Can You Deduct Unreimbursed Job Expenses?

Before 2018, if you were an employee, you could deduct your unreimbursed job expenses to the extent these expenses, along with certain other miscellaneous expenses, were more than 2% of your adjusted gross income (AGI). One of the biggest changes to tax laws in recent years was eliminating the deduction for unreimbursed employee business expenses under the Tax Cuts and Jobs Act.

What Are Unreimbursed Job Expenses?

If you work as an employee, you might have various job-related expenses you end up paying out of your own pocket, such as:

• work-related travel, transportation, meal, and entertainment expenses
• business liability insurance premiums
• depreciation on a computer or cell phone your employer requires you to use in your work
• dues to a chamber of commerce if membership helps you do your job
• dues to professional societies
• education that is work related
• home office expenses for part of your home used regularly and exclusively in your work
• expenses of looking for a new job in your present occupation
• legal fees related to your job
• malpractice insurance premiums
• a passport for a business trip
• research expenses of a college professor
• subscriptions to professional journals and trade magazines related to your work
• tools and supplies used in your work
• union dues and expenses, and
• work clothes and uniforms (if required and not suitable for everyday use).

Can You Deduct Unreimbursed Job Expenses?

Again, prior to the passage of the Tax Cuts and Jobs Act, employees were able to deduct unreimbursed job expenses as a personal itemized deduction. This wasn't the most generous deduction in the world—such expenses were deductible only if, and to the extent, they exceeded 2% of an employee's adjusted gross income. However, it was better than nothing.

Unfortunately, starting in 2018 through 2025, employees can deduct nothing. The Tax Cuts and Jobs Act completely eliminated all miscellaneous itemized deductions subject to the 2% of AGI limit, including the deduction for unreimbursed employee expenses. So, employees who spend their own money for things like job-related car expenses, travel, education, or tools get no deduction at all. The deduction for unreimbursed employee expenses is scheduled to return in 2026.

This makes it important to seek reimbursement for such expenses from your employer. Employees can come out ahead if they trade a salary reduction for such reimbursement—salary is fully taxable, but the reimbursement is tax-free if made under an accountable plan.

What to Do About Job Expenses?

Don't pay them! The best thing to do with expenses you incur while on the job is not to pay them yourself. Have your employer pay them. Use a company credit card or have your employer billed directly for the expense. If you must pay for something out of your own pocket, have your employer reimburse you. Provided they are for work-related expenses and are properly documented, these reimbursements are not taxable income to you and should not be included in the W-2 form your employer files with the IRS showing how much you were paid for the year. Your employer, meanwhile, gets to deduct these expenses as a business expense.

Make sure you know what your employer's reimbursement policy is. If the policy is to reimburse the expense, be sure to claim it. It may be worth your while to take a salary reduction in order to get your employer to reimburse you for some expenses. Note, however, that your employer might be required by law to reimburse you for work-related expenses.

What Is an Accountable Plan?

Any reimbursement you receive from your employer should be made under an "accountable plan." An accountable plan is a set of procedures that ensures that employees don't get reimbursed for personal expenses. In brief, you must:

• make an "adequate accounting" of the expense—that is, follow all the applicable recordkeeping and other substantiation rules for the expense; for example, you must keep receipts (except for travel and meal expenses below $75 or travel and meal expenses paid on a per diem basis)
• timely submit your expense report and receipts to employer, and
• timely return any payments that exceed what you actually spent for job expenses.

If you fail to follow the rules, any reimbursements you receive must be treated as employee income subject to tax.

Talk to a Tax Pro

If you have questions about tax deductions, contact a local tax lawyer or another tax adviser, such as a certified public accountant.