Normally, employee business expenses are deducted as a miscellaneous itemized deduction. However, miscellaneous deductions are limited to those expenses that exceed 2% of a taxpayer's Adjusted Gross Income. As a result, these deductions may be reduced or eliminated altogether.

However, taxpayers like teachers, who work for the public school system, can treat their expenses as a charitable contribution, thus eliminating the 2% of AGI limitation. IRS instructions specifically allow contributions of cash or goods to the US Government or State Agencies including political subdivisions such as school districts, police departments, etc.

Recordkeeping rules for these types of contributions are the same as for noncash contributions. Where the deduction is less than $250, you need to obtain a receipt from the organization including: (1) the name of the charitable organization; (2) the date and location of the contribution; and (3) a reasonably detailed description of the property. If it is impractical to obtain a receipt, document the required information for your own records.

If the charitable gift is more than $250, but less than $500, an acknowledgement of the contribution must also be obtained from the qualified organization. If the gift exceeds $500, a detailed record of each individual expense must be maintained including cost and fair market value, date incurred, and how acquired. For larger gifts (over $5,000), the rules are more complicated. Contact this office for further instructions.