Get a Tax Deduction for Unreimbursed Employee Business Expenses

employee business expense tax deductionsPaying for business expenses or business related auto expenses out of your own pocket?

If your company does not or cannot reimburse the expenses, you might be able to use them as a personal tax deduction.

How to Claim Business Expenses

Unreimbursed business expenses can be claimed on Schedule A (Itemized Deductions) of your 1040 tax return.

If you don’t itemize your deductions or if your total itemized deductions do not exceed your Standard Deduction, there is effectively no tax deduction benefit to be gained from the expenses.

If you do itemize, then here’s the process:

  • Fill out Form 2106 or Form 2106EZ on which you will calculate your deductible amount for qualifying expenses
  • Take the amount on Form 2106 and list it on Schedule A in the appropriate place

What is a Qualifying Expense?

To be a deductible employee business expense, they must be:

Paid for or incurred in the tax year

• Be necessary and ordinary expenses in the course of your employment

• Related to performing your specific job or trade

Unreimbursed by your employer

What Types of Expenses are Deductible?

Necessary and ordinary expenses differ by trade or profession and can include, but are not limited to:

  • Licenses
  • Professional dues
  • Union dues
  • Uniforms
  • Tools
  • Vehicle expenses
  • Insurance premiums
  • Job related continuing education
  • Work related travel
  • Business use of your home

Are There Limitations?

Yes. Employee Business Expenses plus other Miscellaneous Expenses detailed on Schedule A must exceed 2% of Adjusted Gross Income (AGI) floor before being deductible.

If you have unreimbursed employee expenses, it is worth taking the time to do the calculation as it could lower your tax bill. If you don’t bother to do so, you’ll potentially be leaving money on the table.