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5 Helpful Tips about Employee Business Expenses

Taxpayers who pay unreimbursed work-related expenses out of their own pocket may be able to deduct them, if certain criteria is met.  In general, the deduction for employee business expenses is part of a taxpayer’s itemized deduction shown on Schedule A of their personal tax return and is deductible to the extent that the expenses exceed two percent of the taxpayer’s adjusted gross income.

Here are some other important points about employee business expenses:

  • The expenses must be ordinary and necessary. Taxpayers are only able to deduct unreimbursed expenses that are ordinary and necessary to their work as an employee. An ordinary expense is one that is common and recognized in the industry that the taxpayer is employed in. A necessary expense is an expense that is appropriate and useful to employer’s business.
  • Some examples of 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 car
    • Business meals and entertainment
    • Business travel away from home
    • Business use of a home
    • Work-related education
  • Forms to Use. Usually expenses are reported using Form 2106 or Form 2106-EZ.
  • Educator Expenses. Unique and specific to K-12 teachers only, those taxpayers may be able to deduct up to $250 of certain expenses paid. These expenses may include books, supplies, equipment, and other resources used in the classroom. Rather than being reported as an itemized deduction, these expenses are an adjustment to income, meaning the taxpayer does not need to file Schedule A- Itemized Deductions to claim the deduction and there is no adjusted gross income limitation or phase-out to be considered.
  • Keep Records. Keeping good records is encouraged in order to provide proof of expenses, as well as a reminder not to overlook anything.

For any tax questions regarding employee business expenses, always consult a Certified Public Accountant. Submitted by: Dennis Gallant, Senior Manager, Tax Services, Thomas Howell Ferguson P.A. CPAs, (850) 668-8100, dgallant@thf-cpa.com.

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