If You’re a W2 Employee, This One Tax Change Could Mean Real Pain
New tax bill wiped out Unreimbursed Expense Deduction
One benefit employees have lost under the new tax law is an employee’s ability to deduct unreimbursed expenses related to their job. So it might not kill you, but will lower your take-home pay. The deduction for unreimbursed employee expenses was among the qualified 2-percent miscellaneous itemized deductions that were eliminated by the Tax Cuts and Jobs Act (TCJA) passed in Winter 2017.
This affects employee’s ability to do those little (or big) things
This is a huge a blow for employees who had relied on it to deduct unreimbursed expenses like work-related travel, meals, entertainment, gifts, lodging, tools, supplies, professional dues, licensing fees, work clothes and work-related education.
- Seek the Win-win #: If you are an employee who has used this tax deduction, here are some tips to minimize your loss:
- Determine the impact. Review your past tax records to help estimate how much you expect to pay in unreimbursed work expenses and what the tax deduction was worth to you.
- Talk to your employer. Your boss might not even know that the loss of this deduction is a hardship, so explain how you will be affected.
- Push the win-win. Ask your employer to consider reimbursing you for your work-related expenses directly. Your employer can probably deduct those expenses from their business return without increasing your taxable income. This will save them tax dollars when compared with the cost of raising your pay in order to indirectly compensate you for your unreimbursed expenses.
Review your vision, mission, and values, and talk to your employees about their unreimbursed expenses in light of the tax law changes. If you aligns with your values to reimburse them for qualified business expenses, check with your bookkeeper/accountant. Make sure your reporting adheres to IRS accountable plan rules so that your reimbursements are deductible as a business expense and do not add to your employees’ incomes.