How to Deduct Unreimbursed Business Expenses

by Michael Keenan ; Updated July 27, 2017
If you itemize, you must use Form 1040 to file your taxes.

Items you will need

  • Form 2106
  • Schedule A

The Internal Revenue Service allows people who itemize their deductions to write off the cost of certain unreimbursed employee business expenses such as transportation, meals and entertainment. For example, if you drive your car while you are on the job, or pay out of pocket for costs to entertain clients, you can write those costs off. However, in order to claim the deduction, you must itemize, which requires you to forgo the standard deduction. Therefore, you should only claim the unreimbursed business expenses deduction if the total of your itemized deductions exceeds the standard deduction.

Step 1

Gather receipts and mileage logs you have that support all of the business expenses that you are claiming. You do not have to submit them with your return, but you will have to use them to defend your deduction if you are audited.

Step 2

Complete Form 2106 Part II to determine how much you can deduct for your vehicle expenses. If you do not have any vehicle expenses, skip to Step 3. In order to claim vehicle expenses, you will have to report when you started using the car for business purposes, how many miles were driven and for what purpose those miles were driven.

Step 3

Report your total business expenses, except meals and entertainment, in Column A on Lines 1 through 4 of Form 2106. Meal and entertainment are reported on Line 5 in Column B.

Step 4

Report the total reimbursement you received, if any, that was not included on your W-2 form on Line 6. Reimbursement for meals and entertainment is reported on Line 6b. All other reimbursement is reported on 6a.

Step 5

Calculate the total unreimbursed expenses you incurred by subtracting the amount of reimbursement from your total expenses.

Step 6

Multiply your unreimbursed meals and entertainment costs by 0.5 to calculate the deductible amount. For example, if you had $300 of unreimbursed meals and entertainment, you would multiply $300 by 0.5 to find you could deduct $150.

Step 7

Add the unreimbursed business expenses to your deductible portion of your unreimbursed meals and entertainment expenses to find your total deduction.

Step 8

Report the total deduction in Line 10 of Form 2106 and Line 21 of Schedule A.

Step 9

Add your unreimbursed business expenses deduction from Line 21 of Schedule A to your other job expenses and certain miscellaneous deductions you claimed, subtract 2 percent of your adjusted gross income from the result and report the total on Line 27 of Schedule A. This amount will be deducted from your taxable income. For example, if your total job expenses and certain miscellaneous deductions equals $4,000, and your adjusted gross income for the year is $60,000, you would subtract $1,200 from $4,000 to find you could deduct $2,800.

About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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