What are unreimbursed employee expenses, and who qualifies to deduct them?

Unreimbursed employee expenses are ordinary and necessary expenses paid by an employee in connection with their employment for which they are not reimbursed by their employer. Prior to the Tax Cuts and Jobs Act (TCJA) of 2017, these were deductible as a miscellaneous itemized deduction subject to the 2% AGI floor under IRC Section 67(a). Currently, only certain categories of employees, such as qualified performing artists, fee-basis state or local government officials, and employees with disabilities who incur impairment-related work expenses, can deduct these expenses. This deduction is generally not available for most W-2 employees from 2018 through 2025.

How do qualified individuals claim unreimbursed employee expenses on their tax return?

Qualified individuals, such as those listed in IRC Section 62(a)(2), claim these expenses as an above-the-line deduction on Schedule 1 (Form 1040), Line 11, 'Other adjustments.' This means they reduce their Adjusted Gross Income (AGI) directly, rather than being subject to itemized deduction limitations. For example, qualified performing artists would report these expenses on Form 2106, Employee Business Expenses, and then transfer the total to Schedule 1.

Are there any dollar limits or thresholds for deducting unreimbursed employee expenses?

For qualified individuals, there are generally no specific dollar limits on the amount of unreimbursed employee expenses that can be deducted, provided they are ordinary and necessary. However, for qualified performing artists, the deduction is limited to the amount of gross income from performing arts. Prior to TCJA, these expenses were subject to a 2% AGI floor, meaning only the amount exceeding 2% of your AGI was deductible, as outlined in former IRC Section 67(a).

What IRS forms are required to claim unreimbursed employee expenses?

Qualified individuals typically use Form 2106, Employee Business Expenses, to calculate their deductible unreimbursed employee expenses. The total from Form 2106 is then transferred to Schedule 1 (Form 1040), Line 11, 'Other adjustments,' for above-the-line deductions. For certain specific professions like reservists, Form 2106-EZ was previously used but is now consolidated into Form 2106.

What are common mistakes taxpayers make when attempting to deduct unreimbursed employee expenses?

A common mistake is attempting to deduct these expenses when not a qualified individual, as most W-2 employees cannot deduct them from 2018-2025. Another error is failing to maintain adequate records, such as receipts and logs, to substantiate the expenses, as required by IRS Publication 529. Misclassifying personal expenses as business expenses is also a frequent issue, leading to disallowance upon audit.

What constitutes an 'ordinary and necessary' expense for this deduction?

An 'ordinary' expense is one that is common and accepted in your trade or business, as defined in IRS Publication 529. A 'necessary' expense is one that is helpful and appropriate for your business, though it doesn't have to be indispensable. For example, a qualified performing artist's costume expenses would be ordinary and necessary, while personal grooming expenses generally would not be.

Can I deduct unreimbursed mileage or travel expenses as an employee?

For qualified individuals, unreimbursed mileage and travel expenses incurred for business purposes can be deductible. These expenses are calculated using either the standard mileage rate (e.g., 67 cents per mile for business use in 2024) or actual expenses, as detailed in IRS Publication 463. However, for most W-2 employees, these expenses are not deductible from 2018 through 2025 due to TCJA changes.

Are unreimbursed education expenses deductible for employees?

For qualified individuals, unreimbursed education expenses can be deductible if the education maintains or improves skills needed in your present job, or if it's required by your employer or by law to keep your present salary, status, or job. However, the education cannot be to meet minimum requirements for your current job or to qualify you for a new trade or business, as per IRS Publication 970. Again, this deduction is generally unavailable for most W-2 employees from 2018-2025.

What are the audit red flags associated with unreimbursed employee expenses?

High amounts of unreimbursed employee expenses relative to income, especially for individuals who are not in the qualified categories, can trigger an audit. Lack of detailed records, such as receipts, mileage logs, and employer reimbursement policies, is a significant red flag. Deducting expenses that appear personal in nature or are not clearly tied to employment duties also increases audit risk, as the IRS scrutinizes these deductions closely.

How does the Tax Cuts and Jobs Act (TCJA) of 2017 impact unreimbursed employee expenses?

The TCJA of 2017 suspended the deduction for unreimbursed employee expenses as a miscellaneous itemized deduction subject to the 2% AGI floor for tax years 2018 through 2025. This means that most W-2 employees can no longer deduct these expenses. Only specific categories of employees, such as qualified performing artists and fee-basis government officials, retain the ability to deduct these expenses as an above-the-line deduction under IRC Section 62(a)(2).

What changes are anticipated for unreimbursed employee expenses in 2026?

Barring further legislative action, the provisions of the TCJA that suspended the deduction for unreimbursed employee expenses are set to expire at the end of 2025. This means that for tax years beginning in 2026, the deduction for unreimbursed employee expenses as a miscellaneous itemized deduction subject to the 2% AGI floor is expected to return. However, Congress could extend the current suspension or make other changes.

Can I deduct home office expenses as an employee?

For qualified individuals, home office expenses can be deductible if the home office is used exclusively and regularly as your principal place of business, or as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business. However, for most W-2 employees, this deduction is suspended from 2018 through 2025. The rules for home office deductions are stringent and outlined in IRS Publication 587.

How do employer reimbursement policies affect the deductibility of these expenses?

If your employer reimburses you for expenses under an 'accountable plan,' those reimbursements are not included in your income, and you cannot deduct the expenses. If the plan is 'nonaccountable,' reimbursements are included in your income, but you generally cannot deduct the expenses from 2018-2025. For qualified individuals, unreimbursed expenses under a nonaccountable plan would be deductible, as per IRS Publication 463.

What records should I keep to substantiate unreimbursed employee expenses?

You must keep detailed records, including receipts, canceled checks, or other documentation for all expenses, as required by IRS Publication 529. For travel and entertainment (if applicable), you need to record the amount, time, place, and business purpose of the expense, and the business relationship of the people involved. Mileage logs with dates, destinations, and business purposes are crucial for vehicle expenses.

Are professional dues and subscriptions deductible as unreimbursed employee expenses?

For qualified individuals, professional dues to organizations directly related to your employment and subscriptions to professional journals or publications can be deductible. These expenses must be ordinary and necessary for your job. However, for most W-2 employees, these deductions are suspended from 2018 through 2025, falling under the general category of miscellaneous itemized deductions.

Can I deduct job search expenses if I'm looking for a new job in the same field?

Prior to TCJA, job search expenses for a new job in the same line of work were deductible as a miscellaneous itemized deduction. This included expenses for preparing and mailing resumes, travel, and employment agency fees. However, this deduction is suspended for most W-2 employees from 2018 through 2025, as outlined in former IRC Section 67(a).

How do unreimbursed employee expenses interact with the standard deduction?

For most taxpayers, the suspension of unreimbursed employee expenses means they no longer impact the choice between the standard deduction and itemized deductions. For qualified individuals who can still deduct these expenses, they are an 'above-the-line' deduction on Schedule 1, meaning they reduce AGI regardless of whether the taxpayer takes the standard deduction or itemizes. This is a significant benefit compared to itemized deductions.

Are uniforms and work clothes deductible as unreimbursed employee expenses?

For qualified individuals, the cost and maintenance of uniforms and work clothes are deductible if they are required as a condition of employment and are not suitable for everyday wear. For example, a police officer's uniform would qualify, but a business suit would not. This deduction is generally unavailable for most W-2 employees from 2018-2025, as per IRS Publication 529.

What is the difference between an 'above-the-line' and 'below-the-line' deduction for these expenses?

An 'above-the-line' deduction, like those for qualified individuals under IRC Section 62(a)(2), reduces your Adjusted Gross Income (AGI) directly, regardless of whether you itemize. A 'below-the-line' deduction, such as the former miscellaneous itemized deduction for most employees, is taken after AGI is calculated and only if you itemize deductions, and was subject to the 2% AGI floor.

Can self-employed individuals deduct similar business expenses?

Yes, self-employed individuals (independent contractors, freelancers, sole proprietors) can deduct ordinary and necessary business expenses on Schedule C (Form 1040), Profit or Loss from Business. These expenses are not subject to the same limitations as employee business expenses and are generally deductible 'above-the-line' in calculating net self-employment income, as outlined in IRS Publication 334.

Unreimbursed Employee Expenses: 2026 Guide

Unreimbursed Employee Expenses

Navigate the 2026 tax rules for unreimbursed employee business expenses. Learn who qualifies for exceptions (reservists, artists, officials) and how to claim them.

Overview: Unreimbursed Employee Business Expenses in 2026

For many years, employees could deduct certain ordinary and necessary business expenses that were not reimbursed by their employers. However, the landscape of this deduction underwent significant changes with the Tax Cuts and Jobs Act (TCJA) of 2017, which suspended most miscellaneous itemized deductions subject to the 2% adjusted gross income (AGI) floor for tax years 2018 through 2025. Further legislative action, specifically the One Big Beautiful Bill Act (OBBBA), has effectively made this suspension permanent for most taxpayers starting in the 2026 tax year. This guide will clarify the current status of unreimbursed employee business expenses, detailing who can still claim them and how, along with critical considerations for the 2026 tax year.

What This Deduction Is (and Isn't Anymore)

Historically, unreimbursed employee business expenses encompassed a wide range of costs incurred by an employee for their job that their employer did not pay back. These could include professional dues, union dues, job search expenses, work-related education, tools and supplies, and certain travel expenses. Prior to the TCJA, these were generally deductible as miscellaneous itemized deductions on Schedule A (Form 1040), subject to a 2% AGI limitation. This meant that only the amount exceeding 2% of the taxpayer's AGI was deductible.

However, for the vast majority of W-2 employees, this deduction is no longer available. The TCJA eliminated miscellaneous itemized deductions subject to the 2% AGI floor, and the OBBBA has extended this elimination indefinitely. Therefore, for the 2026 tax year, most employees cannot deduct these expenses.

Who Qualifies (The Exceptions)

While the deduction for unreimbursed employee business expenses has been largely eliminated, there are specific, narrowly defined exceptions for certain categories of employees. These individuals can still claim these expenses for the 2026 tax year:

Armed Forces Reservists: Members of a reserve component of the Armed Forces who travel more than 100 miles away from home in connection with their service can deduct their unreimbursed travel expenses. These expenses are deducted as an adjustment to income, not as an itemized deduction, meaning they can be claimed even if the taxpayer does not itemize.
Qualified Performing Artists: To qualify, an individual must meet all of the following criteria:

Performed services in the performing arts as an employee for at least two employers during the tax year.
Received at least $200 from each of those two employers.
Had adjusted gross income (AGI) from performing arts that is more than 10% of their total AGI.
Had an AGI that does not exceed a certain threshold (e.g., $16,000 for single filers in prior years, subject to 2026 inflation adjustments).

Fee-Basis State or Local Government Officials: An employee who is compensated in whole or in part on a fee basis for performing services as an employee of a state or local government, and incurs ordinary and necessary business expenses in connection with that employment, may deduct those expenses.
Employees with Impairment-Related Work Expenses: These are ordinary and necessary business expenses for an employee with a physical or mental disability that enable them to work. These expenses must be for attendant care services at your workplace, or for other expenses necessary for you to work. These are deductible as miscellaneous itemized deductions not subject to the 2% AGI limit.

If you do not fall into one of these specific categories, you generally cannot deduct unreimbursed employee business expenses for the 2026 tax year.

How to Claim It (Form Numbers, Schedule, Process)

For those who qualify under the exceptions, the process for claiming unreimbursed employee business expenses involves Form 2106, Employee Business Expenses.

Form 2106: This form is used to calculate deductible employee business expenses. It details various types of expenses, such as vehicle expenses, travel expenses (including lodging and transportation), and other job-related expenses.

Reporting the Deduction:

Armed Forces Reservists: After calculating their deductible expenses on Form 2106, reservists will report the amount as an adjustment to income on Schedule 1 (Form 1040), line 11. This is an

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Unreimbursed Employee Expenses

Overview: Unreimbursed Employee Business Expenses in 2026

What This Deduction Is (and Isn't Anymore)

Who Qualifies (The Exceptions)

How to Claim It (Form Numbers, Schedule, Process)

Unreimbursed Employee Expenses FAQs

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