If you paid for a work-related expense your employer didn’t reimburse you for or if you spend money looking for work, you used to be able to deduct those expenses on your taxes.
Starting with 2018 tax returns, those unreimbursed work expenses and job search expenses are no longer deductible. That’s because the Tax Cuts and Jobs Act of 2017 (TCJA) eliminated most miscellaneous itemized deductions taxpayers used to be able to deduct on Schedule A.
Business owners and self-employed people can still deduct their business expenses. The change only impacts employees, and there are a few exceptions to the new law. But how do you know who can still claim these expenses, which expenses qualify, and where to claim them on your tax return?
Pro tip: If you’re unsure how changes to the tax code affect you, using tax preparation software from H&R Block can be a smart move. It will take you step-by-step through filing your taxes, plus they have live CPAs available should you have any questions.
Who Can Claim Work-Related Expenses?
If you’re filing an income tax return for 2017 or earlier, you can deduct unreimbursed expenses that exceed 2% of your adjusted gross income (AGI). You claim these as miscellaneous itemized deductions on Schedule A.
For the 2018 to 2025 tax years, you can only deduct certain unreimbursed job expenses if you fall into one of the following categories:
- Armed Forces reservists
- Fee-based state or local government officials
- Qualified performing artists
- Employees with impairment-related work expenses
If you fall into one of these categories and have work-related expenses, you must fill out Form 2106 to deduct your expenses.
Teachers can also deduct some work-related expenses. However, their deduction is limited to $250, and it goes on Line 10 of Schedule 1.
Deducting Work-Related Expenses
Unreimbursed job expenses are costs necessary for your line of work that aren’t paid for or reimbursed by your employer. Some examples of unreimbursed job expenses include:
1. Travel & Mileage Deductions
If you use your car as part of your job, you can deduct your actual expenses or use the standard mileage deduction. In either case, you must maintain accurate records to document the expense. Actual expenses include the following:
- Gas and oil
- Registration fees
- Auto licenses
- Depreciation (or lease payments)
You can deduct the portion of those expenses that are attributable to your job. To calculate the amount, multiply your actual annual expenses by a fraction:
Actual Expense x (Work Miles/Total Miles) = Deductible Amount
For example, let’s assume:
- Actual Costs: $5,000
- Total Miles: 12,000
- Work Miles: 2,000
Plugging these numbers into the above formula, we get:
$5,000 x (2,000/12,000) = $833.33
As an alternative, you can use the standard mileage rate. For 2020 tax returns, that rate is $0.575 per mile. So, if you drove 2,000 miles for work, the deduction would be:
2,000 x $0.575 = $1,150
In this case, the standard mileage rate is better, which is a common result. But can’t you just calculate it both ways and take the better option at tax time? According to IRS Tax Topic 510, if you want to be able to use the standard mileage rate, you must use it in the first year you use the vehicle for business.
After that, you can choose to use either the standard mileage rate or the actual expense method each year, whichever gives you a larger deduction. However, if you use the actual expense method in year one, you’re stuck using that method.
Note that the IRS literature refers to miles you drive for work as “business-use” miles. Even if you’re an employee and don’t own a business, the unreimbursed miles you drive for your employer benefits your employer’s business, so they are still called “business-use” miles.
For example, let’s say you’re a military reservist who must travel to attend a reserve meeting at a base 120 miles away from your home. The miles from your home to the base are considered business miles.
If you want to deduct business miles, be sure to keep good records. You can do this using a mileage tracking app or keeping a paper log noting your mileage and reason for the trip.
2. Work-Related Education & Licensing
Some professions require you to take a certain number of continuing education credits per year to maintain your certification or employment eligibility.
If you’re an armed forces reservist, fee-based state or local government official, qualified performing artist, employee with impairment-related work expenses, or teacher, you may be able to deduct your expenses on Form 2106 or Schedule 1. But even employees who don’t qualify for one of the excepted profession types may be able to deduct these expenses using the lifetime learning credit.
The lifetime learning credit is worth up to $2,000, and you can use it to help offset the cost of undergraduate, graduate, and professional degree courses, including courses to acquire or improve your job skills.
The main requirement is that you must pay the tuition to an eligible educational institution. According to the IRS, that can include “any college, university, trade school, or other post-secondary educational institution eligible to participate in a student aid program run by the U.S. Department of Education.”
To claim the lifetime learning credit, complete Form 8863 and file it with your Form 1040.
3. Other Job-Related Expenses
There are a few miscellaneous expenses that can qualify as unreimbursed job expenses as long as you fit into one of the excepted job categories. These can include:
- Tools or supplies used for your work
- Dues paid to professional societies or other organizations that help you perform your job
- Clothing, uniforms, and safety gear that aren’t suitable to be worn outside work
- Business travel expenses
- Malpractice and business liability premiums
- Home office expenses
All these job-related expenses go on Form 2106.
Deducting Job Search Expenses
Before the TCJA, taxpayers could deduct job search expenses as a miscellaneous itemized deduction if they were looking for a new job in the same line of work.
Since the TCJA eliminated most miscellaneous deductions, job search expenses are no longer deductible for tax years 2018 through 2025. If you still need to file a tax return for 2017 or earlier, you can deduct job expenses on Schedule A.
Deductible job search expenses include things like:
- Preparing, printing, and mailing your resume
- The cost of hiring a resume service or placement service
- Traveling to look for a new job
These costs aren’t deductible for people seeking their first job, seeking a job in a new field, or if there was a substantial break between a previous job and the new one. The IRS doesn’t define “substantial break,” but if you take a year off between jobs to backpack through Europe or care for a child, the IRS might deny your deduction.
Remember, if you receive a 1099-NEC as a business owner or independent contractor, job-related costs are deductible as business expenses on Schedule C. The TCJA only eliminated the deduction for employees.
That’s cold comfort for employees who routinely pay for work-related expenses out of pocket. Those expenses can really add up throughout the year, so losing the ability to deduct them could be a real hit to your wallet.
If that’s the case, consider talking to your employer about reimbursing these out-of-pocket expenses. Your employer will likely require you to submit an expense report and detailed receipts, and you might have to get preapproval for each expense. But the extra effort is probably worth it if your costs are significant.