What is the 2% rule?
The 2% rule referred to the limitation on certain miscellaneous itemized deductions, which included things like unreimbursed job expenses, tax prep, investment, and advisory fees, and safe deposit box rentals.
In 2017 and earlier tax years, wage-earners and other taxpayers who weren’t able to write these off as business expenses were allowed to deduct the portion of these miscellaneous expenses that exceeded 2% of their AGI, provided they took the itemized deduction. These miscellaneous expenses were reported on Form 2106.
Under the Tax Cuts and Jobs Act (TCJA) that Congress signed into law on December 22, 2017, the deduction for these 2% miscellaneous expenses has been suspended in tax years 2018 through 2025. However, this doesn’t affect self-employed individuals and businesses, who can continue to deduct business-related expenses on Schedule C as before.