Employees May Be Able to Deduct Certain Costs
If you paid for work-related expenses out of your own pocket, you may be able to deduct those costs. In most cases, taxpayers claim allowable expenses on Schedule A (Form 1040), Itemized Deductions. Below are 4 tax tips about this deduction.1. 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.
2. Expense Examples. Some costs that you may be able to deduct include:
- Required work clothes or uniforms that are not appropriate for everyday use.
- Supplies and tools you use on the job.
- Business use of your car.
- Business meals and entertainment.
- Business travel away from home.
- Business use of your home.
- Work-related education.
- Note: 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 and Publication 463, Travel, Entertainment, Gift, and Car Expenses.
3. 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. You can deduct the amount that is more than 2% of your adjusted gross income.
4. Keep Records. You must keep records to prove the expenses you deduct. For what records to keep, see the relevant section of Publication 17, Your Federal Income Tax.
For more information on other tax deductions, visit our section on Fringe Benefits.