Changes to the Employee Business Expense Deduction
The Tax Cuts and Jobs Act (TCJA) passed late in 2017, changed many tax rules for everyday Americans. One of the major changes impacting individuals is 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:
- Travel, lodging, and automobile expenses
- 50% of business meal and entertainment expenses
- The home office deduction
Before 2018, 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).
New Law Suspends All Miscellaneous “2%” Business Deductions
Starting in 2018, all miscellaneous itemized deductions subject to the 2% of AGI limitation, including unreimbursed employee business expenses are suspended.
This change went into effect beginning on January 1, 2018 and will remain effective through December 31, 2025.
Most Employees Can No Longer Deduct Job Expenses
In most instances, you may no longer deduct job expenses related to their employment. 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. Employees with impairment-related work expenses claim the expenses as miscellaneous itemized deductions that are not subject to the 2% of AGI limitation.
Also, with tax reform, 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.
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.