13.3 Other Itemized Deductions (Schedule A, Line 16), Nondeductible Personal Expenses & Itemized Deductions on Form 1040-NR

Why This Topic Matters

The Part 1 outline lists "Other itemized deductions" and "Itemized deductions for Form 1040-NR" as separate Deductions and Credits topics. Questions usually test whether an expense a client mentions is deductible at all, and whether a nonresident alien may deduct the same items as a U.S. citizen.

Schedule A, Line 16: The Short List

None of these items is subject to a percentage-of-AGI floor.

Expenses That Are Never Deductible

Before 2018, a long list of expenses were miscellaneous itemized deductions deductible only above 2% of AGI. TCJA suspended them, and OBBBA made the suspension permanent. The following are nondeductible for individuals:

• Tax preparation fees (except the part allocable to Schedule C, E, or F, which is deducted on that schedule);
• Investment advisory, custodial, and IRA fees paid from outside funds;
• Unreimbursed employee business expenses (except for Armed Forces reservists, qualified performing artists, fee-basis government officials, and impairment-related work expenses);
• Union dues, professional dues, and work uniforms of an employee;
• Safe deposit box rental and hobby expenses;
• Legal fees for personal matters, such as a divorce (legal fees for certain employment discrimination claims and whistleblower awards are deducted above the line on Schedule 1, Lines 24h and 24i).

Other personal expenses that were never deductible include life insurance premiums, funeral expenses (deductible only by an estate on Form 706), home repairs, commuting, personal legal fees, and fines or penalties.

2026 change to watch: OBBBA limits the tax benefit of itemized deductions for taxpayers in the 37% bracket (to the equivalent of 35%) and adds an itemized deduction for certain educator expenses, both starting in 2026.

Claim of Right: Repaying Income Taxed in an Earlier Year (IRC §1341)

A taxpayer who included income in an earlier year because it appeared to be theirs (a claim of right), and who later must repay it, may take a deduction in the repayment year:

• Repayment of $3,000 or less: Deducted on the same form or schedule where the income was reported, such as Schedule C or F for self-employment income or Schedule D for a capital gain. A repayment of wages, unemployment compensation, or other nonbusiness income was a miscellaneous itemized deduction and is no longer deductible.
• Repayment of more than $3,000: The taxpayer may either
  1. Deduct the repayment on Schedule A, Line 16, or
  2. Take a credit (Schedule 3, Line 13b) equal to the tax the repaid income added in the earlier year, computing current-year tax without the deduction.

The taxpayer uses whichever method produces the lower tax. Wages repaid in the same year they were received are simply excluded by the employer; this rule applies only to amounts repaid in a later year.

Example: In 2024, Carmen received a $12,000 bonus taxed at her 32% marginal rate ($3,840 of tax). In 2025, her employer requires her to repay it, and she is now in the 22% bracket. A deduction would save about $2,640 (22% of $12,000); the §1341 credit restores the $3,840 of 2024 tax, so the credit method is better. Because the credit method does not require itemizing, she can claim it even if she takes the standard deduction.

Itemized Deductions on Form 1040-NR

A nonresident alien reports effectively connected income (ECI) on Form 1040-NR and generally cannot claim the standard deduction (IRC §63(c)(6)(B)). Instead, the nonresident may itemize on Schedule A (Form 1040-NR), but only these categories:

Business expenses connected with ECI (for example, Schedule C expenses of a U.S. business) are deducted in computing ECI rather than on Schedule A.

The India Student and Apprentice Exception

Under Article 21(2) of the U.S.-India income tax treaty, a student or business apprentice from India may claim the standard deduction on Form 1040-NR. Students from other countries cannot.

Other Form 1040-NR Reminders

• A nonresident cannot file a joint return; a married nonresident files as married filing separately unless the §6013(g) or (h) election is made to be treated as a resident.
• Gambling winnings of a nonresident that are not effectively connected (FDAP income) are taxed at a flat 30% with no deduction for losses unless a treaty provides relief: the Canada treaty lets Canadian residents offset winnings with losses, and some treaties exempt the winnings.

Example: Hiro, a Japanese citizen and nonresident alien, worked in California for five months in 2025 and has $60,000 of ECI wages. He paid $3,900 of California income tax withheld, gave $1,000 to a U.S. university, and paid $9,000 of interest on a mortgage on his home in Osaka. His Schedule A (Form 1040-NR) deductions are $4,900 ($3,900 + $1,000). The mortgage interest is not deductible, and he cannot use the standard deduction.