The Employee Business Expense Deduction
Before tax reform, an employee could deduct unreimbursed job expenses and other miscellaneous expenses that were more than two percent of adjusted gross income (AGI) as long as they itemized instead of taking the standard deduction. Starting in 2018, however, most taxpayers can no longer claim an unreimbursed employee business expense as miscellaneous itemized deductions unless they are a qualified employee or eligible educator.
No other type of employee is eligible to claim a deduction for unreimbursed employee expenses. In other words, the employee business expense deduction can serve as an adjustment to income only for eligible educators and specific employment categories such as:
- Armed Forces reservists
- Qualified performing artists
- Fee-basis state or local government officials
- Employees with impairment-related work expenses
Qualified Expenses
A qualified expense is one that is:
- Paid or billed during the tax year
- Used for carrying on a trade or business of being an employee, and
- Ordinary and necessary
Nondeductible Expenses
Taxpayers should also know there are nondeductible expenses as well. Examples of nondeductible expenses include club dues, commuting expenses, fees, and licenses, such as car licenses, lunches with co-workers, meals while working late, expenses to improve professional reputation, and capital expenses. A full list of nondeductible expenses can be found in Publication 529, Miscellaneous Deductions.
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