Employment Expenses are unreimbursed costs that employees incur while performing their job duties, including items like uniforms, tools, professional dues, work-related travel, home office expenses for employees, and continuing education. The tax treatment of employment expenses changed significantly in 2018, drastically reducing the ability of most employees to deduct work-related costs on their federal tax returns.
Prior to 2018, employees could deduct unreimbursed employment expenses as miscellaneous itemized deductions on Schedule A, subject to a 2% of adjusted gross income floor. Common deductible expenses included job-related travel and transportation, professional dues and subscriptions, work-related education expenses, uniforms and work clothes not suitable for everyday wear, tools and supplies required for work, home office expenses for employees if for the employer’s convenience, union dues, and job search expenses in the same occupation.
The Tax Cuts and Jobs Act suspended the deduction for unreimbursed employee business expenses for tax years 2018 through 2025. This means most employees can no longer deduct work-related expenses on their federal tax returns, even if their employer doesn’t reimburse them. This change particularly impacted teachers, outside sales representatives, performing artists, and other employees with substantial unreimbursed work expenses.
Important exceptions allow certain employees to continue deducting employment expenses. Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses can still deduct qualifying employment expenses as adjustments to income on Schedule 1, not as itemized deductions. Educators can deduct up to $300 in qualified classroom expenses ($600 for married couples both working as educators).
Some states continue to allow employment expense deductions on state tax returns even though federal deductions are suspended. Employees should explore reimbursement arrangements with employers, as employer reimbursements through accountable plans are not taxable to employees and provide better tax benefits than deductions would. The employment expense deduction suspension is scheduled to expire after 2025, potentially restoring deductibility unless Congress extends the elimination.
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