Changes to the Employee Business Expense Deduction

The Tax Cuts and Jobs Act (TCJA) passed changed many tax rules for working Americans. A major change was the elimination of the employee business expense deduction.

Under the old tax rules, employees could deduct ordinary and necessary work-related expenses that their employers didn’t reimburse, including:

  • Business travel expenses like lodging and automobile expenses
  • 50% of business meal and entertainment expenses
  • The home office deduction

So, if you itemized deductions, you could deduct unreimbursed expenses along with other miscellaneous expenses that were more than 2% of your adjusted gross income (AGI).

What’s The Current Law?

Today, all miscellaneous itemized deductions subject to the 2% of AGI limitation, including unreimbursed employee business expenses are suspended.

This law will remain effective through December 31, 2025.

Most Employees Can No Longer Deduct Job Expenses

In most instances, you can’t deduct job expenses.

Military reservists, qualified performing artists, and fee-basis state and local government officials may continue to deduct employee business expenses. These expenses are claimed as an adjustment to income (A.K.A. an above-the-line deduction) on Schedule 1 of Form 1040. Moving expenses are allowed as an adjustment to income only for members of the Armed Forces who move because of a permanent change in duty station.

Employees with impairment-related work expenses claim the expenses as miscellaneous itemized deductions not subject to the 2% of AGI limitation.

For more personalized support as you navigate the changes of tax reform and its impact on your personal taxes, get matched with a tax professional at Block Advisors.

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