In the United States, certain employees are eligible to deduct work-related expenses from their taxable income. The Tax Cut and Jobs Act of 2017 eliminated the ability for most W-2 employees to deduct unreimbursed employee expenses. However, there are still a few exceptions for specific types of employees.
Key Facts
- W-2 Employees: Unfortunately, for most W-2 employees, the Tax Cut and Jobs Act of 2017 eliminated the ability to deduct unreimbursed employee expenses. However, there are a few exceptions for specific types of W-2 employees who can still claim work expenses:
- Reservists in the armed forces
- Qualified performing artists
- Fee-basis state or local government officials
- Employees with work expenses related to an impairment
- Qualified Expenses: To be considered a qualified expense, it must meet the following criteria:
- Paid or billed during the tax year
- For carrying on a trade or business of being an employee
- Ordinary and necessary
- Documentation: If you are eligible to claim work expenses, it’s important to keep proper documentation. The IRS requires taxpayers to prove the time, place, business purpose, business relationship (for gifts), and amounts of these expenses.
- Itemizing Deductions: If you are an eligible W-2 employee and want to deduct work expenses, you will need to itemize your deductions. This means your total itemized deductions must be greater than the standard deduction.
Eligible Employees
The following categories of employees may qualify to deduct work expenses:
- Reservists in the armed forces
- Qualified performing artists
- Fee-basis state or local government officials
- Employees with work expenses related to an impairment
Qualified Expenses
To be deductible, work expenses must meet the following criteria:
- Paid or billed during the tax year
- Incurred while carrying out the employee’s trade or business
- Ordinary and necessary
Documentation Requirements
Eligible employees must maintain proper documentation to support their work expense deductions. The Internal Revenue Service (IRS) requires taxpayers to prove the following:
- Time and place of the expense
- Business purpose of the expense
- Business relationship (for gifts)
- Amount of the expense
Itemizing Deductions
If an eligible W-2 employee wishes to deduct work expenses, they must itemize their deductions. This means that their total itemized deductions must exceed the standard deduction.
Nondeductible Expenses
There are certain expenses that are not eligible for deduction, including:
- Commuting expenses
- Personal expenses
- Expenses reimbursed by the employer
Conclusion
Understanding the eligibility requirements and documentation necessary for employee business expense deductions is crucial for taxpayers. Eligible employees can reduce their taxable income by deducting qualified expenses, provided they meet the specific criteria and provide proper documentation. It is important to consult with a tax professional or refer to the IRS website for further guidance.
References
- Here’s who qualifies for the employee business expense deduction
- Here Are the Work Expenses You Can Deduct on Your Tax Return This Year
- How to claim work expenses when filing your taxes
FAQs
What types of employees can deduct work expenses?
Eligible employees include reservists in the armed forces, qualified performing artists, fee-basis state or local government officials, and employees with work expenses related to an impairment.
What expenses qualify for deduction?
Qualifying expenses must be paid or billed during the tax year, incurred while carrying out the employee’s trade or business, and be ordinary and necessary.
How much can I deduct for work expenses?
The amount of work expenses you can deduct depends on your specific expenses and income. You can deduct up to the amount of your eligible expenses.
Do I need to itemize my deductions to claim work expenses?
Yes, eligible W-2 employees must itemize their deductions to claim work expenses. Your total itemized deductions must exceed the standard deduction.
What documentation do I need to support my work expense deductions?
You must maintain records that prove the time, place, business purpose, business relationship (for gifts), and amount of each expense.
Are there any expenses that are not deductible?
Yes, nondeductible expenses include commuting expenses, personal expenses, and expenses reimbursed by the employer.
How do I claim work expenses on my tax return?
Eligible employees should complete Form 2106, Employee Business Expenses, and attach it to their tax return.
What if my employer reimburses me for some of my work expenses?
You can only deduct the portion of your work expenses that were not reimbursed by your employer.