Medical professionals paying out of pocket for their uniforms. Road warriors who don’t get the federal mileage rate from their employers. Teachers buying supplies for their classrooms.
All these folks can be affected by the disappearance of the unreimbursed employee expense deduction.
The Tax Cuts and Jobs Act, passed into law in late December 2017, put an end to it as of the 2018 tax year.
What are Unreimbursed Employee Expenses?
Going to work every day comes at a cost. Some of those costs –uniforms and mileage on your personal vehicle, for example – were tax deductible prior to 2018. If they were not covered by your employer and exceeded 2% of your income, that is.
Here’s a list of those previously-deductible, unreimbursed employee expenses:
- Business bad debt of an employee
- Business liability insurance premiums
- Damages paid to a former employer for breach of an employment contract
- Depreciation on a computer your employer requires you to use in your work
- Dues to a chamber of commerce if membership helps you do your job
- Dues to professional societies
- Educator expenses
- Home office or part of your home used regularly and exclusively in your work
- Job search expenses in your present occupation
- Laboratory breakage fees
- Legal fees related to your job
- Licenses and regulatory fees
- Malpractice insurance premiums
- Medical examinations required by an employer
- Occupational taxes
- Passport for a business trip
- Repayment of an income aid payment received under an employer’s plan
- Research expenses of a college professor
- Rural mail carriers’ vehicle expenses
- Subscriptions to professional journals and trade magazines related to your work
- Tools and supplies used in your work
- Travel, transportation, meals, entertainment, gifts, and local lodging related to your work
- Union dues and expenses
- Work clothes and uniforms if required and not suitable for everyday use
- Work-related education
How Can I Make Up for the Loss of Unreimbursed Employee Expenses?
The standard deduction has been raised significantly. This can – at least partially and in some cases – offset the loss of itemized deductions.
Remember that personal exemptions of $4,050 in 2017 are gone for 2018. This makes the increase to the standard deduction less meaningful.
With all 200 pages of changes to the tax code the Tax Cuts and Jobs Act brought, one principle still holds true:
The higher your income, the more likely you will be to itemize.
In 2013, the Tax Foundation found that the higher your income, the more likely you are to itemize. A whopping 93.5% of households with incomes over $200,000 itemized, while only 6% of those with under $25,000 in income did.
The tipping point (the point where more people itemized than didn’t) occurred at $75,000 in income. At that level, 58.5%, or well over half, of these folks itemized.
The increase in the standard deduction means that many lower-income households will not need to itemize. Why? Because the standard deduction amount will be higher than their itemized deductions.
On the other hand, those with a higher income (and a higher tax burden) may do well to continue to itemize. It may also be time to re-familiarize themselves with all of the tax law changes.
Run the Numbers: Will it be Better to Itemize Your Deductions in 2018?
Nearly half of all households with $200,000 to $500,000 in income are projected to itemize deductions in 2018, according to the White House Council of Economic Advisers. As well, a healthy majority of taxpayers with incomes of $500,000 are expected to itemize.
It doesn’t matter what your income level is, though.
If the expenses you would have itemized exceed the standard deduction, you are better off itemizing. These expenses can include:
- Medical costs
- Mortgage interest
- Charitable contributions
- State and local taxes
- Loss on your property if you were in a federal disaster area
- And more
There are new rules on each of these deductions. Enlist the help of an Enrolled Agent (EA) to ensure that you do not pay more tax than you need to. An EA can analyze your situation and give you the best possible tax scenario.
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Jeffrey Schneider, EA, CTRS, NTPI Fellow has the knowledge and expertise to help you reach a favorable outcome with the IRS. He is the head honcho at SFS Tax & Accounting Services as well as the Enrolled Agent and Certified Tax Resolution Specialist for SFS Tax Problem Solutions.
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Now What? I Got A Tax Notice From The IRS. Help! Defining and deconstructing the scary and confusing letters that land in your mailbox. Jeff defines and deconstructs the scary and confusing letters in a fashion that mixes attention to detail with humor and an intricate clarification of what is what in the world of the IRS.
The book is available in paperback and ebook on https://Amazon.com
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For more on SFS Tax & Accounting Services, visit https://sfstaxacct.com/
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738 Colorado Avenue Stuart, FL 34994
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Phone: 772-337-1040
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