Can You Deduct Employee Expenses?

We all spend money for our jobs — getting to the office, having the right tools, dressing right. So how do you know when you can deduct work expenses on your income tax return?

No surprise that the IRS has rules to cover all of that on their website. The IRS answers three important questions about deducting work-related expenses when you are a W-2 employee:

What Work Expenses can I Deduct?

You can deduct work-related expenses that are necessary and customary to perform your job duties, as long as they are not reimbursed by your employer. Examples include unreimbursed local transportation (other than commuting between your home and work), tools, professional licenses, association fees, uniforms that are only worn for work, and work-related publications and education.

Non-commuting mileage deductions are calculated using the standard mileage rate (i.e., $0.575 a mile for 2015 and $0.54 for 2016). Work-related entertainment and gifts may also be deductible, subject to limits.

Who Can Deduct Work Expenses?

Eligible work expenses paid during the tax year can be included on your income tax return. Expenses for each spouse/taxpayer should be tracked and reported separately. Your work-related expense records need to include the amount, date, and work-related purpose.

How Do I Deduct my Work Expenses?

Work expenses are only deductible for taxpayers who itemize their deductions using IRS Schedule A, as opposed to taking the standard deduction. Special rules apply for educators and performing artists. In addition to itemizing to take advantage of eligible work expenses, those expenses, plus other miscellaneous itemized deductions, must exceed 2% of your adjusted gross income.

This information is general, so you might need some help sorting it out. You can find more information at www.irs.gov or from a qualified tax professional.