Unreimbursed Business Expense Deduction

Unreimbursed Business Expense DeductionThe Tax Cut and Jobs Act made many changes to the U.S. tax system. For some clients, a major change to taxes this year is the unreimbursed business expense deduction.

This change does not affect expenses that self-employed taxpayers who are filing Schedule C or Schedule F can claim. Those individuals can claim unreimbursed business expenses to offset their income subject to the self-employment tax.

Let’s say you work for a company and get a W-2 at the end of the year.  In past years you could deduct certain expenses you paid out of pocket while doing your employer’s business.  Some clients, like company truck drivers and outside salesmen, used this to their advantage.  Mileage allowances, hotel rooms, meal allowances were all deductible if the company didn’t pay for them.  This year, the unreimbursed employee expense deduction has gone away.  Even if you spent $20,000 to do your employer’s business, you can’t deduct it on your tax return.  If you drive 20,000 business miles, this makes a difference of more than $10,000 to the amount of income you have to pay taxes on.

If this is your employment situation, there will be big non-favorable changes for your 2018 tax return. But don’t worry the elimination of the unreimbursed business expenses deduction is not permanent, the deduction will be reinstated in 2026.