Employee Business Expenses
If you paid for work-related expenses out of your own pocket, you may be able to deduct those costs. In most cases, you can claim allowable expenses if you itemize on IRS Schedule A, Itemized Deductions. You can deduct the amount that is more than two percent of your adjusted gross income. Here are six other facts you should know:
- Ordinary and Necessary. You can only deduct unreimbursed expenses that are ordinary and necessary to your work as an employee. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is appropriate and helpful to your business.
- Expense Examples. Some costs that you may be able to deduct include:
- Required work clothes or uniforms not appropriate for everyday use.
- Supplies and tools you use on the job.
- Business use of your car. Publication 463
- Business meals and entertainment.
- Business travel away from home.
- Business use of your home.
- Work-related education.
This list is not all-inclusive. Special rules apply if your employer reimbursed you for your expenses.
To learn more, check out Publication 529, Miscellaneous Deductions.
You should also refer to Publication 463, Travel, Entertainment, Gift and Car Expenses.
- Forms to Use. In most cases, you report your expenses on Form 2106 or Form 2106-EZ. After you figure your allowable expenses, you then list the total on Schedule A as a miscellaneous deduction.
- Educator Expenses. If you are a K-12 teacher, you may be able to deduct up to $250 of certain expenses you paid in 2015. These may include books, supplies, equipment and other materials used in the classroom. You claim this deduction as an adjustment on your return, rather than an itemized deduction. For more on this topic see Publication 529.
- Keep Records. You must keep records to prove the expenses you deduct. For what records to keep, see Publication 17, Your Federal Income Tax.
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Job Search Expenses Can be Tax Deductible
Taxpayers who are looking for a new job that is in the same line of work may be able to deduct some job-hunting expenses on their federal income tax return, even if they don’t get a new job.
Here are some important facts to know about deducting costs related to job searches:
- Same Occupation. Expenses are tax deductible when the job search is in a taxpayer’s current line of work.
- Résumé Costs. Costs associated in preparing and mailing a résumé are tax deductible.
- Travel Expenses. Travel costs to look for a new job are deductible. Expenses including transportation, meals and lodging are deductible if the trip is mainly to look for a new job. Some costs are still deductible even if looking for a job is not the main purpose of the trip.
- Placement Agency. Job placement or employment agency fees are deductible.
- Reimbursed Costs. If an employer or other party reimburses search related expenses, like agency fees, they are not deductible.
- Schedule A. Report job search expenses on Schedule A of a 1040 tax return and claim them as miscellaneous deductions. The total miscellaneous deductions cannot be more than two percent of adjusted gross income.
Taxpayers can’t deduct these expenses if they:
- Are looking for a job in a new occupation,
- Had a substantial break between the ending of their last job and looking for a new one, or
- Are looking for a job for the first time.
Avoid scams. The IRS does not initiate contact using social media or text message. The first contact normally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.
If you are looking for a job in the same line of work, you may be able to deduct some of your job search costs. Here are some key tax facts you should know about when searching for a new job:
- Same Occupation. Your expenses must be for a job search in your current line of work. You can’t deduct expenses for a job search in a new occupation.
- Résumé Costs. You can deduct the cost of preparing and mailing your résumé.
- Travel Expenses. If you travel to look for a new job, you may be able to deduct the cost of the trip. To deduct the cost of the travel to and from the area, the trip must be mainly to look for a new job. You may still be able to deduct some costs if looking for a job is not the main purpose of the trip.
- Placement Agency. You can deduct some job placement agency fees you pay to look for a job.
- First Job. You can’t deduct job search expenses if you’re looking for a job for the first time.
- Time Between Jobs. You can’t deduct job search expenses if there was a long break between the end of your last job and the time you began looking for a new one.
- Reimbursed Costs. Reimbursed expenses are not deductible.
- Schedule A. You normally deduct your job search expenses on Schedule A, Itemized Deductions. Claim them as a miscellaneous deduction. You can deduct the total miscellaneous deductions that are more than two percent of your adjusted gross income.
- Premium Tax Credit. If you receive advance payments of the premium tax credit, it is important that you report changes in circumstances – such as changes in your income, a change in eligibility for other coverage, or a change of address – to your Health Insurance Marketplace. Advance payments are paid directly to your insurance company and lower the out-of-pocket cost for your health insurance premiums. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.
Employee Business Expenses
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