Can You Deduct Unreimbursed Job Expenses? (2024)

By Stephen Fishman, J.D. USC Gould School of Law

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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 cellular telephone 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).

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 reimbursem*nts 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 reimbursem*nt 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 may be required by law to reimburse you for work-related expenses. For example, this is required in California (see Cal. Labor Code Sec. 2280).

Any reimbursem*nt 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, meal, and entertainment 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 reimbursem*nts you receive must be treated as employee income subject to tax. Thus, the corporation must include them on your W-2. You'll then have to deduct the expense on your personal tax return as described below.

If You Pay Job Expenses Yourself

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 now will be able to 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. Thus, 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 more important than ever to seek reimbursem*nt for such expenses from the employer. As mentioned above, employees can come out ahead if they trade a salary reduction for such reimbursem*nt—salary is fully taxable, but the reimbursem*nt is tax-free if made under an accountable plan.