Employee Expenses are Deductible, but Which Expenses?!?!?

January 25, 2018

It is unfair when you spend money in order to make money, especially when you're not self-employed. The Internal Revenue Service agrees with you, at least to some extent. Employees who incur job-related expenses can potentially deduct those costs on their federal tax returns—except, of course, it's never that easy when it comes to taxes.

Many un-reimbursed employee expenses can be counted as miscellaneous deductions if you itemize on Schedule A.

 

The only problem is that these deductions don't do you any good until they come to more than 2 percent of your adjusted gross income, or AGI. That means a worker with an AGI of $30,000 must have expenses of more than $600 before the expenses are deductible.

 

And even then, only the amount over $600 counts.

 

You can deduct only un-reimbursed employee expenses that are:

  • Paid or incurred during your tax year,

  • For carrying on your trade or business of being an employee, and

  • Ordinary and necessary.

     

     

     

     

     

     

     

     

     

An expense is ordinary if it is common and accepted in your trade, business, or profession. An expense is necessary if it is appropriate and helpful to your business. An expense doesn't have to be required to be considered necessary.

 

You may be able to deduct the following items as un-reimbursed employee expenses.

  • Business bad debt of an employee.

  • Business liability insurance premiums.

  • Damages paid to a former employer for breach of an employment contract.

  • Depreciation on a computer your employer requires you to use in your work.

  • Dues to a chamber of commerce if membership helps you do your job.

  • Dues to professional societies.

  • Educator expenses.

  • Home office or part of your home used regularly and exclusively in your work.

  • Job search expenses in your present occupation.

  • Laboratory breakage fees.

  • Legal fees related to your job.

  • Licenses and regulatory fees.

  • Malpractice insurance premiums.

  • Medical examinations required by an employer.

  • Occupational taxes.

  • Passport for a business trip.

  • Repayment of an income aid payment received under an employer's plan.

  • Research expenses of a college professor.

  • Rural mail carriers' vehicle expenses.

  • Subscriptions to professional journals and trade magazines related to your work.

  • Tools and supplies used in your work.

  • Travel, transportation, meals, entertainment, gifts, and local lodging related to your work.

  • Union dues and expenses.

  • Work clothes and uniforms if required and not suitable for everyday use.

  • Work-related education.

Business Bad Debt

A business bad debt is a loss from a debt created or acquired in your trade or business. Any other worthless debt is a business bad debt only if there is a very close relationship between the debt and your trade or business when the debt becomes worthless.

A debt has a very close relationship to your trade or business of being an employee if your main motive for incurring the debt is a business reason.

 

Example.

You make a bona fide loan to the corporation you work for. It fails to pay you back. You had to make the loan in order to keep your job. You have a business bad debt as an employee.

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