How to Use the Unreimbursed Employee Expense

A very commonly missed deduction is the unreimbursed employee business expense.  You can deduct anything that is required by your job that you personally have to pay for and don’t get reimbursed for.   There are more things in this category than you might think that could be deductible.  The most common are transportation, travel, and meals and entertainment.  Here are a few others you might not know about:

1. Business use of your home if it is required by your employer.
2. Certain educational expenses to improve your existing profession.
3. Legal fees related to your job.
4. Damages paid to a former employer for breach of an employee contract.

One thing that is really important to know about unreimbursed employee business expenses are that they are limited to over 2% of your income. For example, if you earned $50,000 then 2% of your income would be $1000.  That means the first $1000 of your unreimbursed employee business expense is not deductible. So if you spend $1500 in this situation, $500 would be deductible.

Sometimes people get really close to the 2% limit but they aren’t quite there.  Well, there is not need to give up because there are some other things you can add to the 2% limitation that aren’t business related.  So if you don’t think you have enough business expense to count, you may have some of the following expenses that will still give you a deduction:

1. Legal fees related to producing or collecting taxable income.
2. Legal fees related to doing or keeping your job.
3. Legal fees related to divorce as long as the bill specifies the amount.
4. Cost of managing and maintaining income producing investments including investment fees, custodial fees, clerical help, office rent, and any other expenses.
5. Appraisal fees for determining a casualty loss or the value of a charitable contribution.
6. Safety deposit box.
7. Tax preparation and tax advice fees.

We can’t cover everything in with unreimbursed employee expenses in this post because the unreimbursed deduction can be pretty confusing.  Check out www.avoidbeingaudited.com to learn a more about it!

7 Employee Business Expenses You are Probably Missing

A commonly missed deduction is the unreimbursed employee business expense.  Anything that is required by your job that you have to pay for and don’t get reimbursed for is tax deductible.   There are more things in this category than you might think that could be deductible.  The most common are transportation, travel, and meals and entertainment. But there are many more.  Here is a list of 7 employee business expenses you are probably missing on your taxes.

1. Vehicle Expense.  If you have to use you own vehicle for anything other than going to and from work, you can deduct the mileage.  Some examples of this are running errands for your boss, going to job sites and driving to seminars.  Also, if you have two jobs and you drive from one job to the other, those miles are tax deductible.
2. Travel Expense.  Some jobs require the employee to travel out of town.  Most employers reimburse travel expense but if not you can deduct travel such as airfare, hotels. Taxi fare, meals, and a passport.
3. Meals and Entertainment.  If it is ordinary for your type of business to take clients to lunch or dinner, play golf, or provide them with entertainment, then it is deductible.  This is a touchy deduction because it can be misused and the IRS looks closely at it in an audit.  But there are a lot of businesses where meals and entertainment is a common even a necessary expense.
4. Safety Equipment.  Tools and supplies that you pay for are deductible.
5. Uniforms. Clothing required by your employer that is not suitable for ordinary wear.  If the uniform has a logo on it or is special clothing such as scrubs in a medical office it is deductible.  But it you could wear it to the store or to a movie or somewhere like that it is not deductible.  To give you an example, I had a client who had a job selling nail polish.  She did demonstrations to large groups of business owners.  She was required to wear black clothing.  She got audited and even thought she didn’t like black and didn’t wear the clothing anywhere else, the IRS disallowed the deduction because it was normal clothing that she could have worn anywhere.
6. Protective Clothing. This is different than uniforms.  It includes hard hats, safety glasses, gloves, coveralls, safety shoes, etc.  Any clothing that protects you from harm other than your normal clothing is considered protective clothing.
7. Professional Licenses, Business Liability Insurance, and Malpractice Insurance.

We hope this list is helpful for you.  There are actually many more employee expenses that can be deducted on your taxes.  We cover at least 8 more on our CD titled “Itemized Deductions and Gambling Winnings.”  Check out www.avoidbeingaudited.com to learn more.  You might check out our CD/MP3s that teach you all about this deduction as well as many others.