What is an unreimbursed job expense?
If you paid for a job expense that was necessary to your line of work during the tax year, then it may qualify as an unreimbursed work-related expense. Some examples of these expenses include:
- Tools or supplies used for your work, including creative materials like paint, pens, pencils, paper, or other job-specific items.
- Dues paid to professional societies or other organizations that help you to perform your job
- Continuing education
- Clothing and uniforms if they cannot be worn outside of work
- Passport fees, transportation fees, meals and entertainment expenses, and other business travel items
- Insurance premiums, either malpractice or business liability
- Home office costs if required for your work
Who can deduct these expenses?
For returns filed before tax year 2018, employees can deduct any unreimbursed expenses that exceed 2% of their adjusted gross income. These deductions belong on Schedule A as miscellaneous itemized deductions.
The Tax Cuts and Jobs Act disallows this deduction for tax years 2018-2025. However, it is scheduled to return for tax year 2026.
There are some exceptions to the new laws. You may still be able to deduct certain unreimbursed expenses if you fall into one of the categories below:
- Armed Forces reservists.
- Qualified performing artists.
- Fee-basis state or local government officials.
- Employees with impairment-related work expenses
These groups must fill out Form 2106 to take the deduction. Teachers are an exception and must follow different instructions. For more information on how teachers can take this deduction, read Teachers: Can You Deduct Your Out-of-Pocket Classroom Expenses?
What are the qualifications for this deduction?
There are three criteria that must be true in order to deduct unreimbursed employee expenses: The expense must be paid during the tax year you are filing. It must be directly related to your job, and it should be common and necessary to your line of work. For an expense to be ordinary, it must be accepted in your job. For an expense to be necessary, it must be helpful to your job.
Can I deduct job-related expenses if I am self-employed?
Yes, self-employed individuals can deduct job-related expenses on the Schedule C. Certain items like your home office, internet or phone bills, travel expenses, health insurance premiums, and mileage can be deducted. For more information on self-employed specific job-related deductions, read 8 Deductions for Creative Freelancers.