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Taxpayers who work for an employer and who pay for work-related expenses out of their own pocket may be able to deduct them on their income tax returns. Qualified employee business expenses are deductible if when combined with other miscellaneous deductions, the total spent is more than two percent of a taxpayer’s adjusted gross income.
Some examples of qualified deductible employee business expenses may include:
- the cost of purchasing required uniforms or work clothes not worn away from the work environment,
- business use of a home,
- business use of a personal vehicle,
- business-related meals and entertainment,
- work-related travel away from home, and
- tools and supplies purchased for use on the job.
Other deductible expenses that employed taxpayers often overlook are costs of things like the depreciation of their own computer they use for work-related purposes, union dues, malpractice or business liability insurance premiums and subscriptions to professional journals and trade magazines related to work.
Taxpayers must to itemize the deductions and maintain records of income along with receipts of expenses. If expenses have been reimbursed by an employer, they are not tax deductible.
The expenses must also be ordinary and necessary for their work. An employee who purchases an item featuring their company’s logo may not deduct the expense unless the employer requires them to wear or use the item while performing their job. For example, flight attendants who must buy their own uniforms to wear while serving passengers on an aircraft may deduct the expense of the uniform, but not the cost of personal earrings worn to complement their uniform.
K-12 teachers may be able to deduct up to $250 of certain out-of-pocket expenses. Deductible expenses for 2016 federal income taxes may include the cost of books, classroom supplies, equipment and other materials teachers use to help instruct students. For example, a physical education teacher may deduct up to $250 of athletic supplies purchased for students that were needed and used by the student(s) to complete or perform physical education course requirements. This particular work-related deduction is calculated as an adjustment to income rather than an itemized deduction, so they need not itemize to claim this deduction.
IRS Publication 529 “Miscellaneous Deductions” and Publication 463 “Travel, Entertainment, Gift and Car Expenses” provide more specific details about deducting employee business expenses.
If you need more information on deducting work-related expenses, contact one of our experts on tax preparation at McRuer CPAs.
