Employee Business Expenses – Form 2106

Form 2106 is currently used for employees to deduct employee business expenses as an Armed Forces reservist, a qualified performing artist, a fee-basis state or local government official, or an employee with impairment-related work expenses. Employees who do not fit into one of these categories may not use Form 2106 due to the suspension of this miscellaneous itemized deduction as of 2018 – 2026.

You may still claim this itemized deduction on tax returns prior to 2018.

For Tax Returns Prior to 2018

Before the 2018 tax year, most employees could deduct their ordinary and necessary job expenses as a miscellaneous itemized deduction. An ordinary expense is one that is common and accepted in your field, trade, business, or profession and a necessary expense is one that is helpful and appropriate for your business. Note that the IRS does not consider an expense to be a requirement for it to be necessary.

Generally, to file Form 2106, you must be an employee during the year with job-related business expenses that your employer didn’t reimburse. The requirements are considerably more complicated than that, however, and it is best to consult the flowchart in the Instructions for Form 2106 to see if you must file this form.

In order to deduct expenses for travel, entertainment, gifts, or the use of a car or other listed property, you must keep records that indicate the amount, time, place, business purpose, and business relationship.

State Returns

Most states no longer support a deduction from income based on Form 2106. Some states, however, still allow taxpayers to claim these expenses on their state tax returns. 

The states that still allow a deduction for unreimbursed employee expenses are: 

• Alabama
• Arkansas
• California
• Hawaii
• Maryland
• Minnesota
• New York
• Pennsylvania

Even if you are not eligible for the federal deduction, you may be able to claim this state deduction if you live in one of the states listed above. Consult with your State Department of Revenue for more information and requirements to claim this state-specific tax deduction.

This entry was posted on Thursday, June 28th, 2018 at 5:58 pm and is filed under Deductions, Preparing a State Return, Tax Related Questions. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.