Miscellaneous itemized deductions subject to the 2% adjusted gross income floor are gone at the federal level, and they are not coming back. The Tax Cuts and Jobs Act suspended them starting in 2018, and the One Big Beautiful Bill Act struck the sunset date from the statute, so the disallowance is now permanent for every tax year after 2017.1Office of the Law Revision Counsel. 26 USC 67 – 2-Percent Floor on Miscellaneous Itemized Deductions A separate group of miscellaneous deductions that never lived under the 2% floor is still available to anyone who itemizes, and a few specific workers can still claim job expenses as adjustments to income.
What the 2% Floor Used to Do
Under Internal Revenue Code Section 67, taxpayers could deduct miscellaneous itemized expenses only to the extent the total exceeded 2% of adjusted gross income.1Office of the Law Revision Counsel. 26 USC 67 – 2-Percent Floor on Miscellaneous Itemized Deductions The floor worked as a filter. A taxpayer with $100,000 in AGI had a $2,000 threshold; if they had $2,500 in qualifying expenses, only the last $500 actually reduced taxable income. At $200,000 in AGI, the floor doubled to $4,000, and most routine expenses never mattered.
That mechanism is what the current law shuts off. The underlying categories of expense still exist in the code, but there is no way for an individual to claim them.
Expenses You Can No Longer Deduct
The largest category swept away is unreimbursed employee business expenses: required uniforms, professional association dues, work-related travel, specialized tools, and safety equipment that a worker paid for out of pocket without employer reimbursement. Tax preparation costs went with them, including accountant fees, tax software, and legal advice on determining a tax liability. So did investment-related costs: advisory fees, custodial charges, and safe deposit box rentals used for taxable securities.2Internal Revenue Service. Tax Cuts and Jobs Act – A Comparison for Individuals
Hobby losses and job search expenses fell into the same bucket. All of them are permanently disallowed for individual filers.3Internal Revenue Service. Publication 529 – Miscellaneous Deductions The amended statute now reads that no miscellaneous itemized deduction shall be allowed for any taxable year beginning after December 31, 2017, with no expiration.4Internal Revenue Service. Internal Revenue Bulletin 2026-04
Miscellaneous Deductions That Still Work
A separate group of itemized deductions was never subject to the 2% floor, and none of them were touched by the TCJA or the permanent change. They are reported on Line 16 of Schedule A.5Internal Revenue Service. About Schedule A (Form 1040) – Itemized Deductions These remain available:
- Gambling losses, deductible up to the amount of gambling winnings reported for the year, with documentation of both wins and losses.6Internal Revenue Service. Tax Topic 419 – Gambling Income and Losses
- Impairment-related work expenses paid by a person with a physical or mental disability for attendant care at work or other expenses needed to do the job. These are not subject to the 7.5% medical expense limit either.7Internal Revenue Service. Publication 907 (2025) – Tax Highlights for Persons With Disabilities
- Federal estate tax on income in respect of a decedent, when a beneficiary receives income that was also subject to federal estate tax.8Internal Revenue Service. Publication 559 – Survivors, Executors, and Administrators
- Casualty and theft losses from income-producing property, such as investment stocks, bonds, or vacant land held for investment.
- Losses from Ponzi-type investment schemes.
- Repayments over $3,000 made under a claim of right, when you return income you reported in an earlier year.
- Amortizable premium on taxable bonds.
- Unrecovered investment in an annuity.
Because no percentage floor applies, every qualifying dollar reduces taxable income directly.
Above-the-Line Deductions for Specific Workers
Three narrow groups of employees can still deduct work-related expenses as adjustments to income on Schedule 1, without itemizing. Armed Forces reservists who travel more than 100 miles from home for reserve duties can deduct unreimbursed travel expenses up to the federal per diem rate, reported on Schedule 1 after completing Form 2106.9Internal Revenue Service. Publication 3 – Armed Forces Tax Guide Qualified performing artists who meet specific income and employment requirements can deduct work-related expenses above the line. Fee-basis state and local government officials can deduct expenses tied to that service.
Outside those categories, W-2 employees have no above-the-line path for unreimbursed work costs.
Self-Employed Filers Are Not Affected
If you are self-employed, none of this changes anything for you. Business expenses have always been reported on Schedule C, not as miscellaneous itemized deductions, so the 2% floor never applied to your work costs and the permanent elimination does not touch them. A freelance graphic designer can still deduct software subscriptions, home office costs, and professional development directly against business income. A salaried designer at an agency with identical out-of-pocket costs gets no federal deduction at all. The gap between employees and independent contractors on this point has widened since 2018.
State Returns May Be Different
Many states do not automatically conform to federal tax code changes. Some still calculate taxable income under an older version of the Internal Revenue Code, and some have explicitly kept deductions the federal government dropped. Unreimbursed employee expenses, tax preparation fees, and investment costs can remain deductible on a state return even though they are permanently disallowed federally.
This produces a common split filing pattern. A taxpayer claims the standard deduction on the federal return, which is $16,100 for single filers and $32,200 for married couples filing jointly in 2026,10Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 but itemizes on the state return to pick up what the state still allows. Some states that permit these deductions apply their own percentage floors. State instructions are the only reliable place to check.
Because state rules can still put these expenses to use, keeping receipts, canceled checks, credit card statements, and invoices is worth the effort. Travel and transportation records should also include the business purpose and destination.11Internal Revenue Service. What Kind of Records Should I Keep
Claiming a Disallowed Deduction Has a Cost
Putting a suspended deduction on a federal return is not a harmless error. If the IRS determines that an underpayment resulted from deducting expenses you were not entitled to, a 20% accuracy-related penalty applies to the underpayment.12Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments That penalty covers underpayments caused by negligence or a substantial understatement of income tax. On a $5,000 deduction that should not have been taken, the added tax plus the 20% penalty grows fast. Anyone who relied on these deductions before 2018 should be careful not to carry those habits onto a current return.
The practical alternative for an employee stuck with real out-of-pocket costs is an accountable reimbursement plan with the employer. Payments under such a plan are tax-free to the worker and deductible by the employer, which usually produces a better result than the old floor-limited deduction ever did.