Employee Business Expenses
In most cases, you can claim allowable expenses if you itemize on IRS Schedule A, Itemized Deductions. You can deduct the amount that is more than two percent of your adjusted gross income. Here are five other facts you should know:
- Ordinary and Necessary. You can only deduct unreimbursed expenses that are ordinary and necessary to your work as an employee. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is appropriate and helpful to your business.
- Expense Examples.Some costs that you may be able to deduct include:
- Required work clothes or uniforms not appropriate for everyday use.
- Supplies and tools you use on the job.
- Business use of your car.
- Business meals and entertainment.
- Business travel away from home.
- Business use of your home.
- Work-related education.
This list is not all-inclusive. Special rules apply if your employer reimbursed you for your expenses. To learn more call our office or check out Publication 529, Miscellaneous Deductions. You should also refer to Publication 463, Travel, Entertainment, Gift and Car Expenses.
- Forms to Use.In most cases, you report your expenses on Form 2106 or Form 2106-EZ. After you figure your allowable expenses, you then list the total on Schedule A as a miscellaneous deduction.
- Educator Expenses.If you are a K-12 teacher, you may be able to deduct up to $250 of certain expenses you pay in 2016. These may include books, supplies, equipment and other materials used in the classroom. Claim this deduction as an adjustment on your return, rather than an itemized deduction. For more on this topic, please call us.
- Keep Records. You must keep records to prove the expenses you deduct so that you can prepare a complete and accurate income tax return. For most expenses, the law doesn’t require any special form of records; however, you should keep all receipts, canceled checks or other proof of payment, and any other records to support any deductions or credits you claim. If you are deducting travel or entertainment expenses, certain detailed records that support the deductibility of your expenses are required. For what records to keep, see Publication 17, Your Federal Income Tax and Publication 463, Travel, Entertainment, Gift and Car Expenses.
Please call our office, if you have any questions about employee expenses or need help setting up a recordkeeping system to document your expenses.