Taking an Itemized Deduction for Job Expenses
There are various job-related expenses that can be taken as itemized deductions on Schedule A of your U.S. federal income tax return. While most of these deductions can only be taken to the extent that they exceed 2% of your adjusted gross income, if you have sufficient medical expenses, taxes, mortgage interest, charitable contributions, and casualty or theft losses in order to itemize deductions, you should also take advantage of this tax benefit for certain miscellaneous job-related expenses.
As an employee, you can take an itemized deduction on Schedule A for certain out-of-pocket job-related expenses that are not reimbursed by your employer. Un-reimbursed employee expenses are one of the categories of miscellaneous deductions that are subject to the 2% of the adjusted gross income limit.
Some of the types of un-reimbursed employee expenses you can deduct include the following (aside from travel, transportation, entertainment, and gift expenses; and business use of part of your home):
- Depreciation on a computer or cellular telephone your employer requires you to use in your work
- Tools needed for your job
- Work clothes and uniforms are necessary by your employer that are not suitable for ordinary wear
- Protective clothing required in your work, such as hard hats, safety shoes, and glasses
- Union Dues
- Dues to professional organizations and chambers of commerce
- Subscriptions to professional journals
- Work-related education expenses
- Expenses to look for a new job in your present occupation, even if you do not get a new job
Depreciation on a Computer or Cell Phone
You may be able to deduct depreciation on a computer or cell phone if the use is ”for the convenience of your employer” and is “required as a condition of your employment”. These conditions will depend on the facts and circumstances in each case, but in general terms, “for the convenience of your employer” means that there is a substantial business reason for requiring their use, and “required as a condition of your employment” means that you cannot adequately perform your duties without them.
If you use the computer or cell phone more than 50% in your work, you can claim depreciation under the General Depreciation System (GDS). You may also be able to take the section 179 deduction, and the 50% or 30% special depreciation allowance the year you start using them.
If you do not meet the 50% use test, you must use straight-line depreciation under the Alternative Depreciation System (ADS), and you will not be able to take the section 179 deduction or the individual first-year depreciation allowance.
Exception for Computer Used in a Home Office
If you use the computer in what qualifies for tax purposes as a home office, you do not have to meet the 50% use test. You can take depreciation under GDS, the section 179 deduction, and the special first-year depreciation allowance.
Use Form 4562, Depreciation and Amortization, to calculate your depreciation deduction. But if you file Form 2106 or 2106EZ, you would report the depreciation on that form, and not on Form 4562.
You can deduct the cost of tools that you use in your work either as an expense or as depreciation. If the tools generally wear out and are thrown away within one year, they are a deductible expense. If they last longer, you can take a depreciation deduction. You can calculate depreciation on Form 4562, and Internal Revenue Service (IRS) Publication 946, How To Depreciate Property, has specific instructions and tables to determine the amount of depreciation you can deduct.
Work Clothes and Uniforms
You can deduct the cost and upkeep (laundry, dry cleaning, mending and repairs) of work clothes and uniforms if they meet the following two conditions:
- You must wear them as a condition of your employment, and
- The clothes are not suitable for everyday wear.
Clothing that is distinctive will not necessarily meet the first test. And for purposes of the second test, the fact that you do not wear your work clothes off the job is not sufficient. The work clothes must not be suitable for normal everyday wear.
Some examples of employees who would typically meet these tests include healthcare workers, delivery persons, transportation workers, law enforcement officers, firefighters, and musicians and entertainers who use theatrical apparel.
Work clothing such as a business suit, bib overalls, regular shoes, or blue work clothes would not usually meet the requirements since these you could use outside your work.
If you are on full-time active duty, you usually cannot deduct the cost or upkeep of your uniforms. But if you are a reservist, and military regulations restrict you from wearing your dress except while on duty, you can claim a deduction for your expenses if you did not get reimbursement.
You can deduct the cost of required protective equipment such as safety shoes or boots, safety glasses, hard hats, and work gloves if you need them for your work. Examples of workers who would typically be able to deduct these expenses include carpenters, construction workers, welders, electricians, cement workers, machinists, equipment operators, pipe fitters, truck drivers, and fishing boat crew members.
Initiation fees and dues you pay for union membership are deductible. Assessments for benefit payments to unemployed union members are also deductible. But if part of an evaluation is to fund the amount of sick, accident, or death benefits, that part of the assessment is not deductible. Contributions to a union pension fund are not deductible, even if the union require them.
Dues to Professional Organizations and Chambers of Commerce
Dues you pay to professional organizations, chambers of commerce, business leagues, civic or public service organizations, trade associations, boards of trade, and real estate boards, and similar organizations are deductible if membership helps you carry out the duties of your job. In this case, the association does not have to be required by your employer. The test is whether membership contributes to effectively carrying out your duties, and therefore should be related to your line of work.
Any amounts you pay for lobbying or political activities are not deductible. And, you cannot deduct dues paid to an organization if its primary purpose is to conduct entertainment activities or to provide members with access to entertainment facilities. Out-of-pocket expenses you pay at such facilities may be deductible entertainment expenses, subject to the rules and limitations on these expenses.
Subscriptions to Professional Journals
Subscriptions to professional journals and trade magazines are deductible if they are related to your work.
Work-related Education Expenses
Work-related education expenses are deductible, even if they lead to a degree if they meet the following two tests:
- The education must serve to maintain or improve skills required in your present work.
- It must be required by your employer or by law to keep your salary, status, or job, and the requirement must serve a bona fide business purpose of your employer.
You cannot deduct education expenses, even if one or both of the preceding tests meet if the education:
- is needed to meet the minimum requirements to qualify you in your work or business, or
- will lead to qualifying you in a new trade or business.
If the education qualifies you for a new trade or business, the expenses are not deductible even if you do not go into that trade or business.
Laws and regulations determine the minimum education requirements to qualify in your work or business, the standards of your trade, profession, or business, and by your employer. If the minimum requirements subsequently change, after you had met the requirements that were in effect when you get hired, and you have education expenses to meet these new requirements, your costs would be deductible.
Maintaining or Improving Skills
If you get more education than the law or your employer requires, you can deduct the expenses only if they continue or improve your skills. Keeping up-to-date on changes or the latest innovations in your trade or profession would qualify as deductible education expenses.
If you qualify based on these tests, deductible education expenses include tuition, fees, books, supplies, and certain transportation costs.
Leave of Absence
If you take a year or less off, to get an education to maintain or improve your skills, and you subsequently return to the same type of work, your absence is considered temporary, and your work-related education expenses are deductible, even if you do not respond to the same employer.
If you take more than a year off, your absence is indefinite and your education during that period is considered to qualify you for a new trade or business, for tax purposes. Your education expenses would not be deductible as work-related expenses. But you may be eligible for other tax benefits for education.
Other Tax Benefits for Education
Your work-related education expenses may also qualify for the tuition and fees deduction, which is an adjustment to gross income on Form 1040, or the education credits – Hope credit and lifetime learning credit, which would be direct reductions in your tax. You should see which benefits you qualify for, and determine which will give you the most tax advantage.
Job Hunting Expenses
You can deduct certain expenses of looking for a job in your present occupation. Deductible expenses include:
- Employment or outplacement agency fees that you pay
- Costs of producing and sending your resume to prospective employers
- Travel and transportation expenses if you go to an area primarily to look for a job. If the trip is not mainly to look for a job, you cannot deduct the cost of the trip, but if you look for a job while you are in the area, you can deduct the transportation and related expenses you incur while looking for a job in that area. If you use your vehicle, you can deduct actual costs, or use the standard mileage rate.
Your job hunting expenses are not deductible if:
- You are looking for your first job,
- You are looking for a job in a new occupation, or
- There was a substantial break between the ending date of your last post and the time you started looking for another job.
Non-Deductible Job-Related Expenses
Certain expenses related to your work as an employee are excluded explicitly from deductible costs. These include the following:
- Commuting expenses
- Lunches with co-workers
- Meals while working late
- Professional accreditation fees
- Lost wages or lost vacation time
Commuting expenses between your home and your regular or principal place of business are not deductible. It includes parking at your workplace. But other transportation expenses may be deductible.
Lunches with co-workers are only deductible while you are travelling away from home overnight, and are then subject to certain limits (50% rule, for example).
Meals while working late would also be deductible if you were travelling away from home. Or, you may be able to claim a deduction if the meal qualifies as a deductible entertainment expense.
Fees to gain the first right to practice a profession are not deductible. These include accounting certificate fees, bar exam fees and expenses, and license fees to practice medicine or dentistry.
Lost Wages or Lost Vacation Time
These do not represent an out-of-pocket expense and are not deductible.