If you itemize deductions and are an employee, you may be able to deduct certain work-related expenses. The expenses need to be both “ordinary and necessary.” This means incurring those expenses is necessary to do your job.
You must keep records to prove the business expenses you deduct. Here is a list of expenses that can be deducted:
• Business use of automobile and travel expenses, if ordinary and necessary in your occupation. The costs of traveling to and from work are considered personal expenses and not deductible;
• Union dues and dues to professional societies for your profession;
• Computers and cell phones if required by your job;
• Small tools and supplies necessary to perform your job;
• The cost and cleaning expenses of work clothes and uniforms that are not suitable for everyday use and are a condition of your employment;
• Subscriptions to professional journals and trade magazines related to work;
• Meals and entertainment expenses, subject to limits;
• Work-related education that maintains or improves the skills required by your current job. Expenses include tuition, books and fees necessary for job (i.e., Teachers pursuing a Master’s degree in Education). You can’t deduct expenses if the course isn’t related to your job or qualifies you for a new trade or profession;
• Job-search expenses you incur while seeking a new job in your current occupation. Costs of preparing a résumé, employment-agency fees, and travel expenses are acceptable;
• The business use of a home, if it is used regularly and exclusively for business; and you are required to work at home for the convenience of your employer. The home-office deduction has a new and simplified option. A $5 per square foot of qualifying home office space, up to a maximum 300 square feet, can be utilized. Thus, the maximum deductible allowance is $1,500.
If your employer reimburses you under an accountable plan, you may not deduct any of the reimbursed amounts.
Generally, you report business expenses on IRS Form 2106 to figure the deduction for employee-business expenses. These expenses flow to Form 1040, Schedule A, as a miscellaneous itemized deduction subject to 2 percent of your adjusted gross income (AGI) rules. Only employee-business expenses that are in excess of 2 percent of your AGI can be deducted. For example, if your AGI is $75,000, the first $1,500 ($75,000 x .02) of miscellaneous expenses is not deductible.
For more information see IRS Publication 529, “Miscellaneous Deductions.”
Barry Lisak is an IRS Enrolled Agent, meaning that he has passed special U.S. Treasury Department exams that qualify him to represent clients dealing with audits or tax-resolution cases. Any questions can be directed to him at (516) TAX-SAVE, or email@example.com.