Non-Qualified Tax Deduction Options
The Internal Revenue Service calculates your tax liability by deducting your qualified expenses from your income and multiplying the result by your tax rate. However, not all expenses qualify as a deduction. The Internal Revenue Service provides a list of expenses that, in general, do not qualify as a deduction from income tax but are subject to special rules that could affect your tax bill.
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Clothing and Household Items
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As a general rule, clothing and household items do not qualify as tax deduction. However, you do have the option, under the right circumstances, to claim for this expense under special rules. For instance, you can deduct the cost of clothing or household item if you donate it to a charity and the items are in good condition. You also have the option of claiming a deduction on clothing items that are not in good condition, as long as they come with an appraisal attached to it.
Bonuses and Awards
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In most cases, bonuses or awards granted by your employer are considered as part of your income and must be declared. However, in special cases you have the option to deduct otherwise non-qualified deductions. For instance, if you received an employee achievement award as recognition of years in service or a safety award, you may deduct the fair value of the prize from your income. Notice there is a cap of $1,600 and in cases of length of service awards, it must be for at least 5 years to qualify.
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Sick Pay
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Sick pay paid by your employer is generally a non-qualified deduction, and as such you must include it in your income tax. However, if you receive sick pay from a health insurance or accident policy, your sick pay is not taxable. Notice that benefits for sick pay provided by a welfare fund and insurance policies paid by your employer do not qualify for a tax break and must be treated as income.
Medicare and Social Security
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If you and your employer have an agreement whereby your employer agrees to pay for your Medicare or Social Security, you must report the unpaid medicare and Social Security payments as income. Nevertheless, if you are a householder or farm worker and your employer pays for your Medicare and Social Security, you have the option of treating it as a qualified deduction.
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