Can I Deduct Unreimbursed Employee Business Expenses?

Updated April 06, 2026 by Carolyn Richardson, EA, MBA

Many employees pay out‑of‑pocket for things they need to do their jobs—tools, uniforms, travel, professional dues, or continuing education. A common question is whether those costs qualify as an employee business expense deduction on a tax return.

The short answer for most people today: no, not on your federal return. The deduction for unreimbursed employee business expenses (or EBE) was temporarily suspended by the Tax Cuts and Jobs Act of 2017 and then recently, the suspension was made permanent by the One Big Beautiful Bill Act of 2025.

But there are important exceptions for some employees, and some states still allow deductions, even when the IRS does not. This updated guide explains how the rules work now, who still qualifies, and where state tax law may provide relief.
 

What is an Employee Business Expense?

An employee business expense is a cost you pay personally to perform your job as a W‑2 employee and that your employer does not reimburse. Common examples include:
 

• Required tools or equipment
• Work‑specific uniforms (not everyday clothing)
• Job‑related travel or mileage
• Professional licenses or union dues
• Continuing education required to keep your job

These expenses must be ordinary and necessary, meaning they are common in your line of work and helpful for performing your job duties.

Even prior to the suspension, EBE was limited and was only deductible if it exceeded 2% of your Adjusted Gross Income (AGI). So, if your AGI was $50,000, you had to have at least $1,000 of unreimbursed expenses before you got any deduction.
 

Federal Exceptions: Who Can Still Deduct Employee Business Expenses?

Although the general deduction is gone, some employees can still deduct certain employee business expenses on a federal return. These expenses are claimed using Form 2106, Employee Business Expenses, and are treated as adjustments to income rather than as itemized deductions.

Only the following employees can now deduct their unreimbursed EBE:
 

• Armed Forces reservists, which include members of the Army, Navy, Marine Corps, Air Force, and Coast Guard Reserve, the Army or Air National Guard, and the Reserve Corps of the Public Health Service. Reservists can only deduct unreimbursed travel expenses up to the federal per diem rate for travel and meals, plus the standard mileage rate, when they are traveling more than 100 miles from home in connection with performing services as a reservist. They can also deduct parking fees, ferry fees, and tolls incurred as part of their travel.
   
• Qualified performing artists who meet the following criteria:
  • Performed services as an employee (receiving a Form W-2) in the performing arts for at least two employers during the year
  • The wages from at least two employers was $200 or more during the year
  • Their allowable business deductions were more than 10% of their gross income from performing, and 
  • Their adjusted gross income is $16,000 or less before deducting those expenses.
     
• Fee‑basis state or local government officials. Most government employees are not paid on a fee basis, but exceptions may include justices of the peace, notary publics, building or electrical inspectors, county clerks, and advisory board members.
   
• Employees with impairment‑related work expenses can deduct those expenses that enable employees with physical or mental disabilities to work. This includes attendant care and specialized equipment needed for the employee to perform the duties of their job.
   
• Teachers. An eligible teacher is one who is employed as an educator for kindergarten through 12th grade for at least 900 hours during a school year. This also includes instructors, counselors, principals, and aides working for schools in the same grades. Higher education teachers, such as college professors, do not qualify, nor do parents who homeschool their children. Eligible expenses include books, supplies, and equipment used in the classroom. It also includes professional development courses. Teachers can deduct up to $300 ($600 if both the taxpayer and spouse are educators) as an adjustment to gross income, and any remaining expenses are now deductible under the OBBBA as miscellaneous itemized deductions starting in 2026.

If you do not fall into one of these categories, the deduction is not allowed unless you can claim it as a state itemized deduction, and that will depend on where you live. The states that allow some form of EBE deduction include California, New York, Pennsylvania, Minnesota, Arkansas, Alabama, and Hawaii. Even if you don’t itemize your deductions for the federal return, you can usually itemize them for the state. But check your state’s website to verify how to claim deductions for employee business expenses.
 

A Note About Statutory Employees

Statutory employees are not treated as employees for federal tax purposes, but they do receive a Form W-2. If you are a statutory employee, the “statutory” box on your Form W-2 will be checked. When this is the case, you report your income as self-employment income on Schedule C rather than as wages. Only some occupations are considered to be statutory, including full-time traveling salespersons who solicit orders from wholesalers, restaurants, or similar businesses and who are selling them items used in the buyer's business; full-time insurance agents selling policies or annuities for only one insurance company; or agent-drivers or commission-drivers engaged in distributing meat, vegetables, baked goods, non-milk beverages, or laundry and dry-cleaning services. It can also include home workers performing work with materials provided by the employer. 

Keep in mind, though, that even if you are working in one of these occupations, you may not be considered a statutory employee; that will be determined by your employment contract.
 

What do I do if I am incurring business expenses but don’t meet any of these exceptions?

If you’re incurring significant expenses for your job that you are paying for out of your own pocket, but you don’t work in one of the allowed situations to deduct them as explained earlier, what can you do? It seems unfair to have to pay for these costs out of your hard-earned wages.

First, talk to your boss about the costs you are incurring and see if a reimbursement plan can be worked out. Generally, reimbursements made to employees for expenses under an accountable plan are not considered to be taxable income to the employee. Many larger employers have accountable plans. But be careful, as it may be considered a “non-accountable” plan, in which case the reimbursement will be treated as wages to you, and you still won't be able to deduct the expense to offset it. 

If you know that your coworkers are also incurring similar costs, you may be able to lobby your company management for either a reimbursement plan or a fixed monthly allowance paid to you to cover your expenses, at least partially. Management is far more likely to consider this option when multiple employees are impacted.

If your state is one of the ones that still allows you to deduct the employee business expenses, make sure you keep records of the expenses and claim them on your state return, even if you can't claim them on your federal return. Increasing your state refund or lowering your state tax liability may help to defer some of those costs.