26 U.S.C. § 67 — 2-percent floor on miscellaneous itemized deductions

(a) General rule: For an individual, miscellaneous itemized deductions for a tax year are allowed only for the amount that exceeds 2 percent of adjusted gross income. Anything below that 2% floor isn't deductible. (b) Miscellaneous itemized deductions defined: This term means all itemized deductions except a specific list: mortgage and other interest (section 163); taxes (section 164); casualty or theft losses of certain kinds, or losses described in section 165(d) (section 165(a)); charitable contributions, including certain trust set-asides (sections 170 and 642(c)); medical, dental, and similar expenses (section 213); impairment-related work expenses; the estate-tax deduction for income in respect of a decedent (section 691(c)); deductions tied to personal property used in a short sale; the claim-of-right deduction (section 1341); the deduction for annuity payments that stop before the investment is recovered (section 72(b)(3)); the amortizable bond premium deduction (section 171); deductions for cooperative housing costs (section 216); and educator expenses as defined in subsection (g). (c) Disallowance of indirect deduction through pass-through entities: The Secretary must write regulations blocking people from indirectly deducting, through a pass-through entity like a partnership, amounts they couldn't deduct if they paid them directly — and must require whatever reporting is needed to enforce that. This rule doesn't apply to a 'publicly offered regulated investment company' — one whose shares are continuously offered to the public, regularly traded on an established market, or held by at least 500 people at all times during the year. The Secretary can lower that 500-person threshold by regulation for funds losing shareholders through net redemptions. This rule also doesn't apply to cooperatives and real estate investment trusts, and, except as regulations provide, doesn't apply to estates and trusts. (d) Impairment-related work expenses: These are expenses of a handicapped individual (as section 190(b)(3) defines that term) for attendant-care services at their workplace, plus other work-related expenses necessary for them to be able to work — as long as the expense would otherwise be deductible under section 162. (e) Adjusted gross income for estates and trusts: For this section, an estate's or trust's adjusted gross income is computed the same way as an individual's, except two categories of deductions are instead treated as allowable in arriving at adjusted gross income: administration costs that wouldn't have been incurred if the property weren't held in the estate or trust, and the deductions allowed under sections 642(b), 651, and 661. Regulations must make appropriate adjustments elsewhere in the tax code to account for this. (f) Coordination with other limitation: This section's 2% floor is applied before the separate dollar limit in the second sentence of section 162(a), which deals with trade or business expenses. (g) Educator expenses: For subsection (b)(13), 'educator expenses' means the kind of expenses described in section 62(a)(2)(D), but figured with three changes: ignore that section's dollar limit; ignore the exclusion of nonathletic health and physical-education supplies; and read 'as part of instructional activity' in place of 'in the classroom.' It's also figured as if section 62(d)(1)(A)'s definition of eligible educator were expanded to include an interscholastic sports administrator or coach. (h) Suspension for taxable years beginning after 2017: Despite subsection (a), no miscellaneous itemized deduction is allowed at all for any tax year beginning after December 31, 2017.