How do Miscellaneous Deductions Impact State Taxes?
Miscellaneous deductions, although limited, can have various impacts on state taxes depending on the regulations of the individual state. Generally, these deductions are items that do not fall into the standard categories of tax credits or deductions. They include expenses such as unreimbursed employee expenses, tax preparation fees, and investment-related expenses.
For many states, the federal tax treatment of miscellaneous deductions can provide a baseline for state taxation. If a state conforms to federal tax guidelines, taxpayers may be able to carry over these miscellaneous deductions to decrease their state taxable income, similar to federal filings. However, some states have unique regulations that can either enhance or limit the benefits of these deductions.
Notably, the Tax Cuts and Jobs Act of 2017 temporarily suspended many miscellaneous deductions for federal tax purposes, impacting the ability to claim them on state returns in those states that conform to federal law. Thus, the impact is not universally applicable and varies by jurisdiction.
Taxpayers should consult their state-specific tax codes or seek advice from tax professionals to understand how miscellaneous deductions are treated and to maximize potential benefits when filing state taxes.