Unreimbursed Employee Expenses


Prior to 2018, if employees incurred out-of-pocket expenses that were not reimbursed by their employer, the employee could deduct unreimbursed employee business expenses as a miscellaneous itemized deduction. If the employee chose to itemize deductions, the expenses would be reported on Schedule A to the extent that the aggregate miscellaneous itemized deductions exceeded 2% of the employee’s adjusted gross income. These deductible employee expenses included job-related mileage, travel expenses, work-related dues, home office, tools and supplies as well as several others.

With the passage of the Tax Cut and Jobs Act of 2017 (TCJA), the deduction for unreimbursed employee expenses was eliminated for tax years starting January 1, 2018 through December 31, 2025. This means that if the employer does not reimburse the employee’s business expense, the employee is no longer permitted to claim a tax deduction for the expense. An accountable reimbursement plan adopted by an employer could be used to reimburse employee expenses. If the plan complies with specific IRS requirements, the reimbursement of certain business expenses would not be taxable to the employee.

It is important to note that the elimination of unreimbursed employee expenses only affects taxpayers who claimed an employee-related deduction on Schedule A. If a Schedule C or Schedule F is typically filed, then business-related deductions would not be affected by the elimination.

The elimination of this deduction under the TCJA is not permanent. It is expected to be reinstated beginning January 1, 2026.


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