You can deduct certain un-reimbursed employee expenses on your tax return under certain circumstances. Keep in mind:
The person or company that pays the expenses usually is the one that gets to deduct them. So, if your employer pays for an expense, or reimburses you for one, then they get to take the deduction.
If you pay for your own expenses and don’t get reimbursed, then you might be able to deduct them on your tax return.
Also, if you were reimbursed by your employer but the money was included in your wages (such as a car allowance), then you might still be able to deduct some expenses in the year that you pay them.
However, there are some limitations and restrictions on what and how much you can deduct. Here are some frequently asked questions and answers to help you.
Do I have to itemize deductions to deduct employee business expenses?
Yes. (Employee business expenses are reported on schedule A of your tax return.)
Therefore, your itemized deductions, including your eligible business expenses, need to be greater than your standard deduction.
If they are, then you can itemize and maybe save some taxes.
Also, for your employee business expenses to be itemized on schedule A, they have to be greater than 2% of your adjusted gross income or AGI. Once you input the information, TurboTax will do these calculations for you and determine if they meet this test.
See the following article to learn more about itemizing your deductions: Tax Deduction Wisdom - Should You Itemize?
Can I deduct the cost of commuting to work?
Generally not. However, if you are assigned to a temporary job location outside the area that you live and work, then you can deduct these expenses.
Can I deduct any of cost of going between the two places that I work?
Although your expense of going to your main workplace is not deductible on your tax return, the cost of going from one workplace to another is deductible as an employee business expense.
Also, the expense of going home from your last workplace (unless it is a temporary workplace) is not deductible.
Are all of my employee business expenses deductible?
Not necessarily.
First, the expenses need to be both “ordinary and necessary” as defined by the IRS.
This means that you need to have the expense to do your job. Also, the IRS does not allow specific expenses such as the cost of commuting to and from work except for certain circumstances when you go from one job to another.
What types of employee business expenses are deductible?
You can deduct expense that are “ordinary and necessary” to do your job. Some examples of deductible expenses include:
- Union Dues
- Tools
- Travel (hotel, airfare, etc.) and transportation costs (cab fare, tolls, parking, etc.) other than for commuting to and from work.
- Uniforms, but only if they are NOT suitable for everyday use and necessary for your work. Examples include firefighter and police officer uniforms. Also, if you are paid a clothing allowance (e.g. full time military), then you cannot deduct the cost of a uniform.
- Business entertainment and gifts, but these have certain limits.
- Computers and cell phones if required for your job and for the convenience of your employer.
- Home office expenses if your employer does not provide you a place to work.
Some examples of normally non-deductible expenses include:
- Wristwatches – The IRS disallows the deduction for a watch regardless of whether you are required to have one for your job.
- Clothing that is adaptable to everyday wear such as suits or dressy clothes.
- Dry cleaning – Dry cleaning expenses are not usually deductible unless it is to maintain a uniform that is deductible or when you are away from home on business.
Click here for IRS Tax Topic 514 for further guidance on Employee Business Expenses.
Click here for IRS Publication 529, Miscellaneous Deductions, for detailed information on what can and cannot be deducted if you itemize.
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