Prior to the 2018 Tax Cuts and Jobs Act (TCJA), employees were allowed to deduct their qualified unreimbursed business expenses ("UBE") as miscellaneous itemized deductions, subject to certain limitations. Common examples of UBE include expenses for travel, transportation, meal, dues to professional organizations, safety equipment and small tools or supplies.
The TCJA eliminated the UBE deduction for the vast majority of employees. Now, only certain qualified employees or eligible educators can claim UBE as miscellaneous itemized deductions.
You must fall into one of the following categories of employment to claim a deduction for UBE:
Armed Forces reservists.
Qualified performing artists.
Fee-basis state or local government officials.
Employees with impairment-related work expenses.
Eligible educator---a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in school for at least 900 hours during a school year.
Unreimbursed business expenses for individuals in these categories of employment are deducted as adjustments to gross income. Qualified employees listed in one of the categories above must complete Form 2106 (Employee Business Expenses) to take the deduction.
Qualified Unreimbursed Business Expenses
You can only deduct unreimbursed business expenses that are:
Paid or incurred during your tax year;
For carrying on your trade or business of being an employee; and
Ordinary and necessary.
Note, an expense is considered "ordinary" if it is common and accepted in your trade, business, or profession. An expense is considered "necessary" if it is appropriate and helpful to your business; the expense does not have to be required to be considered necessary.
Even if you fall into one of the qualified categories of employment mentioned above, you generally cannot claim a deduction for the following expenses:
Burial or funeral expenses, including the cost of a cemetery lot.
Fees and licenses, such as car licenses, marriage licenses, and dog tags.
Fines or penalties.
Health spa expenses.
Home repairs, insurance, and rent.
Home security system.
Illegal bribes and kickbacks.
Life insurance premiums paid by the insured.
Lobbying expenses (except if the expenses are ordinary and necessary expenses of carrying on your trade or business).
Losses from the sale of your home, furniture, personal car, etc.
Lost or misplaced cash or property.
Lunches with co-workers.
Meals while working late.
Medical expenses as business expenses other than medical examinations required by your employer.
Personal disability insurance premiums.
Personal legal expenses.
Personal, living, or family expenses.
Professional accreditation fees.
Professional reputation, expenses to improve.
Relief fund contributions.
Residential telephone line.
Stockholders' meeting, expenses of attending.
Tax-exempt income, expenses of earning or collecting.
The value of wages never received or lost vacation time.
Travel expenses for another individual.
Voluntary unemployment benefit fund contributions.
For more information, see IRS Publication 529 (Miscellaneous Deductions).
About the Author
Attorney Jordan D. Howlette is the President of MyTaxRights, LLC and the managing-member of JD Howlette Law, LLC, a civil litigation firm that represents individuals and businesses involved in tax disputes with the IRS, the United States Department of Justice (DOJ), and various state departments of revenue. A former trial attorney with the DOJ’s Tax Division, Jordan leverages his extensive background in tax litigation to educate others about their federal tax rights and responsibilities. Each tax season, Jordan also volunteers as a tax coach with the Center for the Advancement of Tax Equity, where he teaches others how to self-prepare and file their taxes through the non-profit's free tax clinics.