If you’re a salaried employee, understanding what’s eligible for deduction and how the process works can potentially save you money during tax season. Here’s a straightforward guide to help you navigate which business expenses you can deduct.
Can Salaried Employees Deduct Business Expenses?
Historically, salaried employees could claim unreimbursed work-related expenses as miscellaneous deductions. However, changes under the Tax Cuts and Jobs Act (TCJA), enacted in 2018, significantly altered this provision. Currently, most salaried employees cannot deduct these unreimbursed expenses on their federal tax returns until at least 2025.
Exceptions and Special Cases
Despite general restrictions, there are specific categories of employees who can still deduct certain expenses:
Armed Forces Reservists: Reservists traveling more than 100 miles from home.
Qualified Performing Artists: Performing artists meeting specific criteria set by the IRS.
Fee-basis State or Local Government Officials: Individuals who are paid on a fee basis rather than a fixed salary.
Employees with Impairments: Employees with physical or mental impairments incurring impairment-related work expenses.
What Work Expenses Are Tax Deductible?
If you fall into one of the above categories, you may be able to deduct:
- Travel expenses: Including mileage, airfare, hotels and meals. If you’re wondering, “Can an employee deduct travel expenses for work?”—yes, provided you’re eligible.
- Tolls: Employees often ask, “Can I write off tolls for work?” and “Are tolls tax deductible?” Eligible employees can indeed deduct toll expenses related to work travel.
- Home office expenses: If you regularly and exclusively use part of your home as your principal place of business.
- Professional dues and subscriptions: Fees for memberships and industry-specific publications.
- Supplies and equipment: Necessary tools, uniforms, or materials for your job.
How to Write Off Work Expenses
For eligible employees, deductions should be reported on Form 2106 (Employee Business Expenses). If qualified, these expenses are then carried over to Form 1040 (Schedule 1), which reduces your Adjusted Gross Income (AGI). Use expense tracking software like ExpensePoint to easily document your receipts and maintain accurate records.
State Taxes and Employee Expenses
While federal deductions are limited, some states still allow work expense tax write-offs. Read Are Expense Reimbursements Considered Taxable Income? for more information. Always consult your state tax guidelines or a tax professional for clarity on what is permissible locally.
Best Practices for Tracking Expenses
Regardless of your deduction eligibility, maintain accurate and detailed records:
- Keep all receipts and invoices.
- Maintain a clear log of dates, expenses and business purposes.
- Use expense tracking software to simplify documentation.
Stay Informed and Organized
While federal tax deductions for salaried employees are currently limited, certain exceptions and state-level opportunities exist. Staying informed and organized ensures you’re prepared to take advantage of available deductions, potentially lowering your tax bill. To effectively maximize your deductions, consider using an expense management tool like ExpensePoint to streamline expense reporting and ensure no deduction is missed.
Always consider consulting a tax professional or CPA to ensure compliance and maximize your deductions based on your unique situation.
