Taxpayers who had work-related expenses that they weren’t reimbursed for were previously able to deduct them on their tax return. That’s not the case anymore. The Tax Cuts and Jobs Act of 2017 updated who qualified for this tax break, captured on 2106 form which is attached to Schedule A of IRS form 1040.
Who needs to submit?
The IRS specifies that Armed Forces reservists, fee-basis state or local government officials, and employees with impairment-related work expenses can still write expenses off on their tax returns.
Performing artists also qualify for this deduction if they meet certain criteria like having at least two employers and having at least 10% of the maximum $16,000 gross income before taxes going towards allowable business expenses for that performing art. More details on what determines a qualified performing artist can be found here.
Do I file 2106 form or 2106-EZ form?
Fill out either 2106 form or 2106-EZ form to claim these deductions. If you received no reimbursements at all, you’ll fill out the 2106-EZ form and if you received partial reimbursements, then you’ll fill out the 2106 form.
Partial reimbursements mean that, for example, if you paid $500 for something, and received $200 in reimbursements from your company, the remaining $300 can be itemized on form 2106 and submitted with your tax returns.
What can I deduct?
Expenses that are required to maintain employment in your trade or profession qualify for deductions as long as they are ordinary and necessary charges in your field. This includes continuing education classes or certifications, vehicle use, tools and supplies, and more.
Vehicle Usage Deductions
In terms of vehicle use, there are certain parameters in place for which vehicle-related expenses can be deducted. First, charges must be used specifically while on the job. In other words, expenses for personal use or commuting to and from your place of work do not qualify for deductions.
If you’re looking to deduct mileage and plan to use the standard mileage rate of $0.545 per mile, then you can fill out the 2106-EZ form. If you plan to deduct actual vehicle expenses, however, you must fill out the 2106 form. That’s because the actual costs account for factors like depreciation, part of your maintenance and repair costs, auto insurance and fuel.
In either case, make sure to keep detailed records of your work-related mileage and any vehicle-related expenses that you’ll want to write off.
Job Search Deductions
You can deduct certain expenses related to finding work. Common deductions in this category are subscriptions to job boards, resume review and printing costs, charges for continuing education in your field, or maintaining necessary certifications. Union dues also qualify for deductions.
Expenses pertaining to your daily ability to find and keep work can also be deducted. These expenses include things like subscriptions to trade magazines or journals, tools and supplies, mandatory professional insurance premiums and even deductions for the usage of a home office.
The cost of purchasing and laundering work uniforms can also be deducted as long as the clothes are required for work and can’t be worn outside of business operations. If this applies to you, keep track of your receipts from the dry cleaner and deduct them on your tax return.
Limitations to Itemized Deductions
The IRS has a standard deduction amount based on your filing status. Since forms 2106 and 2106-EZ are attachments to Schedule A, the total amount of deductions on Schedule A must be greater than the standard deduction amount for your filing status. If it’s not, then you’ll benefit more from taking the standard deduction.
You could also be subject to a 2% limitation on deductions outlined specifically on forms 2106 and 2106-EZ. This means that 2% of your adjusted gross income (AGI) will be subtracted from the deductions on these forms.
For example, let’s say your AGI is $50,000 and you have $2,500 of un-reimbursed expenses on Form 2106. Two-percent of your income is $1,000, so that would be subtracted from the $2,000 you’re looking to deduct and only $1,500 would be eligible for the discount.
Before worrying about what you can deduct, first make sure that your occupation qualifies for un-reimbursed deductions given the new criteria. Next, gather all of your pertinent receipts and determine whether form 2106 or 2106-EZ is what you need to fill out. Lastly, itemize these expenses on the appropriate form and submit them along with Schedule A of form 1040.
If you need assistance determining which forms you should fill out, TaxSlayer has hundreds of certified CPAs available to help you get the most out of your taxes this season.