IRS Tax Tip 2016-50: Six Tips You Should Know about Employee Business Expenses

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IRS Tax Tips

March 29, 2016

Issue Number: IRS Tax Tip 2016-50

Inside This Issue

Six Tips You Should Know about Employee Business Expenses

If you paid for work-related expenses out of your own pocket, you may be able to deduct those costs. In most cases, you can claim allowable expenses if you itemize on IRS Schedule A, Itemized Deductions. You can deduct the amount that is more than two percent of your adjusted gross income. Here are six other facts you should know:

1. Ordinary and Necessary. You can only deduct unreimbursed expenses that are ordinary and necessary to your work as an employee. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is appropriate and helpful to your business.

2. Expense Examples. Some costs that you may be able to deduct include:

Required work clothes or uniforms not appropriate for everyday use.
Supplies and tools you use on the job.
Business use of your car.
Business meals and entertainment.
Business travel away from home.
Business use of your home.
Work-related education.

This list is not all-inclusive. Special rules apply if your employer reimbursed you for your expenses. To learn more, check out Publication 529, Miscellaneous Deductions. You should also refer to Publication 463, Travel, Entertainment, Gift and Car Expenses.

3. Forms to Use. In most cases, you report your expenses on Form 2106 or Form 2106-EZ. After you figure your allowable expenses, you then list the total on Schedule A as a miscellaneous deduction.

4. Educator Expenses. If you are a K-12 teacher, you may be able to deduct up to $250 of certain expenses you paid in 2015. These may include books, supplies, equipment and other materials used in the classroom. You claim this deduction as an adjustment on your return, rather than an itemized deduction. For more on this topic see Publication 529.

5. Keep Records. You must keep records to prove the expenses you deduct. For what records to keep, see Publication 17, Your Federal Income Tax.

6. IRS Free File. Most people qualify to use free, brand-name software to prepare and e-file their federal tax returns with IRS Free File. Free File software will help you determine if you can deduct your expenses. It will do the math, fill out the forms and e-file your return – all for free. Check your other e-file options if you can’t use Free File.

Visit IRS.gov/forms to view, download or print IRS tax products anytime.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

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IRS Tax Tip 2016-50: Six Tips You Should Know about Employee Business Expenses

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Issue Number: IRS Tax Tip 2016-50

Inside This Issue