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Taxpayers who are salaried company employees frequently overlook tax deductions for their out-of-pocket work-related expenses. Many companies reimburse employees’ expenses; especially those incurred by sales representatives and executives. But other workers may also have business-related expenses that are not reimbursed and may qualify as a tax deduction.
A work-related unreimbursed expense must be both “ordinary and necessary” to your job in order to qualify as a deduction. An “ordinary” expense is something that is commonly accepted as needed to perform your job in your particular industry. A “necessary” expense is one that is appropriate and/or required to perform your job.
Some examples of unreimbursed expenses that may qualify as a tax deduction include a required uniform and/or work clothes, supplies and tools you use on the job, work-related education, business use of your personal vehicle, business use of your home, and business-related travel, meals and entertainment. The same deductions may also apply to self-employed individuals and small business owners.
Other often overlooked qualifying expenses include depreciation on a computer your employer requires you to use, liability and malpractice insurance premiums, licenses and regulatory fees, dues to chambers of commerce and professional societies, passport fees and more.
You can deduct the amount of expenses that is more than 2% of your adjusted gross income. For more information, see IRS Publication 529 with details on deductions and the forms you may need to list and figure the correct deduction amount.
Reminder: make certain you have receipts and records to prove the expenses you deduct. Keeping proper records is crucial in the event of an audit. For more information on the records you should keep and for how long, click here.
Following filing requirements and submitting the proper forms to receive expense deductions can be complicated, but if done properly, can pay off in a notable tax savings. If you have any questions, please contact one of our tax preparation experts at McRuer CPAs.
