Deducting work expenses: What you should know

Young African-American business woman saving a restaurant receipt so she can later deduct work expenses.Image: Young African-American business woman saving a restaurant receipt so she can later deduct work expenses.

In a Nutshell

If your job comes with individual expenses, you may be able to deduct some of them from your 2017 federal income taxes. Deductions are changing for the 2018 tax year, so here’s what you should know to deduct qualifying work expenses for your 2017 taxes.
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The information in this article applies to the 2017 tax year. Tax reform suspended miscellaneous itemized deductions subject to the 2% floor, including unreimbursed employee expenses, for tax years between Jan. 1, 2018 and Dec. 31, 2025. This article was fact-checked by our editors and Christina Taylor, MBA, senior manager of tax operations for Credit Karma Tax®.

Your job is supposed to make you money, but being employed can also come with some unavoidable individual costs.

Perhaps you have to take public transportation from your home to work. Or your job may require you to purchase clothing that isn’t appropriate for everyday wear. Maybe your job is unionized and you have to pay union dues.

While your employer may reimburse you for certain work-related expenses — with allowances for uniforms or commuter costs, for example — it likely won’t cover all the costs associated with your job. You might be able to deduct some of those unreimbursed work expenses from your 2017 federal income taxes.

Here’s what you should know.



Deducting work expenses — the basics

For the 2017 tax year, the IRS allows individuals to take certain itemized deductions for expenses that exceed 2% of their adjusted gross income. Unreimbursed employee expenses are subject to the 2% threshold. So if you had individual costs related to work in 2017, and your employer didn’t pay you back for these costs, you might be able to deduct them from your federal income taxes.

Deductible unreimbursed employee expenses can include work-related travel, union dues, education and training, and other miscellaneous expenses that you paid for or incurred during the tax year (as long as they were ordinary, necessary and related to your trade or your work as an employee).

To qualify for these deductions as an employee, you must itemize your deductions, rather than take the standard deduction. Also, to deduct your unreimbursed employee business expenses, you may need to complete either Form 2106 or Form 2106-EZ and then add the total to your Schedule A, the form for itemized deductions, that accompanies your tax return.

The tax reform law adopted in December 2017 changes how deductions subject to the 2% limit are handled. We’ll dive more into that later.

What you can deduct for your 2017 taxes

Since changes will go into effect when you file your 2018 tax return (due in April 2019), it’s a good idea to maximize all your itemized deductions for your 2017 return, while you still can, especially for unreimbursed employee expenses.

It’s best if you’ve kept all your receipts throughout the year, as you’re required to have receipts for expenses of $75 or more and for all lodging expenses you wish to deduct. You’ll need these to complete Form 2106 or Form 2106-EZ and as well as your Schedule A.

Here are just a few of the unreimbursed work-related expenses you may be able to deduct.

Business liability insurance

If you had to purchase insurance to protect yourself from personal liability for on-the-job actions, the premiums for that liability insurance are deductible.

Home office

If you’re an employee who works from home, you may be able to take a home office deduction provided you meet the requirements. You must use your home office regularly and exclusively for work. So if you convert a guest bedroom into a home office where you work every day, that room might be eligible for this deduction. However, if there’s still a bed in the room and it’s regularly used for guests, the room might not be considered eligible.

Job search expenses

Costs related with searching for a job in your current line of work could be deductible.

License fees

If your job requires you to have a special license from a state or local government, or you have to pay regulatory fees, you may be able to deduct these expenses if your employer doesn’t pay for them.

Mileage

If your employer doesn’t reimburse your mileage for work-related driving, you may be able to deduct 53.5 cents per mile for business travel and 17 cents per mile for medical or moving purposes on your 2017 return.

Moving

If you moved for a new job within the 2017 tax year, you might be able to deduct some of your moving expenses. Generally, in order to deduct moving expenses, your move must meet the following requirements:

  • Was within 12 months of starting a new job
  • Would have added at least 50 miles to your commute if you had remained living in your previous home
  • Preceded at least 39 weeks of full-time employment in the first 12 months of your new job (78 weeks in the first 24 months if you’re self-employed)

If you meet these requirements, you may be able to deduct the cost of moving your household goods and personal effects and the cost of lodging while you moved to your new home. However, you can’t deduct the meals you had as you traveled to your new home.

Be sure to keep all receipts, bills, credit card statements, mileage logs and other records related to the move. And be aware that if your employer covered any of your moving costs, additional rules and limitations apply. Check out IRS Publication 521 to learn more about the moving expense deduction for your 2017 federal income tax return.

Professional dues

If being a member of a professional organization such as a bar or medical association, chamber of commerce, trade association or similar organization helps you do your job, you may be able to deduct the unreimbursed portion of those dues.

Tools

If your work requires you to own and use certain tools, you can generally deduct what you spend to purchase those tools provided they wear out and are discarded within one year from the purchase date. You can deduct for depreciation of tools that have a usable life of more than a year.

Travel expenses

You might be able to deduct the cost of work-related travel for a temporary assignment. These expenses include transportation to and from the assignment, meals and lodging, baggage charges, cleaning and laundry expenses. Other limitations may apply, so check out IRS Publication 463 to learn more.

Union dues

If your job requires you to participate in a union, you can generally deduct dues and initiation fees you pay for membership in the union. And if your union assesses fees for benefit payments to unemployed members, you can deduct those assessments that don’t cover sick, accident or death benefits. If any of your union expenses were used for certain political activities, these expenses may not be deductible.

Work clothes and uniforms

If your job requires you to wear a certain kind of attire that isn’t suitable as everyday wear, or you have to wear a uniform for work, you can generally deduct the costs of buying and caring for those clothes. However, if the clothes you wear for work would also be suitable for nonwork use, you may not be able to deduct the costs.

Remember, when deducting any of these work expenses they must be unreimbursed — meaning your employer doesn’t pay you back for these job-related costs.

And if you had eligible expenses for 2016 but didn’t take them, you have an option, says Al Zdenek, president and CEO of Traust Sollus Wealth Management in Princeton, New Jersey.

“[File] an amended return and take the deductions for 2016,” he advises. “The IRS normally addresses this within six months. They will credit you interest if they agree with the deduction and resultant refund.”

Changes for the 2018 tax year

As we mentioned earlier, tax reform changed the rules for deductions for 2018.

All miscellaneous itemized deductions previously subject to the 2% floor (which included unreimbursed employee work expenses) are suspended between the 2018 and 2025 tax years.

“Employees will not be able to deduct work-related expenses due to the elimination of certain itemized deductions, although these could still be deductible for partners in a partnership as unreimbursed partner expenses,” Zdenek says.

Also, if your employer offers a commuting reimbursement for biking to work, you’ll no longer be able to exclude that amount from your gross income and wages. In other words, you’ll need to report that reimbursement as income.

While tax reform eliminated many deductions employees might once have been able to take for unreimbursed work-related expenses, it did significantly increase the standard deduction. For tax years between Jan. 1, 2018, and Dec. 31, 2025, the standard deduction will be $24,000 for taxpayers who are married filing jointly, $18,000 for those filing as head of household and $12,000 for everyone else.


Bottom line

As you’re filing your 2017 taxes, the decision about whether to itemize your deductions or claim the standard deduction will depend on which one has a greater capacity to reduce your taxes.

For 2017, the standard deduction for single filers and those with a married filing separately status is $6,350, while it’s $9,350 for heads of household and $12,700 for married couples who file jointly. However, depending on your filing status, itemizing your deductions — including unreimbursed work-related expenses — could lead to a higher deduction that reduces your taxable income.

Now may be as good a time as any for deducting work expenses you haven’t been reimbursed for, because starting next year when you file your 2018 return, you won’t have that option. Credit Karma Tax®, a free online tax-filing service, can help you itemize your qualifying deductions to maximize any refund you may be owed.


Christina Taylor is senior manager of tax operations for Credit Karma Tax®. She has more than a dozen years of experience in tax, accounting and business operations. Christina founded her own accounting consultancy and managed it for more than six years. She co-developed an online DIY tax-preparation product, serving as chief operating officer for seven years. She is the current treasurer of the National Association of Computerized Tax Processors and holds a bachelor’s in business administration/accounting from Baker College and an MBA from Meredith College. You can find her on LinkedIn.


About the author: Satta Sarmah Hightower is a writer, editor and content marketing manager with a decade of experience in the media industry. Her writing focuses on healthcare, personal finance and technology. Satta has produced sponso… Read more.