Are unreimbursed employee expenses deductible? Finance guide

Published

May 12, 2025

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If your employees pay out of pocket for job expenses, you might assume that anything not covered by your expense reimbursement program can be written off. Since the passage of the Tax Cuts and Jobs Act of 2017, however, most work-related purchases haven’t been deductible, which means, without a solid reimbursement policy, employees end up covering costs they shouldn’t have to.

In this article, we’ll break down which unreimbursed employee expenses can be deducted, who qualifies, and how a clear expense reimbursement system helps keep things fair.

What are unreimbursed employee expenses?

Unreimbursed employee expenses are work-related costs that employees pay out of pocket without getting paid back by their employers. These can include business travel, uniforms, tools, training, or even office supplies. Essentially, any work-related expenses your team covers that the business doesn’t reimburse.

Before 2018, workers could claim back these reimbursable expenses on their personal tax returns if they exceeded 2% of adjusted gross income (AGI) and they opted to itemize deductions. The Tax Cuts and Jobs Act of 2017 temporarily suspended this deduction, however, which means most employees currently cannot recover these costs on their tax returns.

For employees, the suspension can mean absorbing business costs that were once tax-deductible. For employers, it highlights the importance of a comprehensive expense reimbursement process. Failure to cover key business expenses could lead to frustrated employees, higher turnover, and even compliance issues in states with reimbursement laws.

Types of unreimbursed employee expenses: IRS rules

Not every type of work expense qualifies for deduction, even if it seems essential. The IRS applies two criteria: the purchase must be ordinary—something people in the industry typically pay for—and essential—something a worker genuinely requires to perform job duties. If an expense doesn’t satisfy both requirements, it’s not deductible on a federal tax return.

While many employees lost the ability to deduct these expenses due to the Tax Cuts and Jobs Act of 2017, these definitions still matter. Self-employed workers, some state tax filers, and a few special job categories can still claim business expenses as deductions.

Ordinary expenses

An ordinary business expense is one that someone in a particular line of work would routinely pay for as part of the job. It doesn’t have to be essential per se, but it does need to be common practice in the industry. A carpenter buying power tools, a real estate agent paying for property listing ads, and a freelance photographer subscribing to editing software are all examples of ordinary business expenses.

Necessary expenses

A necessary expense is one that’s both helpful and appropriate for an employee’s line of work, though the IRS sets a high bar for what that means. It doesn’t need to be required by the employer, but it must be directly related to earning income. A traveling nurse might pay for lodging between hospital contracts, or a truck driver might pay for an upgrade to GPS technology, for example.

The purchase must also be specific to the employee’s profession. A lawyer subscribing to a law journal would qualify, for example, but not a general newspaper. The key test for a necessary expense is whether the purchase is truly work-related and not just generally helpful. If the employer doesn’t cover it, the employee must show that the cost is essential enough that most professionals would agree it’s a justifiable business expense.

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Unreimbursed employee expenses examples

Some employees use their personal funds to pay for tools and supplies needed for their jobs without realizing how much they're spending. From work-related travel to licensing fees to office supplies, these costs can add up quickly. Without a clear expense reimbursement policy and a straightforward internal process, employees can get stuck footing the bill for essential business expenses like those listed below.

1. Uniforms and work attire

The IRS considers work clothes deductible if they’re required for a job and not suitable for everyday wear. Examples include protective gear like steel-toed boots and hard hats, medical scrubs, and law enforcement uniforms.

2. Work-related travel expenses

Employees who travel for work can incur costs associated with airfare, hotel stays, rental cars, and per diem meal costs. Self-employed workers can claim these as a business expense deduction, but W-2 employees rely on employer reimbursement to recoup money spent.

3. Professional development and training

Depending on their line of work, employees may periodically need additional training, workshops, or certifications to remain competitive in their fields. If these education expenses aren’t covered by your reimbursement program, employees can end up bearing the cost.

4. Supplies and materials

From time to time, employees may need to purchase supplies and materials needed for their work. A construction worker might pick up a package of nails or a can of paint, for example, or an office worker may need to order a package of printer paper.

Are unreimbursed employee expenses deductible?

Most unreimbursed employee expenses are not deductible on individual federal tax returns due to the Tax Cuts and Jobs Act of 2017, which suspended these itemized deductions from 2018 to 2025. Before 2018, many employees could deduct job-related expenses that exceeded 2% of adjusted gross income (AGI) if they itemized deductions.

Currently, only select groups of workers, including performing artists, members of the armed services, teachers, fee-based public officials, workers with disabilities, and certain state taxpayers, can still claim these deductions. Employees that are not part of these select groups must rely on employer expense reimbursement programs to avoid paying out-of-pocket for work-related expenses.

Who can deduct unreimbursed business expenses?

While the Tax Cuts and Jobs Act of 2017 suspended most unreimbursed employee expense deductions from 2018 to 2025, certain categories of employees can still deduct some work-related expenses.

Armed forces reservists

Members of the Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve; the Army National Guard of the United States; the Air National Guard of the United States; or the Reserve Corps of the Public Health Service can deduct expenses related to travel over 100 miles from home in connection with their service.

Example: A Washington-based member of the Army Reserve drives from Lakeview to Yakima for a weekend of drills, stopping at a hotel along the way. The cost of the lodging, as well as fuel, qualifies for the deduction, as Lakeview is more than 100 miles from Yakima.

Service members applying this deduction will calculate the specific amount using the federal per diem and standard mileage rates for the specific tax year. This deduction also works “above the line,” which means it reduces the individual’s overall gross income.

Qualified performing artists

Individuals working in the performing arts can qualify to deduct certain work-related expenses if they satisfy three criteria. To qualify as a “performing artist” for purposes of this deduction, a person must:

Have worked for at least two employers in the performing arts during the tax year;
Received wages equal to $200 from each of those employers;
Earned an adjusted gross income of less than $16,000 before adjusting for any expenses; and
Incurred work-related expenses equal to 10% of gross income earned from work in the performing arts.

Example: A professional actor lands three parts over the course of the year at three different theaters. Each role pays $5,000. The actor also spends $1,500 on audition fees, headshots, and acting classes. Because the actor worked for three different employers, earned less than $16,000, and has qualifying expenses equal to 10% of their gross income, they can deduct the $1,500 spent to advance their career before claiming either the standard or itemized deduction.

Fee-basis public officials

State or local government officials who receive fees for services performed instead of a salary can claim work-related expenses as an above-the-line adjustment to gross income rather than an itemized deduction.

Example: The probate judge in a small, rural county handles a few estates each year. Individuals who require the judge’s services pay a statutory fee that covers the time and administrative work. For all other business-related expenses, the judge can deduct those amounts from their earned income before claiming either the standard or itemized deduction.

Educators

K-12 teachers, instructors, counselors, principals, or aides who work at least 900 hours during the school year can deduct work-related expenses, such as classroom supplies, from gross income rather than as an itemized deduction.

Example: An art teacher spends $200 on discounted museum tickets for a class field trip and $350 on extra supplies for a special project. The teacher can deduct this $550 in expenses from their overall income before claiming either the standard or itemized deduction.

Workers with disabilities

Workers with physical or mental disabilities who purchase equipment or services to support them at work have the option to claim those expenses as an itemized deduction after calculating their adjusted gross income.

Example: An employee who requires regular insulin injections purchases an in-office mini-fridge to ensure proper storage of and easy access to the medication. This expense qualifies for reimbursement, but the employee calculates that claiming a standard deduction will result in an overall lower tax bill and so does not claim the itemized deduction.

How to deduct unreimbursed employee expenses

Workers who qualify to deduct reimbursed employee expenses, such as educators, army reservists, qualifying performing artists, and public officials who work on a fee basis, can claim these itemized deductions by filing Form 2106 with their federal tax return. Workers with disabilities who incur impairment-related business expenses can also deduct those amounts to reduce their taxable income using Form 1040.

Step 1: Determine eligibility

To claim unreimbursed employee expenses as an itemized deduction, employees need to fall within one of the qualifying professional categories. Army reservists, performing artists, educators, and fee-basis public officials can claim this itemized deduction. Workers with disabilities who must purchase equipment or supplies essential in order to perform their duties, such as a wheelchair-accessible desk or an adaptive keyboard, can also deduct these expenses if not covered by their employer.

Step 2: Complete Form 2106

Most employees who qualify to deduct unreimbursed employee expenses will need to complete Form 2106, Employee Expenses. For example, those who aren’t claiming a deduction for a vehicle will itemize qualifying business expenses and list out any partial reimbursements in Part I to calculate their final deduction. If an employee drives a personal vehicle for work, however, and wants to claim those costs, they will need to complete Part II to calculate the deduction based on either actual expenses or the standard mileage rate.

Educators are not required to complete Form 2106. Instead, they deduct qualifying expenses on Line 11 of Schedule 1 to Form 1040, Individual Income Tax Return.

Step 3: Report your deduction on Form 1040

Army reservists, fee-basis public officials, and qualifying performing artists will enter the deduction calculated using Form 2106 on Line 12 of Schedule 1 to Form 1040. Educators, as previously noted, will enter any qualifying expenses on Line 11. Because this is an “above the line” deduction, it works to reduce the employee’s adjusted gross income (AGI). The employee remains eligible to choose a standard or itemized deduction at Line 12 of the Form 1040.

Workers with disabilities, however, must use line 16 of Schedule A to Form 1040 to claim unreimbursed expenses as a deduction. (That means they won’t see a change to their AGI and must opt for itemized deductions over the standard to benefit.)

Streamline business expense reimbursement and processing with Rippling

Employees shouldn’t have to cover business costs out of pocket, but when they do, they expect swift, accurate reimbursements. And a slipshod spend management or expense reimbursement system not only dampens employee morale; it also hamstrings finance teams’ ability to stay compliant, track spending, and ensure fair compensation.

A good expense reimbursement process does more than just pay employees back; it keeps spending transparent and under control. Without a structured system, finance teams struggle to track expenses, ensure compliance, and prevent unnecessary costs. A well-defined policy gives employers full visibility into business expenses while ensuring employees aren’t left covering important business costs.

While some expense management systems offer only basic approval chains, Rippling expense management allows for tailored policies that align with company spending rules. The best systems let you set custom approval flows, flag out-of-policy expenses, and automate key workflows—helping finance teams stay proactive and in control.

With Rippling, you can:

Automatically route expenses and bills to the right approver every time.
Flag out-of-policy spending with hyper-custom policies, like by vendor or value, for further review.
Close the books faster with AI-powered transaction categorization, and integration with your accounting systems.

FAQs on unreimbursed employee expenses

Are unreimbursed employee expenses still allowed?

Currently, you cannot deduct unreimbursed employee expenses from your federal tax return. The Tax Cuts and Jobs Act of 1017, which became effective in 2018, suspended this type of itemized deduction until 2025. In some states, however, including Alabama, Arkansas, California, Hawaii, Maryland, Minnesota, New York, and Pennsylvania, you can still deduct union dues, work uniforms, and other professional expenses on your state income tax return.

How much can I deduct for unreimbursed employee expenses?

At the federal level, the Tax Cuts and Jobs Act of 2017 suspended many employees’ ability to deduct expenses as itemized deductions until 2025. If you live in a state that still allows them, you’ll need to review the rules for your jurisdiction to understand how much you can deduct. Alabama, for example, caps itemized deductions at 2% of your adjusted gross income, while New York uses a formula to determine your maximum itemized deductions depending on your tax bracket. Regardless of state, self-employed workers can still claim business expense deductions on Schedule C.

When did the IRS stop allowing unreimbursed employee expenses?

Congress passed the Tax Cuts and Jobs Act in 2017, suspending most unreimbursed employee expenses as itemized deductions from 2018 until 2025. Employees cannot deduct expenses like union dues, business travel, or uniforms unless they qualify for an exception. Some self-employed workers and individuals in specific job categories can still claim them, however.

Which states still allow unreimbursed employee expenses?

While the Tax Cuts and Jobs Act of 2017 suspended the ability of W-2 employees to claim unreimbursed employee expenses as itemized deductions on their federal tax returns until 2025, some states still allow them. If you file taxes in Alabama, Arkansas, California, Hawaii, Maryland, Minnesota, New York, or Pennsylvania, you may still be able to deduct some qualifying expenses up to a certain amount on your state or city tax return.

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