Employee business expenses can be deducted as an adjustment to income only for specific employment categories and eligible educators.
Taxpayers can no longer claim unreimbursed employee expenses as miscellaneous itemized deductions, unless they are a qualified employee or an eligible educator. They must complete Form 2106, Employee Business Expenses to take the deduction.
If someone falls into one of these employment categories, they are considered a qualified employee:
- Armed Forces reservists
- Qualified performing artists
- Fee-basis state or local government officials
- Employees with impairment-related work expenses
No other type of employee is eligible to claim a deduction for unreimbursed employee expenses.
Here’s what makes something a qualified expense:
- Paid or billed during the tax year
- For carrying on a trade or business of being an employee, and
- Ordinary and necessary
Taxpayers should know there are nondeductible expenses.
There is a full list of nondeductible expenses in Publication 529, Miscellaneous Deductions.
IRS updates guidance for deductible business expenses