Key takeaways
- The 2017 tax law suspended this deduction for 2018 through 2025, and the 2025 tax law made the suspension permanent.
- Armed forces reservists, qualified performing artists, fee-basis government officials and employees with impairment-related work expenses can still deduct certain costs, mainly on Form 2106.
- K-12 educators keep a capped above-the-line deduction, and from 2026 can itemize classroom costs above that cap.
- Reimbursements under an accountable plan are tax-free, which is why asking your employer is the best way to recover these costs.
What are unreimbursed employee expenses?
These are the costs of doing your job that you pay out of your own pocket and never get back. A nurse buying her own scrubs. A sales rep driving to clients in his own car. A designer paying for software the company won’t cover. A remote worker’s desk, monitor and internet bill.
The key word is unreimbursed. An out-of-pocket expense that your employer later pays back isn’t part of this topic at all; it’s simply a reimbursement. The tax question only comes up when the money is gone for good.
Keep receipts for work costs your employer didn’t cover with the Manage Receipt app.
Before 2018, employees could deduct these as a miscellaneous itemized deduction, to the extent the total went over 2% of their adjusted gross income. They reported them on Form 2106 and Schedule A. That route is closed for most people now.
Current federal treatment
The 2017 Tax Cuts and Jobs Act suspended miscellaneous itemized deductions for 2018 through 2025. The suspension was due to end in 2026, but the 2025 tax law, often called the One Big Beautiful Bill Act, made it permanent. For 2026 and later, a typical W-2 employee gets no federal deduction for unreimbursed job costs, even if they itemize.
| How the cost is handled | Federal tax effect for the employee |
|---|---|
| Reimbursed under an accountable plan | Tax-free and not reported as wages |
| Paid as a flat allowance with no receipts required | Taxable as wages, no offsetting deduction |
| Never reimbursed | No deduction for most employees |
The most common casualty is the employee home office deduction. Remote and hybrid employees who buy their own desk, chair or internet plan can’t write any of it off on a federal return, no matter how much of the week they work from home. The same goes for union dues, work boots, licenses and job-search costs.
This applies to W-2 jobs only. If you also freelance on the side, the costs of that side business are still deductible on your own Schedule C. Just don’t mix the two: a laptop you use only for your W-2 job isn’t a side-business expense.
Exceptions
A few groups can still deduct certain unreimbursed job costs:
| Who | What they can deduct | Where |
|---|---|---|
| Armed forces reservists | Travel more than 100 miles from home for reserve duty | Form 2106, adjustment to income |
| Qualified performing artists | Performing-arts job costs, if they meet the income tests | Form 2106, adjustment to income |
| Fee-basis state or local government officials | Costs of the fee-basis job | Form 2106, adjustment to income |
| Employees with a disability | Impairment-related work expenses, such as attendant care at work | Itemized deduction |
| Eligible K-12 educators | Classroom supplies and training | Above-the-line deduction ($300 for 2025); from 2026, costs above the cap can be itemized |
The rules for each group have their own tests. The Form 2106 instructions and Publication 463 explain them.
Ask your employer for reimbursement
Since the deduction is gone for most people, reimbursement is the only realistic way to get the money back, and it’s better anyway. A reimbursement under an accountable plan is worth 100 cents on the dollar and isn’t taxed. Even the old deduction only saved a fraction of the cost.
- Check the policyFind what your employer covers: mileage, phone, internet, equipment, training.
- Keep receiptsSave every receipt and note the business purpose.
- Submit on timeFile an expense claim within about 60 days, the IRS safe harbor for accountable plans.
- Ask about gapsIf a regular cost isn’t covered, propose adding it to the policy.
Some states go further. California, for example, requires employers to reimburse employees for necessary business expenses. If you work remotely and pay for your own equipment, it’s worth asking HR what your state requires.
State rules
State income taxes don’t always follow federal law. Several states, including California, New York and Pennsylvania, still let employees deduct some unreimbursed job costs on the state return, each with its own forms, limits and definitions. If you live in one of these states, keep the same receipts you would have kept for the old federal deduction and check your state’s instructions at filing time. The state saving is usually smaller than the old federal one, but it isn’t zero.
Turn out-of-pocket costs into a claim
Because most employees can’t deduct job costs, a clean reimbursement claim is the way to get the money back. Scan each receipt into Manage Receipt when you pay, add the business reason, and export an expense report with every receipt attached that your manager can approve without chasing details. The same records cover you if your state still allows the deduction.
Explore AI Expense ReportsFrequently asked questions
Can I deduct unreimbursed work expenses?
Most W-2 employees can’t on their federal return. The deduction was suspended from 2018 and made permanent by the 2025 tax law. A few groups still qualify, and some states allow it on the state return. The best option for most employees is to ask the employer for reimbursement.
Who can still deduct them?
Armed forces reservists traveling more than 100 miles for duty, qualified performing artists, fee-basis state or local government officials and employees with impairment-related work expenses. K-12 educators also keep a capped above-the-line deduction, and from 2026 can itemize classroom costs above that cap.
Can W-2 employees deduct a home office?
No, not on the federal return. The home office deduction for employees was part of the miscellaneous itemized deductions that are now permanently suspended. Self-employed people can still claim it. As an employee, ask your employer to reimburse home office costs like internet or equipment.
Is an expense reimbursement taxable?
Not if it’s paid under an accountable plan: the expense has a business connection, you substantiate it within a reasonable time and you return any excess. Allowances paid without receipts, or reimbursements under a non-accountable plan, are taxable wages.