Employee Business Expenses
Form 2106 is currently used to deduct employee business expenses for specific W-2 employees. This includes Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses.
For taxpayers outside these job categories, you can no longer use Form 2106 to claim job-related expenses for tax years 2018 – 2026, as this itemized deduction was suspended with the Tax Cuts and Jobs Act of 2017.
Filing for Tax Returns Prior to 2018
Before the 2018 tax year, most employees could deduct their ordinary and necessary employee business expenses.
- An ordinary expense is common and accepted in your field, trade, or profession.
- A necessary expense is helpful and appropriate for your business. An expense does not have to be required for the IRS to consider it necessary.
To file Form 2106 for these prior years, you must be an employee with unreimbursed job expenses. The requirements to claim this deduction are complex, so it is best to consult the flowchart in the Instructions for Form 2106 to see if you are eligible for this deduction.
Note that if you deduct expenses for travel, entertainment, gifts, or the use of a car or other listed property, you must have records that show the amount, time, place, business purpose, and business relationship.
State Tax Returns
While the federal deduction is no longer applicable for many, some states still allow taxpayers to claim employee business expenses on their state tax returns. The states that currently allow the deduction of unreimbursed employee expenses are:
- Alabama
- Arkansas
- California
- Hawaii
- Maryland
- Minnesota
- New York
- Pennsylvania
Even if you are not eligible for the federal deduction, you may be able to claim this state deduction if you live in one of the states listed above. For more information and requirements, consult with your State Department of Revenue.
