Foreign Service Representation Expenses
If you are an employee of the U.S. Foreign Service and your position requires you to establish and maintain favorable relations in foreign countries, you may receive a nontaxable allowance for representation expenses. If your expenses are more than the allowance you receive, you can no longer deduct the excess expenses as an itemized deduction on Schedule A (Form 1040). This is due to the Tax Cuts and Jobs Act which suspended miscellaneous itemized deductions subject to the 2% floor under section 67(a) of the Internal Revenue Code unless you are an Armed Forces reservist, a qualified performing artist, a fee-basis state or local government official, or an employee with impairment-related work expenses. Due to the suspension of miscellaneous itemized deductions subject to the 2% floor under section 67(a), employees who do not fit into one of the listed categories cannot deduct employee business expenses. See the categories listed under Other Employee Business Expenses in Publication 516, U.S. Government Civilian Employees Stationed Abroad.
Loss on conversion of U.S. dollars into foreign currency
The conversion of U.S. dollars into foreign currency at an official rate of exchange that is not as favorable as the free market rate does not result in a deductible loss.