Are unreimbursed employee expenses tax deductible?

Unreimbursed employee expenses are out-of-pocket costs you pay for work that your employer doesn't pay back. For most W-2 employees, these expenses aren't tax deductible on federal returns from 2018 through 2025 due to the Tax Cuts and Jobs Act (TCJA).

But the rules aren't black and white. A handful of workers can still claim these deductions, several states allow them on state returns, and the federal rules could change after 2025. Here's what you need to know about unreimbursed employee expenses, who can deduct them, and how to claim them if you qualify.

What are unreimbursed employee expenses?

Unreimbursed employee expenses are business costs you pay out of your own pocket that your employer doesn't pay back. They typically cover ordinary and necessary expenses you incur to do your job.

Common examples include:

• Work supplies: Items like tools, equipment, or software you purchase yourself
• Travel costs: Mileage, parking, tolls, or airfare for business trips
• Professional development: Courses, certifications, or conferences required for your job
• Work attire: Uniforms or protective clothing your employer requires but doesn't provide

Employees end up covering these costs for a few reasons. Your employer's expense reimbursement policy may not cover every work-related purchase, remote work setups often blur the line between personal and business spending, and some jobs simply require employees to bring their own tools or equipment.

Are unreimbursed employee expenses tax deductible?

Most W-2 employees can't deduct unreimbursed work expenses on their federal taxes from 2018 through 2025. The TCJA suspended the miscellaneous itemized deduction that previously allowed employees to write off these costs.

Federal tax rules under the TCJA

Before 2018, W-2 employees could deduct unreimbursed business expenses as miscellaneous itemized deductions on Schedule A. The deduction was subject to a 2% floor, meaning you could only write off the portion of expenses that exceeded 2% of your adjusted gross income (AGI).

The TCJA suspended this deduction starting in tax year 2018. The suspension is scheduled to expire after 2025, at which point the deduction could return unless Congress takes further action.

Non-deductible work expenses for W-2 employees

Under current federal rules, most W-2 employees can't deduct these common job-related costs:

• Home office costs
• Work-related travel
• Professional dues and subscriptions
• Tools and supplies
• Work uniforms and clothing

These are still legitimate business expenses. They just aren't federally deductible for most employees right now. If your employer reimburses these costs through an accountable plan, the reimbursements aren't taxable to you—which is often a better outcome than a deduction anyway.

Who can still deduct unreimbursed work expenses?

While most employees lost the federal deduction, the IRS carved out specific exceptions. Four groups of workers can still claim unreimbursed employee expenses on their federal returns.

Armed Forces reservists

Members of the U.S. Army, Navy, Air Force, Marine Corps, Coast Guard, National Guard, and Reserve Corps can deduct unreimbursed travel expenses for attending reserve meetings more than 100 miles from home. The deduction covers transportation, lodging, and meals beyond what the government reimburses.

Qualified performing artists

Actors, musicians, and other performing artists can deduct unreimbursed business expenses if they:

• Have at least two employers during the tax year
• Earn at least $200 from each employer
• Have $16,000 or less in AGI
• Have qualified performing arts expenses exceeding 10% of their gross income from performing

Fee-basis state and local government officials

Government workers who receive fee-based compensation rather than a salary can still deduct unreimbursed business expenses. Salaried government employees can't claim this deduction.

Employees with impairment-related work expenses

Workers with physical or mental disabilities can deduct impairment-related work expenses. These include attendant care services at work and other accommodations needed to perform the job.

What work expenses are tax deductible?

If you fall into one of the qualifying categories above, you can deduct ordinary and necessary expenses related to your work. The IRS defines "ordinary" as common and accepted in your trade and "necessary" as helpful and appropriate for your job.

Travel and transportation costs

Business travel expenses include mileage on your personal vehicle, airfare, lodging, parking, and tolls. The IRS requires you to document each expense with the date, amount, location, and business purpose. For vehicle expenses, you can either use the standard mileage rate or track actual vehicle costs.

Work uniforms and protective clothing

To deduct work clothing, the items must be required by your employer and not suitable for everyday wear. Scrubs, hard hats, safety boots, and branded uniforms typically qualify. A business suit you wear to the office doesn't qualify, even if your employer requires professional attire.

Tools, supplies, and equipment

You can write off tools and equipment you purchase for work that your employer doesn't provide. This includes hand tools for tradespeople, specialized software for technical roles, and supplies needed to perform your duties. Keep receipts and document the business purpose of each item.

Union dues and professional fees

Union dues, professional organization memberships, and licensing fees may be deductible for qualifying employees. If you're wondering whether you can claim union dues on taxes, the answer depends on your eligibility under one of the four exception categories above.

Home office expenses

Qualifying employees who use a dedicated space regularly and exclusively for work can deduct home office expenses. The space must be your principal place of business or used to meet with clients. Self-employed individuals follow different rules and can claim the home office deduction through Schedule C.

Job-related educational expenses

Education expenses qualify if they maintain or improve skills for your current job. They don't qualify if the education trains you for a new career. Professional certifications, continuing education credits, and industry conferences typically meet the test.

How to claim unreimbursed employee business expenses

Qualifying employees claim unreimbursed expenses by documenting their costs, completing the right forms, and meeting itemized deduction thresholds. Here's the process step by step.

1. Track and document your expenses

The IRS requires proof of purchase records for every expense you deduct. Save receipts, credit card statements, canceled checks, and mileage logs. For each expense, note the date, amount, location, and business purpose.

Keeping digital records is far easier than holding onto paper receipts that fade or get lost. Tools like Ramp's expense management software automatically capture receipts, categorize expenses, and maintain audit-ready documentation in one place.

2. Complete Form 2106 and Schedule A

Most qualifying employees use Form 2106 to calculate their unreimbursed expenses. You enter your expenses in Part I and any partial reimbursements from your employer. If you used a personal vehicle for work, complete Part II to calculate the vehicle deduction.

Armed Forces reservists, fee-basis officials, and qualified performing artists report their deduction as an above-the-line adjustment on Schedule 1 of Form 1040. Employees with impairment-related work expenses report the deduction on Schedule A.

3. Meet itemized deduction thresholds

Most of these deductions only help if you itemize on Schedule A. Your total itemized deductions—including unreimbursed work expenses, mortgage interest, state and local taxes, and charitable contributions—must exceed the standard deduction for the year. If the standard deduction is higher, claiming itemized deductions won't reduce your tax bill.

State tax deductions for employee expenses

Even though federal deductions are suspended, several states still let you deduct unreimbursed employee expenses on your state tax return. The rules vary by state, so check your specific state's requirements.

California employee expense reimbursement rules

California offers strong protections for employees. Under California Labor Code Section 2802, employers must reimburse employees for all necessary expenses incurred while performing their job duties. If your employer doesn't reimburse you, you may have legal recourse through the California Labor Commissioner.

California also allows employees to deduct unreimbursed business expenses on their state return using Schedule CA (540). This makes California one of the most employee-friendly states for unreimbursed expense claims.

Pennsylvania Schedule UE deductions

Pennsylvania lets employees deduct unreimbursed business expenses using Schedule UE. You'll need documentation showing the expense was ordinary, necessary, reasonable, and directly related to your job. Pennsylvania requires that the expense actually be required as a condition of employment.

Other states allowing job-related expense deductions

Several other states permit some form of unreimbursed employee expense deduction, including New York, Alabama, Arkansas, Hawaii, Minnesota, and Maryland. Each state has its own forms, rules, and limits. Check with your state's department of revenue or a tax professional for guidance on what you can claim.

Will federal deductions for unreimbursed expenses return?

The TCJA provisions suspending the unreimbursed employee expense deduction are scheduled to expire after the 2025 tax year. If Congress doesn't extend them, the deduction could return for the 2026 tax year and beyond.

That said, the future is uncertain. Congress could extend the suspension, modify the rules entirely, or let the provisions expire as scheduled. Keep an eye on legislative changes heading into 2026, and consult a tax professional if you're planning around potential changes.

How Ramp simplifies tracking and managing unreimbursed employee expenses

Managing unreimbursed employee business expenses creates headaches for both employees and finance teams. Employees struggle to keep track of receipts and documentation needed for tax deductions, while finance teams lack visibility into these expenses that impact budgeting and compliance.

Ramp's expense management software simplifies expense tracking and documentation. When employees incur business expenses that won't be reimbursed, they can still capture and categorize them within Ramp's platform using the mobile app's receipt scanning feature. This creates a complete record of all business-related spending, whether reimbursed or not, giving employees the documentation they need come tax time.

The platform's automated expense categorization and real-time syncing with accounting systems means that all expense data—including unreimbursed items—stays organized and accessible. Employees can export their unreimbursed expense reports directly from Ramp when preparing their personal tax returns, complete with IRS-compliant documentation.

Meanwhile, finance teams maintain full visibility into total business-related spending patterns, helping them make informed decisions about expense policies and employee support. By centralizing all expense tracking in one platform, Ramp eliminates the manual spreadsheets and lost receipts that traditionally plague unreimbursed expense management.

Take control of all business expenses with Ramp

Beyond tracking unreimbursed expenses, Ramp's expense management platform helps you control costs across your entire organization. Block out-of-policy spending before it happens with real-time card controls, and automate approval workflows to keep your team moving fast.

Ready to see how Ramp can transform your expense management? Try an interactive demo and discover why customers save an average of 5% annually across all spending.