Many employees pay out of pocket for job related expenses and are not reimbursed by their employers. Does that mean they can write off those job related expenses on their taxes? Sounds fair, but unfortunately, the law may not be on their side. Here is an overview of what job expenses you may be able to write off and what to consider when planning for tax season.
The Current Tax Rules
Before 2018, employees who incurred unreimbursed work expenses could deduct these costs if they exceeded 2% of their adjusted gross income (AGI). However, the Tax Cuts and Jobs Act (TCJA) of 2017 made significant changes.
From 2018 through 2025, W-2 employees cannot deduct unreimbursed job expenses on their federal tax returns. This means that most employees who don’t receive reimbursement for certain work-related costs cannot deduct those expenses at the federal level.
These rules do not apply to self-employed individuals or independent contractors. Self-employed taxpayers can still deduct business expenses from their income.
What About State Taxes?
While federal deductions for employee job expenses are off the table for now, some states have different rules. Some states still allow employees to deduct unreimbursed work expenses on their state tax returns. If you work in a state that permits this, you may still be eligible to deduct job-related costs at the state level. Common states with such provisions include:
- Alabama
- Arkansas
- California
- Minnesota
- New York
Check your state’s tax guidelines or consult with a tax professional to see if you qualify.
Self-Employed and Independent Contractors
If you’re self-employed, you’re in luck. The TCJA didn’t change the rules for independent contractors and freelancers. They can still write off business expenses such as:
- Office Supplies: From paper and pens to more substantial office equipment.
- Home Office: A portion of your home expenses, like rent or utilities, if you use part of your home exclusively for business.
- Travel and Meals: Costs incurred for business trips or client meetings.
- Professional Services: Fees paid to lawyers, accountants, or other service providers necessary for business.
It’s best to speak with a tax professional when filing your taxes.
Job Expenses That Used to Be Deductible
If you’re curious about what expenses used to be deductible before the TCJA, here’s a a list. Laws are always changing, so it’s best to speak with a tax professional before filing taxes.
- Travel Expenses: Costs related to business travel such as transportation, lodging, and meals.
- Uniforms: Specialized clothing or uniforms required for the job and not suitable for everyday wear.
- Tools and Equipment: Items that were necessary for work but not reimbursed by the employer.
- Dues and Subscriptions: Membership fees for professional organizations or trade publications relevant to the job.
- Continuing Education: Courses that maintained or improved job skills.
Strategies for Employees to Maximize Benefits
While federal deductions may not be an option for most employees, there are still ways to minimize out-of-pocket costs and maximize financial benefits:
- Negotiate Reimbursements: If you frequently incur work-related expenses, talk to your employer about setting up or enhancing an expense reimbursement policy.
- Tax-Advantaged Accounts: Contribute to Flexible Spending Accounts (FSAs) or Health Savings Accounts (HSAs) for medical expenses. While not directly related to job expenses, these accounts can help lower your taxable income.
- Employer Programs: Take advantage of any employer-offered programs for work-related expenses, such as stipends for home office supplies or professional development.
Future Changes to Watch For
Tax laws change periodically, and there’s always a possibility that deductions for unreimbursed employee expenses could return in the future. Stay updated on tax legislation, especially as 2025 approaches when parts of the TCJA are set to expire.
Conclusion
For now, employees cannot write off job expenses and need to rely on their employers for reimbursements. If you’re self-employed, make sure to take full advantage of business expense deductions to reduce your taxable income. Always check with a tax professional or refer to IRS guidelines to ensure you’re maximizing any tax benefits you’re eligible for.
See Also:
- Independent Contractor vs Employee: Which Is Better?
- Independent Contractors: Are You A Misclassified Employee?
Disclaimer: This article is intended for informational purposes only. It provides general information and is not intended and should not be construed as professional advice. The author is not your attorney, accountant, financial planner or any other professional and no professional-client relationship is created. We do not represent that the information provided is accurate or up-to-date as laws and regulations are always changing. If you have an issue that requires professional help, you should contact the appropriate professional to help you on your specific set of facts. Please read the Terms and Conditions for additional information.
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