Whether you can deduct allowable work
related expenses depends on your reimbursement arrangement with
your employer. Your employer may not reimburse you at all for
your work related expenses. In this case, any allowable expense
is fully tax deductible subject to the 2% limit and the AGI
If you are reimbursed, the type of
reimbursement plan you have determines the tax deductibility of
your expenses. An allowance or reimbursement plan is either an
accountable or a nonaccountable plan.
If your employer reimburses you under an
accountable plan, you cannot claim a tax deduction for any
amount for which you were reimbursed. This is because your
employer does not include the payments in your wages and your
are therefore not taxed on these payments.
To be an accountable plan, your employer's
plan must meet all three of the following rules:
You must have paid or incurred the expenses while
performing services as an employee of your
You must adequately account to your employer for
these expenses within a reasonable period of time.
You must return any excess reimbursements or
allowance within a reasonable period of time.
Definition of excess reimbursement or
An excess reimbursement or allowance is any
amount that is more than the business related expenses you
reported to your employer.
If you meet the three rules, your employer
should not include in box 1 of your W-2 form any of the
reimbursements that were paid to you. If your expenses
equal your reimbursements, you have no tax deduction. If
your expenses exceed your reimbursements, the excess amount of
expenses is tax deductible.
If you are reimbursed under a nonaccountable
plan, your employer includes the entire amount of the
reimbursement as wages in box 1 of your W-2 form. All your
eligible expenses are deductible on Schedule A if you receive
reimbursements under a nonaccountable plan. You do not reduce
your expenses by the amount of the reimbursement. A
nonaccountable plan is a reimbursement arrangement that does
not meet the rules for an accountable plan.
Your employer makes the decision whether to
reimburse you under an accountable or nonaccountable plan. If
you receive payments under a nonaccountable plan, you cannot
convert these amounts to payments under an accountable plan by
voluntarily accounting for your expenses to your employer or by
returning excess payments.