Employee Expense Tax Deductions

Employee Expense Tax Deductions

Employee Expense Tax Deductions

There are some (albeit few!) expenses that can still be deducted as the result of the 2018 Tax Reform. A detailed list of employee expenses that have been discontinued as employee tax deductions – some until 2026, and others beyond that.

The Tax Cuts and Jobs Act removed many miscellaneous deductions, including employee expense deductions, but increased the standard deduction. As a result, this allows taxpayers to easily claim the standard deduction and save more on their taxes rather than figure out how to itemize their deductions. When you prepare your taxes on eFile.com, the tax app will select the deduction method that benefits you the most and apply it accordingly.

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If you recently began searching for work due to COVID-19 or other life-changing events, even though the traditional deductible job search expenses are no longer deductible on your tax return due to the higher standard deduction, you might overall have a tax advantage if you don’t have to search for a job every year or if your job search expenses are not that high to begin with. Plus, depending on where you get a new job, your new employer might reimburse you for some of your moving expenses; it’s worth asking your employer about it.

As a result of the COVID-19 pandemic Congress introduced the Employee Retention Credit. Even though it is a credit that can not be claimed by a taxpayer directly on the 2020 Tax Return, it might still apply to a taxpayer. Not only as a result of COVID, in more and more states Employers are required to reimburse employees for necessary expenses.

For example, based on Section 2802 of the California Labor Code employers are required to reimburse reasonable and “necessary” expenses to employees as a result of a direct consequence of discharging their job duties. The thought behind this regulation is to prevent employers from passing their operating expenses on to their employees.

Overall, Section 2802 applies broadly to many employee’s expenses that are required to perform their jobs, including vehicle expenses, travel expenses, and cell phone and internet plans. For example, if it is mandatory for employees to use their own personal cell phones for work, generally they must be compensated for a reasonable percentage of their personal phone plans. For many companies, this requirement has already impacted how companies implement Bring-Your-Own-Device or BYOD and remote or work from home programs. The potential obligation to reimburse employees for remote work expenses is not limited to California as other states, including New Hampshire, Iowa, Illinois, Montana  and South Dakota, have enacted laws which may require reimbursement of employee expenses. However, case law in these states is not as well-developed as it is in California.

Here is the point – even though your employer might not be required to reimburse certain work related expenses to you, you still might want to discuss it with your employer; re-reimbursed expenses to you are not taxable income.

Below are the allowable employee business expenses that can be deducted. If you need to claim any of these expenses, they are entered on the Itemized Deductions – Job, Tax and Other Expenses form when you prepare your return on eFile.com.

For a full list of these deductions, including those not directly related to employment, see tax deductions, miscellaneous tax deductions, and IRS Publication 529, Miscellaneous Deductions. These include deductions on fines or penalties and repayments of debt. The eFile App will report these deductions on the proper forms when you prepare your taxes on eFile.com.

For ONLY for those employees in the categories below, some unreimbursed employee expense are deductible. When you prepare your return on eFile.com, these are entered on eFileIT Form 2106 in your account:

Fee-basis state or local government officials – If you are paid on a fee basis for your services, you can claim expenses in performing services in that job as an adjustment to income rather than as a miscellaneous itemized deduction. In order to qualify under this structure, you must be employed by a state or local government and be paid in whole or in part on a fee basis.

Employee with impairment-related work expenses – If you are physically or mentally disabled and are limited in your ability to perform your job (such as performing manual tasks, walking, speaking, breathing, learning, and working) you can deduct any impairment-related work expenses. Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and other expenses in connection with your place of work that are necessary for you to be able to work.

Deductible Expenses for the Above Categories

If you fall into any of the above categories, you may be able to make these deductions on your tax return.

Vehicle expenses; parking fees, tolls, transportation

You can deduct vehicle expenses using one of two methods: the standard mileage rate or the actual expense method. Local transportation expenses are expenses incurred while traveling from one workplace to another when you are not traveling away from home. They include the cost of transportation by air, rail, bus, taxi, and the cost of using your car. You can choose to use the standard mileage rate to figure your car expenses. See the current mileage rate for business use of a vehicle.

If you perform work at two separate locations in a day, whether or not for the same employer, you can generally deduct any travel expenses incurred while traveling between the two locations.

You can deduct expenses incurred while traveling between your home and a temporary work location if at least one of the following applies:

For this purpose, a work location is considered temporary if your work there is realistically expected to last (and does in fact last) for 1 year or less. It is not temporary if your work there is realistically expected to last for more than 1 year, even if it actually lasts for 1 year or less. If you begin work and expect it to last less than a year but that changes, then the work is temporary for that first year. After that, it is not a temporary workplace.

Travel Expenses

Travel expenses are sustained when traveling on business away from home for your employer. While you may deduct travel expenses incurred in connection with a temporary work assignment, you cannot deduct travel expenses paid in relation to an indefinite work assignment.

Travel expenses include the following the cost of getting to and from your business destination, meals and lodging, while on travel, baggage charges, and cleaning and laundry expenses.

Business Expenses

Business expenses that are ordinary (common in your industry) and necessary (needed or helpful for your trade or business). Examples are capital expenses, cost of goods sold, business assets, improvements). See IRS Publication 535, Business Expenses, for more information.

These business expenses must directly relate to your profession under one of the four previously mentioned categories.

Meal Expenses

You can deduct entertainment expenses (including entertainment-related meals) only if they are directly related to the active conduct of your trade or business. However, the expense only needs to be associated with the active conduct of your trade or business if it directly precedes or follows a substantial and bona fide business-related discussion. You can deduct only 50% of your business-related meal and entertainment expenses unless the expenses meet certain exceptions. You apply this 50% limit before you apply the 2%-of-adjusted-gross-income limit – the eFile App will do this for you.

If you are self-employed, you can deduct medical expenses, taxes paid, home mortgage interest, and charitable gifts to name a few in addition to advertising, utilities, and other expenses related to your business costs. As a self-employed taxpayer, review the 1099 forms you may be expecting to report and learn what defines an independent contractor.

Home Office Deduction

If you’re self-employed and use part of your home for your business, you can deduct home office business expenses against your self-employment income.

Like employee deductions, job search expense deductions are no longer deductible from tax years 2018 – 2025. Unless this is extended, this rule will expire and these deductions may be claimable for 2026 returns. This information will remain for back taxes or previous year’s tax return as well as future returns in which it may apply.

Because looking for a job is a job in itself, efforts and fees you may come across may be deductible. You cannot claim these deductions if:

Below are deductible expenses that are claimable outside of the years define by the Tax Cuts and Jobs Act.

See also: if your job was affected by the COVID-19 Pandemic, see this page on the Recovery Rebate Credit and Employee Retention Credit. Additionally, find information on unemployment benefits and taxes.

You can deduct some job placement agency fees you pay to look for a new job in your current profession. Should your employer repay you for employment agency fees at a later date, you must include any amount received in your gross income up to the amount of your tax benefit in the earlier year. The IRS refers to this type of income as a recovery and it is considered taxable income.

From Tax Years 2018-2025, you can only claim the moving expenses deduction if you are an active duty military member or if you are an employee who incurred reimbursed expenses dated before January 1, 2018 and did not claim them on a prior tax return.

If you recently moved to another city for a new job or because your old job is now at a new location, you may be able to deduct your job related moving expenses on 2017 and earlier tax returns. If you can satisfy the distance and time tests, then your job-related moving expenses might be tax deductible. Members of the armed forces do not have to meet these tests if the move was due to a permanent change of station.

How to Meet the Distance Test

The distance test is met if your new workplace is at least 50 miles further from your former home than your previous workplace from that home. For example, if your old job was 10 miles from your former home, your new job must be at least 60 miles from that home.

How to Meet the Time Test

To fulfill the time test, you must work full-time for at least 39 weeks during the 12 months immediately following your move. If you are self-employed, the time test requires you to work full-time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after your move. You can deduct your moving expenses on your tax return even though you have not met the time test by the date your return is due if you expect to meet the 39-week or the 78-week test as required.

Other Expenses Related to a Job Move

Realistic and practical moving job expenses are deductible and include the costs of moving your personal and household items to your new home. You can also deduct the expenses of traveling to your new home, including lodging costs.

However, you cannot deduct the following expenses:

If you travel to and from another area to search for a new position in your current occupation, you may be able to deduct the cost of the trip. However, the trip must be primarily related to a new job search in order for the travel expenses to be deductible. If looking for a job is not the main objective of the trip, you may still be able to deduct some travel costs. The amount of time spent on personal activity compared to the amount of time spent searching for work will determine whether the trip is primarily a personal or a job searching trip.

Report job search expenses as miscellaneous deductions on Schedule A, Itemized Deductions. You can deduct the total miscellaneous deductions that are more than 2 percent of your adjusted gross income.

Resume Fees

You can claim a deduction on expenses incurred for preparing and mailing copies of a resume to prospective employers.

Premium Tax Credit Related to Your Job Search

If you received an advance payment of the Premium Tax Credit (which provides financial assistance to help you pay for health insurance you buy through the Health Insurance Marketplace), make sure that you report life changes your Health Insurance Marketplace. These changes include moving to a different state as well as your income or family size.

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Employee or Job Tax Deductions

Employee or Job Tax Deductions

Important: All miscellaneous deductions subject to 2% of your Adjusted Gross Income (AGI) are eliminated for Tax Years 2018-2025. We will keep this information for 2017 and earlier tax returns and 2026 and later tax returns. When you prepare your Taxes on eFile.com the eFile Tax App will make sure all deductions will be applied that you qualify for.

One of the results of the Tax Cuts and Jobs Act was removing the deduction for un-reimbursed employee business expenses until 2026 tax returns. This means that employees can no longer reduce their taxable income by deducting employee business expenses (as listed below) or job search expenses. Overall, most taxpayers might actually fair better with the higher standard deductions compared to the previous employee expense tax deductions.

As stated earlier, many tax deductions have been eliminated or replaced with the increased standard deduction.  This was greatly increased to make it easier for taxpayers to claim deductions and reduce their taxable income. With that, claiming itemized deductions has changed. Overall, to decide on whether the itemized versus standard deduction method is best for you can be challenging. However, when you prepare your 2020 Taxes with eFile.com, there is no need to memorize these changes. The eFile App will select the deduction method that benefits you the most.  Having said that, you can still select in the eFile Tax App which method you prefer. Furthermore, the tax app will select tax credits you may be entitled to when you prepare your tax return on eFile.com

As it stands now, the following employee or job related deductions CANNOT be applied with your 2020 return, but are scheduled to return beginning with 2026 returns. Keep in mind, if any of these expenses occur during your employment, you might want to ask your employer if you can get these fees re-reimbursed by them:

The above must be used to produce gross income, to manage property for producing said income, and/or to determine a tax refund.

Additionally, the following are job-related expenses that were non-deductible in past years and will remain non-deductible for 2020:

Commuting Expenses: You cannot deduct commuting expenses for transportation between your home and your regular place of work. If you carry tools, instruments, or other items in your car to and from work, you can deduct only the additional cost of transporting the items, such as the rent of a trailer to carry them. Self-employed individuals may be able to deduct mileage if they travel for work.

Lobbying Expenses: Expenses paid for lobbying activities cannot be deducted.

If an organization is tax-exempt and part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. Here are exceptions to this:  

Meal Expenses: You cannot deduct the cost of lunches with co-workers or when working late, except while traveling away from home on business.

Professional Accreditation Fees: The cost of professional accreditation fees such as the following cannot be deducted:

Tax-Exempt Income, Expenses of Earning or Collecting: If you have expenses to generate tax-exempt income, you cannot deduct the interest owed on a debt used to acquire or continue to purchase tax-exempt securities. If you cannot determine which expenses were used to generate taxable and tax-exempt income, you need to divide them based on the amount of each type of income to determine the amount you can deduct.

Non-Deductible Expenses: If your employer provides you any of the following, it will generally be considered taxable income. Furthermore, these expenses do not qualify as deductible:

See employee tax deductions that you may be able to claim under certain circumstances. Instead of worrying about what deductions you can claim, prepare your taxes on eFile.com and let the tax app help you keep more of your hard earned money.

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Income Tax Savings Tips

Income Tax Savings Tips

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Finding tax savings and reducing your taxes can be a time-consuming task since existing tax laws change frequently while new tax laws are constantly introduced. Keep up-to-date on the latest methods of tax reduction and the most effective tax planning tips. One of the most important steps a wage or salary earner can do is monitor the ongoing tax withholding per paycheck. Whatever you enter on the W-4 now, you still won’t know how it will impact your next tax return regarding a tax refund or taxes owed. For example, if you received a tax refund as a result of your latest tax return or you are expecting a refund next year, you may decrease the amount of taxes withheld from your paycheck so you get your refund money now via increased paychecks. The challenge is to know how to balance this. On eFile.com, we make it easy to determine optimal withholding with free tools and calculators.

From there, you can prepare and e-file your 2020 Taxes with eFile.com and we will help select deductions and credits to get the most out of your refund. Your 2020 Tax Return is due April 15, 2021.

Tax-free income is compensation you receive which cannot be taxed by the IRS. Looking for a pay raise but not more taxes? Assistance in the form of money or services is nontaxable income. Here are several examples of expenses that can be paid or reimbursed by your employer without burdening you with any new income taxes:

Tax planning can help reduce your tax bill and earn you a bigger tax refund. Start your tax planning now so you are prepared once tax season arrives. Check out our list of tax planning tips and this helpful checklist that may help you increase your tax savings, optimize your tax deductions, reduce your tax burden, and ultimately save you money on taxes!

Tax Tip: Plan your tax savings during the months of October, November, and December so you are ready for tax season.

Start Federal and State Tax Returns

Turn your kindness into cash back! See how you can save money on charitable donations: 

Put your tax planning into action and estimate your 2020 Tax Return with the easy to use eFile Tax Estimator and Calculator. To get the most out of your 2021 Tax Refund, prepare and e-File your 2020 Taxes with eFile.com and TAXercise your paycheck!

Keep up to date with changed, extended, or canceled tax breaks.

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Hardship, COVID, and Struggling Taxpayers

Hardship, COVID, and Struggling Taxpayers

Depending on the degree of economic hardship that you are faced with, you may be eligible for adjustment to payments on back taxes, deferment of collection action, or leniency in regards to the default status of payment agreements (i.e. offer in compromise). Canceled debt from commercial lenders is often included as taxable income on your federal income taxes. At eFile.com, we will help you prepare and e-File your 2020 Tax Return. The eFile app will also find any tax credits and tax deductions you qualify to claim on your return. eFileIT now or by Tax Day, April 15, 2021.

Lean on this page if you are struggling with tax payments. 

Here are other life situations that affect your taxes: 

Plan to Save: Start the Free 2020 Tax Calculator

Save money on your taxes each year.

Learn to save money on simple, everyday expenses.

Find ways to claim deductions or credits as a student.

Claim your home-related expenses on your taxes.

Information on COVID-19 and taxes.

Find ways to pay taxes here.

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Live a Frugal Life: Money Saving Tips

Live a Frugal Life: Money Saving Tips

Want to save money on common purchases and everyday expenses? These simple, practical money saving tips can help you maximize your budget and have more money left over at the end of each month to add to your savings, help pay off your debts, or even buy yourself something special.

To save even more money in 2021, prepare and e-File your 2020 Tax Return with eFile.com and utilize various benefits, including tax tools and a personal support page. This tax year, TAXercise your paycheck and get the most out of your IRS or State Return, due April 15, 2021.

Have a money saving tip that we didn’t mention and that you would like to share? Contact eFile.com to tell us! We may post it on this page, but we will not post any personal information.

Additionally, save money with your 2020 Tax Return by filing with e-File.com.

Tax Saving Loopholes for Honest Taxpayers

Save money on home, energy, shopping and food expenses.

Discover ways to save money on entertainment, technology, fitness, and health

Save money on work, school, and travel.

Read about unusual tax breaks and deductions.

Detailed overview of tax history in United States and the world.

Find helpful information on help with paying taxes as well as what to do if you have tax debt.

Use our free tax tools to calculate taxes or determine eligibility for certain tax credits.

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Money Saving Tips For Traveling, College Students in 2021

Money Saving Tips For Traveling, College Students in 2021

Want to save money when you commute to work, travel, or go to school in 2021? These simple money savings tips and ideas below can help you save every day on those expenses.  Here’s another great way to save money in 2021: prepare and e-File your 2020 Tax Return on eFile.com. We provide the same features as other popular tax return preparation and e-Fling sites for less, and everyone gets free premium tax support. See other reasons to prepare and e-File your return on eFile.com. In addition to these tips, find ways to get the most out of your 2020 Return, such as tax credits when you work or live abroaddeductions, and the difference between itemized and standard deductions.

Navigate below to find tips on transportation expenses, travel expenses, and tips for traveling college students.

Save money on home, energy, shopping and food expenses.

Discover ways to save money on entertainment, technology, fitness, and health

Save money on everyday expenses and finances

Read about unusual tax breaks and deductions.

Detailed overview of tax history in United States and the world.

Find helpful information on help with paying taxes as well as what to do if you have tax debt.

Use our free tax tools to calculate taxes or determine eligibility for certain tax credits.

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