Writing Off Your Work-Related Costs

With Labor Day upon us, now is the time that workers should be thinking about the tax-deductible expenses they incur for their job. Retaining appropriate receipts and other records can support write-offs for these expenses at tax time. However, not all job-related expenses are deductible. Here is a roundup of some of the items you can and cannot deduct, and the gray areas in which deductions may or may not be appropriate.

Deductible employee business expenses

Most unreimbursed employee business expenses are claimed as miscellaneous itemized deductions on Schedule A. Job-related personal moving expenses are deductible from gross income.

Examples of deductible employee business expenses include:

• Cell phones, smartphones, tablets, and computers for work (along with monthly telecommunications costs)
• Education costs to maintain or improve job skills
• Home office expenses if you work at home for your employer’s convenience and meet other tests
• Job-hunting expenses
• Subscriptions to professional journals
• Union and trade association dues
• Work clothes and uniforms
• Work tools and equipment

Nondeductible employee business expenses

The biggest nondeductible expense is commuting costs. No matter how far or how long it takes you to get to and from work each day, your costs are not deductible. Exception: The added cost of bringing tools to work can be deductible (e.g., rental costs of a trailer to bring your own equipment to the job).

Other nondeductible expenses include:

• Education costs that qualify you for a new trade or business
• Home office expenses if the location is for your convenience and not for your employer’s convenience
• Work clothes suitable for street use (i.e., items that can normally be worn anywhere, not just on the job)

Reimbursed expenses

If your employer reimburses you for out-of-pocket costs for job-related expenses under an “accountable plan” where you are required to substantiate your costs to your employer and meet certain other conditions, then you do not get to write off any of these expenses; the reimbursements are not taxable to you. But if the plan is a nonaccountable plan, the reimbursements are taxable to you, and you then deduct the expenses in the same way as if you hadn’t received reimbursement.