Can I deduct employee-related business expenses?

(The IRS no longer allows a deduction for Employee Expenses, for the 2018 tax year and beyond. However, many states still allow the deduction.)

There are three scenarios for employee-related business expenses that determine the tax treatment:
 
Scenario #1: Employer does NOT reimburse employee at all for expenses
In this case, the employee could report all unreimbursed employee expenses on the tax return as an itemized deduction (subject to income limitations, explained below).
 
Scenario #2: Employer reimburses employee through non-accountable plan (means reimbursements ARE included as income on W2)
In this case, the employee could report all employee expenses on the tax return as an itemized deduction (subject to income limitations, explained below).  This goes toward offsetting the tax liability resulting from the employer’s inclusion of reimbursements into W2 income.
 
Scenario #3: Employer reimburses employee through accountable plan (means reimbursements are NOT included as income on W2)
In this case, the employee cannot report any expenses since the employer effectively already provided full reimbursement. Otherwise, there would be a “double benefit” on the expenses.
 
Income Limitations:
Employees can generally deduct only the part of their unreimbursed employee expenses that exceeds 2% of adjusted gross income from that tax return (includes income from both taxpayers, if married filing joint).
 
For instance, if adjusted gross income is $50,000, only expenses that exceed $1,000 (2%) can be deducted. So $5,000 in expenses would provide a $4,000 net deduction in this case. The deductible expense amount is then added to the total itemized deductions to determine the ultimate deduction. Click here for more on the standard deduction vs. itemizing deductions.
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