An employee who itemizes deductions may be able to deduct certain work-related expenses. The IRS provides information that can help an employee determine which expenses may be deducted as employee business expenses.
Qualifying Expenses for Itemized Deductions
Expenses that may qualify for an itemized deduction for employees include:
- Business travel away from home
- Business use of the employee's car
- Business meals and entertainment
- Use of the employee's home
- Supplies and tools
- Miscellaneous expenses
Employees must keep records to prove the business expenses deducted.
Reimbursement of Expenses
If an employer reimburses an employee under an accountable plan, the employee does not include the payments in his or her gross income, and may not deduct any of the reimbursed amounts. In an accountable plan, an employee must meet the following three requirements:
The employee must have paid or incurred expenses that are deductible while performing services as an employee,
The employee must adequately account to the employer for these expenses within a reasonable time period, and
The employee must return any excess reimbursement or allowance within a reasonable time period.
If the plan under which the employee is reimbursed by an employer is non-accountable, the payments received should be included in the wages shown on Form W-2. The employee must report the income and itemize deductions to deduct these expenses.
Only employee business expenses that are in excess of 2% of the employee's adjusted gross income can be deducted.
For more information, please see IRS Publication 529, Miscellaneous Deductions. Tax Topic 514 also discusses employee business expenses. Information for employers can be found in our section on Employer Tax Laws. Also be sure to check out our free tool for employers, the Personnel Recordkeeping Guide, for an overview of key recordkeeping requirements under federal law, including payroll and employment tax records.
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