Know these Helpful Tips about
Employee Business Expenses
(IRS Tax Tip 2017-42)
Taxpayers who pay work-related expenses out of their own pocket may be able to deduct them. Generally, employee business expenses are deductible if they are more than two percent of adjusted gross income. In most cases, they go on IRS Schedule A, Itemized Deductions.
Other key points about employee business expenses:
- They must be Ordinary and Necessary. People can only deduct unreimbursed expenses that are ordinary and necessary to their work as an employee. An ordinary expense is one that is common and accepted in the industry. A necessary expense is appropriate and helpful to a business.
- Expense Examples. Some potentially deductible costs include:
- Required work clothes or uniforms not appropriate for everyday use.
- Supplies and tools for use on the job.
- Business use of a car.
- Business meals and entertainment.
- Business travel away from home.
- Business use of a home.
- Work-related education.
This list is not all-inclusive. Special rules apply for reimbursed expenses by an employer. IRS Publication 529, Miscellaneous Deductions, and Publication 463, Travel, Entertainment, Gift and Car Expenses, provide more details.
- Forms to Use. In most cases, expenses are reported using Form 2106 or Form 2106-EZ. IRS Schedule A may also be used.
- Educator Expenses. K-12 teachers may be able to deduct up to $250 of certain expenses paid in 2016. These may include books, supplies, equipment and other materials used in the classroom. They are an adjustment to income rather than an itemized deduction. In other words, people do not need to itemize to claim them. IRS Publication 529 has more.
- Keep Records. The IRS urges people to keep good records for proof of income and expenses and also as a reminder not to overlook anything. IRS Publication 17, Your Federal Income Tax, has more on what to keep.