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Deducting
Employee Business Expenses
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QUALIFYING
FOR THE DEDUCTION
Not surprisingly, there are a few hurdles you will need
to cross before you can deduct your unreimbursed employee business
expenses. The first is the requirement that the work expenses you
incur be both “ordinary and necessary.” According to the IRS, an
ordinary expense is one that is common and accepted in your trade or
business. A necessary expense is one that is helpful and appropriate
for your trade or business.
The second consideration is that only taxpayers who itemize their
deductions can deduct unreimbursed business expenses – and only to
the extent that those expenses, along with any other miscellaneous
deductions, exceed 2 percent of your adjusted gross income. For
example, if your adjusted gross income is $60,000, you may deduct
only those miscellaneous itemized deductions that exceed $1,200. The
following list will help identify the most common deductible
job-related expenses.
TRAVEL AND ENTERTAINMENT
Deductible travel expenses include the ordinary and
necessary expenses of temporarily traveling away from your home
overnight for business. This includes the cost of taxis, busses,
limos, and operating your car. You may also deduct what you pay for
hotels, telephone calls, tips, baggage handling, and 50 percent of
the cost of qualifying meals and entertainment for yourself and your
guests. The rules governing travel and entertainment expenses are
complex and should be followed carefully.
BUSINESS GIFTS
You can deduct up to $25 in business gifts to any one taxpayer per
year. There's no limit on how many customers you can give business
gifts to during the year.
JOB-RELATED EDUCATION
The cost of seminars, workshops, and courses is
deductible (1) when the education is required by your employer or
the law to keep your present salary, status, or job, or (2) the
education maintains or improves skills needed in your present work.
JOB SEARCH EXPENSES
Expenses you incur in looking for another job in your
present occupation can be deducted, even if you don't find a new
job. The costs of writing and printing your resume, using an
employment agency, and traveling to interviews (only if
the trip relates primarily to seeking a new job) qualify as
deductible job search expenses.
OTHER JOB-RELATED AND MISCELLANEOUS
EXPENSES
Additional job-related deductible expenses include dues
to professional societies and unions, legal fees related to doing or
keeping your job, subscriptions to professional journals and trade
magazines related to your work, work uniforms, and tools and
supplies used in your work. Once you’ve totaled your job-related
expenses, don’t forget to add in the cost of other miscellaneous
itemized deductions, such as investment-related expenses and the
cost of tax advice and tax return preparation.
HOW TO CLAIM EMPLOYEE EXPENSES
Your total unreimbursed business expenses are entered on
Schedule A. In most cases, you’ll need to provide additional detail
on Form 2106, Employee Business Expenses, or Form 2106-EZ,
Unreimbursed Employee Business Expenses. Contact your CPA to learn
more about these and other requirements.
Brought to you by the North Carolina
Association of Certified Public Accountants in cooperation with the AICPA.
©2007 The American Institute of Certified Public Accountants |
