Usually you can't write off business expenses if your employer has already reimbursed you. Since your employer already footed the bill, deducting those expenses on your tax return would be "double dipping" in the eyes of the Internal Revenue Service. However, there is an exception. If you received reimbursement under a non-accountable plan, the reimbursement is considered taxable income and you can deduct the expenses.
If your employer reimburses you for business expenses, it's either under an accountable or a non-accountable plan. Under an accountable plan, your employer must verify that your expenses were in connection with the business and maintain records documenting your expenses. Check with your employer to ensure it has an accountable plan. If you're reimbursed under an accountable plan, your reimbursement won't be included with taxable income and you can't deduct the expense on your tax return.
On the other hand, if you're reimbursed and your employer doesn't have an accountable plan, that reimbursement is technically taxable wages. Your total reimbursement will be included in Box 1 of your annual Form W-2 along with your annual salary and bonuses. In this situation, you may deduct business expenses on your tax return to offset the income. If your employer simply didn't reimburse you at all, you can also deduct business expenses incurred.
Calculating Business Expenses
There's a wide range of expenses that qualify as business expenses for tax purposes. Along with mileage, lodging and food, employees can deduct unreimbursed tolls, airline baggage fees, professional dues, passports for business trips and even union dues. You can deduct only half the cost of meals on business travel. Additionally, in lieu of calculating gas, oil, maintenance, depreciation, insurance and repairs on your car, you can simply claim the IRS standard mileage deduction rate. To do this, multiply the number of miles driven for business travel by the current rate, which can be found on the IRS website.
Limitations on Deductions
There are a few limitations associated with writing off business expenses. The business expenses are subject to a 2 percent floor. That means you can only deduct business expenses that exceed 2 percent of your adjusted gross income. Business expenses are an itemized deduction, which means you'll forgo the standard deduction for the year.
How to Deduct Business Expenses
Taxpayers can deduct unreimbursed business expenses on Form 2106, "Employee Business Expenses." Fill out sections A, B, C and D on the second page before completing the schedule on the first page. If you're taking the standard mileage rate, you don't need to fill out section C. Likewise, you can ignore section B if you've decided to calculate actual mileage expenses. Include Form 2016 with your main Form 1040 when submitting your tax return.
- TurboTax: Employees Can Deduct Workplace Expenses
- IRS Publication 463: Chapter 6 - Reimbursements
- Internal Revenue Service. "Publication 463 Travel, Gift, and Car Expenses," Pages 30-33. Accessed Feb. 1, 2020.
- Internal Revenue Service. "Publication 463 Travel, Gift, and Car Expenses," Page 33. Accessed Feb. 1, 2020.
- Internal Revenue Service. "Publication 463 Travel, Gift, and Car Expenses," Page 30. Accessed Feb. 1, 2020.
Based in San Diego, Calif., Madison Garcia is a writer specializing in business topics. Garcia received her Master of Science in accountancy from San Diego State University.