Unreimbursed Employee Expenses: What Can You Deduct

Sometimes your job may require you to pay out-of-pocket costs. When this happens, you may be able to deduct those expenses on your tax return.

Keep in mind that you can only deduct them if you are itemizing your expenses. So if you’re only claiming the standard deduction, then you won’t be able to deduct these expenses.

In addition, these costs are subject to the 2% of AGI (adjusted gross income) floor limitations.

What Expenses Qualify?

1. You must incur the expense and not have been reimbursed by your employer. However, if you received reimbursement payments but the employer includes those reimbursements in your salary/wages, then you may still be able to deduct those expenses.

2. Expenses must be ordinary and necessary for carrying on your trade or business as an employee. They are ordinary if they are common and accepted in your profession or employer’s business. They are necessary if they are appropriate and helpful to your profession or employer’s business.

Most Common Job-related Expenses:

  • Using Your Vehicle – When you use your vehicle to attend meetings, meet clients, run business errands, attend training or conferences for your employer, you may be able to deduct the cost of the mileage driven and parking fees. In 2009, the mileage rate is 51.5 cents per mile. So if you drove 100 miles for your employer, then you can deduct as much as $51 on your return. The caveat is to make sure that you keep proper mileage log. Please note that commuting (mileage to and from work) costs are not deductible.
  • Work Clothes and Uniforms – For work clothes or uniforms to qualify as job-related expenses, they must be required by the employer and they must not be suitable for everyday use. So even if suit and ties are requirement for a salesman to wear at work on a daily basis, those are not deductible because they can still be worn for everyday use. Example of clothing that normally qualifies are medical professional scrubs, auto mechanic’s uniform, military uniform, painter and carpenter uniform, etc.
  • Home Office Tax Deduction – You can deduct expenses such as the portion of rent, insurance, utilities home office, depreciation, etc but the home office must be used exclusively and regularly for your trade or employer’s business and it must be for the convenience of the employer.
  • Job Search Expenses of your present occupation –You can deduct the cost of transportation to go to interviews, cost of preparing a resume, cost of fax machines, interview books and guide, and mailing costs. Please note that the cost for paying a babysitter while you are away for a job interview will not be included here but can be included under the “dependent care” credit.
  • Dues paid – union dues and expenses, dues to professional societies, dues to a chamber of commerce if membership helps you do your job.
  • Fees Paid – laboratory breakage fees, legal fees related to your job, license and regulatory fees.
  • Professional Credential Related – professional credential or license fees, malpractice insurance premiums, occupational taxes, continuing education to maintain professional license or credentials, subscription to professional journals and trade magazines related to the trade or business.
  • Education Related – work-related education, educator expenses that are more than you can deduct as adjustment to income, research expenses of a college professor.
  • Travel & Entertainment Related – Travel, meals, entertainment, gifts, and local lodging related to your work, Passport for a business trip.
  • Tools Used for work – tools such as hammer, screw driver, toolbox, electric saw, power tools, mechanics tools, etc.

Other Job-related Expenses:

  • Business bad debt of an employee.
  • Business liability insurance premiums.
  • Damages paid to a former employer for breach of an employment contract.
  • Depreciation on a computer or cell phone your employer requires you to use in your work.
  • Office supplies not reimbursed by employer
  • Physical examinations required by your employer.
  • Repayment of an income aid payment received under an employer’s plan.
  • Rural mail carriers’ vehicle expenses.

Source: IRS.gov

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