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Unreimbursed Employee Business Expenses

You may be able to deduct certain work-related expenses if you meet both requirements of being an employee and you itemize on your tax return. If you incur costs “ordinary and necessary” for your job that are not reimbursed by your employer, keep records to prove the ones you paid and plan to deduct. These expenses are included on Form 2106: Employee Business Expenses, which flows into Schedule A: Itemized Deductions on your Form 1040. Eligible expenses are limited, as they are subject to a 2% floor rule – meaning they are only deductible in the amount that exceeds 2% of your Adjusted Gross Income.  Also beware, that if you are paying alternative minimum tax (AMT), then these deductions will not save you any income tax, as they are not deductible for AMT.

Unreimbursed employee business expenses can be combined with other miscellaneous deductions such as tax preparation fees, investment expenses, and safety deposit box expenses to meet this threshold. Some common business expenses that qualify include the following:

  • Professional dues, memberships, licenses, subscriptions, and publications
  • Cell phone costs at an estimated business use percentage
  • Tools and supplies
  • Uniforms and safety gear required for your job
    • Any clothing deducted cannot be suitable for everyday wear
  • Continuing education if it doesn’t qualify you for a new trade
  • Union dues
  • Job-searching expenses if within the same occupation
  • Business liability or malpractice insurance premiums
  • Rent paid for business equipment or space
  • Parking and toll fees
  • Home office expenses if you use part of your home regularly and exclusively for business, you are required to work at home for the convenience of your employer, and you do not have an office at another job site
    • A simplified method is available rather than using actual expenses with an indirect allocation
  • Overnight business travel away from home, such as transportation and lodging expenses
  • Business mileage either using the standard rate or actual expense method
    • Commuting between your home and main workplace is not deductible
  • Incidental expenses, such as baggage fees or hotel tips
  • Standard meal allowance for overnight business travel
    • “Per diem” rates vary by area, but averages $51/day
  • If the above mentioned allowance is not used, you can deduct 50% of all actual business meal and entertainment expenses, regardless of location
    • A bona fide business-related discussion must take place before, during, or after

Please consult with your tax professional at Ketel Thorstenson, LLP if you have questions regarding deductible unreimbursed employee business expenses.

Lindsey Nolan

Lindsey Nolan

Lindsey is a 2009 graduate of the University of South Dakota with a Masters of Professional Accountancy degree. She joined KTLLP in January 2014 as an Associate in the Tax department.
Lindsey Nolan

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