Unreimbursed Employee Expenses
You can deduct employee expenses that are:
- Paid or incurred during your tax year,
- For carrying on your trade or business of being an employee,
- Ordinary and necessary, and
- Not reimbursed.
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 does not have to be required to be considered necessary.
You may be able to deduct the following items:
- Union dues and expenses.
- Dues to professional societies.
- Dues to a chamber of commerce if membership helps you do your job.
- Licenses and regulatory fees.
- Work clothes and uniforms if required and not suitable for everyday use.
- Tools and supplies used in your work.
- Depreciation on a computer or cellular telephone your employer requires you to use in your work.
- Education that is work related.
- Subscriptions to professional journals and trade magazines related to your work.
- Travel, transportation, entertainment, and gift expenses related to your work.
- Job search expenses in your present occupation.
- Business bad debt of an employee.
- Business liability insurance premiums.
- Damages paid to a former employer for breach of an employment contract.
- Educator expenses that are more than you can deduct on Form 1040, line 23.
- Home office or part of your home used regularly and exclusively in your work.
- Laboratory breakage fees.
- Legal fees related to your job.
- 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.
Union Dues and Expenses
You can deduct dues and initiation fees you pay for union membership.
You can also deduct assessments for benefit payments to unemployed union members. However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. Also, you cannot deduct contributions to a pension fund even if the union requires you to make the contributions.
You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities.
Dues to Chambers of Commerce and Professional Societies
You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. Similar organizations include:
- Boards of trade,
- Business leagues,
- Civic or public service organizations,
- Real estate boards, and
- Trade associations.
- Dues paid to an organization if one of its main purposes is to:
- Conduct entertainment activities for members or their guests, or
- Provide members or their guests with access to entertainment facilities.
- Dues paid to airline, hotel, and luncheon clubs.
- Lobbying and political activities. You may not be able to deduct that part of your dues that is for certain lobbying and political activities.
Licenses and Regulatory Fees.
You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession.
You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return.
Work Clothes and Uniforms
You can deduct the cost and upkeep of work clothes if the following two requirements are met.
You must wear them as a condition of your employment
The clothes are not suitable for everyday wear.
It is not enough that you wear distinctive clothing. The clothing must be specifically required by your employer. Nor is it enough that you do not, in fact, wear your work clothes away from work. The clothing must not be suitable for taking the place of your regular clothing.
Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc.).
Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear.
However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible.
Protective clothing. You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves.
Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers.
Military uniforms. You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses.
If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive.
If you are a student at an armed forces academy, you cannot deduct the cost of your uniforms if they replace regular clothing. However, you can deduct the cost of insignia, shoulder boards, and related items.
You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school.
Tools Used in Your Work.
Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. You can depreciate the cost of tools that have a useful life substantially beyond the tax year.
Depreciation on Computers or Cellular Telephones
You can claim a depreciation deduction for a computer or cellular telephone that you use in your work as an employee if its use is:
For the convenience of your employer.
- For the convenience of your employer, and
- Required as a condition of your employment.
This means that your use of the computer or cellular telephone is for a substantial business reason of your employer. You must consider all facts in making this determination. Use of your computer or cellular phone during your regular working hours to carry on your employer's business is generally for the convenience of your employer.
Required as a condition of your employment.
This means that you cannot properly perform your duties without the computer or cellular telephone. Whether you can properly perform your duties without it depends on all the facts and circumstances. It is not necessary that your employer explicitly requires you to use your computer or cellular telephone. But neither is it enough that your employer merely states that your use of the item is a condition of your employment.
You are an engineer with an engineering firm. You occasionally take work home at night rather than work late at the office. You own and use a computer that is similar to the one you use at the office to complete your work at home. Since your use of the computer is not for the convenience of your employer and is not required as a condition of your employment, you cannot claim a depreciation deduction for it.
You must keep records to prove your percentage of business and investment use.
Travel, Transportation, Meal, Entertainment, and Gift Expenses
If you are an employee and have ordinary and necessary business-related expenses for travel away from home, local transportation, entertainment, and gifts, you may be able to deduct these expenses.
Travel expenses may include:
- Travel expenses are those incurred while traveling away from home for your employer.
- You can deduct travel expenses paid or incurred in connection with a temporary work assignment.
- Generally, you cannot deduct travel expenses paid or incurred in connection with an indefinite work assignment.
Temporary work assignment.
- The cost of getting to and from your business destination (air, rail, bus, car, etc.),
- Meals and lodging while away from home,
- Taxi fares,
- Baggage charges, and
- Cleaning and laundry expenses.
If your assignment or job away from home in a single location is realistically expected to last (and does in fact last) for 1 year or less, it is temporary, unless there are facts and circumstances that indicate it is not.
Indefinite work assignment.
If your assignment or job away from home in a single location is realistically expected to last for more than 1 year, it is indefinite, whether or not it actually lasts for more than 1 year.
Employment that is initially temporary may become indefinite due to changed circumstances.
Local transportation expenses.
You cannot deduct your daily commuting expense to and from your principal place of work.
Work at two places in a day. If you work at two places in a day, whether or not for the same employer, you can generally deduct the expenses of getting from one workplace to the other.
Temporary work location. You can deduct expenses incurred in going between your home and a temporary work location if at least one of the following applies.
- The work location is outside the metropolitan area where you live and normally work
- You have at least one regular work location (other than your home) for the same trade or business. (If this applies, the distance between your home and the temporary work location does not matter.)
Home office. You can deduct expenses incurred in going between your home and a workplace if your home is your principal place of business for the same trade or business.
Meals and entertainment.
Generally, you can deduct entertainment expenses (including entertainment-related meals) only if they are directly related to the active conduct of your trade or business. However, the expense only needs to be associated with the active conduct of your trade or business if it directly precedes or follows a substantial and bona fide business-related discussion.
You can deduct only 50% of your business-related meal and entertainment expenses unless the expenses meet certain exceptions. You apply this 50% limit before you apply the 2%-of-adjusted-gross-income limit.
Meals when subject to “hours of service” limits. You can deduct 70% of your business-related meal expenses if you consume the meals during or incident to any period subject to the Department of Transportation's “hours of service” limits. You apply this 70% limit before you apply the 2%-of-adjusted-gross-income limit.
You can generally deduct up to $25 of business gifts you give to any one individual during the year. The following items do not count toward the $25 limit.
- Identical, widely distributed items costing $4 or less that have your name clearly and permanently imprinted.
- Signs, racks, and promotional materials to be displayed on the business premises of the recipient.
Education That Is Work-Related
You can deduct education expenses for tuition, books, supplies, laboratory fees, and similar items, and certain transportation costs, even if the education may lead to a degree, if the education meets at least one of the following two tests:
- It maintains or improves skills required in your present work.
- It is required by your employer or the law to keep your salary, status, or job, and the requirement serves a business purpose of your employer.
deduct expenses for education if:
- The education is needed to meet the minimum educational requirements to qualify you in your work or business, or
- Will lead to qualifying you in a new trade or business.
deduct the cost of travel that in itself constitutes a form of education. Example, a French teacher who travels to France to maintain general familiarity with the French language and culture cannot deduct the cost of the trip as an educational expense.
You can deduct legal fees related to doing or keeping your job.
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.
Business Liability Insurance.
You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job.
Damages for Breach of Employment Contract.
If you break an employment contract, you can deduct damages you pay your former employer if the damages are attributable to the pay you received from that employer.
Educator Expenses Over Limit
If you were an educator in 2005 and you had qualified expenses that were more than you can deduct on Form 1040, line 23, you can deduct the rest as an itemized deduction subject to the 2% limit. See Educator Expenses, later.
If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home.
You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively:
- As your principal place of business for any trade or business,
- As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or
- In the case of a separate structure not attached to your home, in connection with your trade or business.
The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job.
Principal place of business. If you have more than one place of business, the business part of your home is your principal place of business if:
- You use it regularly and exclusively for administrative or management activities of your trade or business, and
- You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.
Otherwise, the location of your principal place of business generally depends on the relative importance of the activities performed at each location and the time spent at each location.
You should keep records that will give the information needed to figure the deduction according to these rules. Also keep canceled checks, substitute checks, or account statements and receipts of the expenses paid to prove the deductions you claim.
Tax Preparation Fees
While tax preparation fees are not "employment related," they are one of the more common deductions for the average taxpayer
You can usually deduct tax preparation fees in the year you pay them.
Thus, on your 2005 return, you can deduct fees paid in 2005 for preparing your 2004 return.
These fees include the cost of tax preparation software programs and tax publications. They also include any fee you paid for electronic filing of your return. However, if you paid your tax by credit card, you cannot deduct the convenience fee you were charged.
Note: Deduct expenses of preparing tax schedules relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F) on the appropriate schedule. Deduct expenses of preparing the remainder of the return on Form 1040, Schedule A, line 21.