must post an indemnity bond to replace taxable securities that are mislaid, lost, stolen, or destroyed can deduct the premium paid to buy the bond and the related incidental expenses as investment expenses. This deduction would be subject to the 2 percent floor on miscellaneous itemized deductions.

The medical portion of the cost of assisted living arrangements are deductible medical expenses.

A taxpayer may claim an above-the-line deduction for contributions to a traditional IRA.

IRA trustee fees in excess of the maximum amount deductible for IRA contributions may be deductible investment expenses. The deduction would be subject to the 2 percent floor on miscellaneous itemized deductions.

Treatments received to overcome an inability to have children are generally deductible medical expenses.

The loss in purchasing power caused by inflation, or a rise in the price level of currently produced goods and services, is not a deductible loss.

Damage caused by insects generally does not qualify for a deductible casualty loss.

Institutional care

Institutional care costs are deductible medical care expenses if an individual is in the institution primarily because her condition requires the availability of medical care.

Insurance premiums

Medical and hospital insurance premiums are deductible as a medical expense.

Interest on Investments

If a taxpayer borrows money for investment, the interest on the loan may be deductible up to the amount of the taxpayer's net investment income.

Investment

Ordinary and necessary expenses paid or incurred to produce or collect income or to manage property held for producing income are deductible as miscellaneous itemized deductions subject to the 2 percent floor.

Investment advice

Fees paid for counsel and advice about investments that produce taxable income, including investment advisory services, are deductible investment expenses subject to the 2 percent floor on miscellaneous itemized deductions

Investment fees

Fees related to investments that produce taxable income are deductible investment expenses subject to the 2 percent floor on miscellaneous itemized deductions.

Israeli charitable organizations.

Under an income tax treaty with Israel, donations to certain Israeli charitable organizations may be deducted as charitable contributions for federal tax purposes, with the amount of the deduction limited to 25 percent of the taxpayer's adjusted gross income from Israeli sources.

J

Jewelry

The accidental loss or disappearance of jewelry may be deductible as a casualty loss if it results from a sudden, unusual, or unexpected event.

Job search expenses

The expenses of looking for a new job in the taxpayer's present occupation may be deductible as unreimbursed employee expenses subject to the 2 percent floor on miscellaneous itemized deductions.

Journals

The costs of subscriptions to professional journals and trade magazines related to the taxpayer's work may be a deductible business expense. If the Journal expense is a job expense it may be deducted as an unreimbursed employee expenses subject to the 2 percent floor on miscellaneous itemized deductions.

K

Kickbacks

No deduction is allowed for any payment to a government official or any other person that is an illegal bribe or kickback.

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