If your employer does not reimburse you for your work-related expenses, any allowable expense in excess of 2% of your adjusted gross income is fully deductible on Schedule A.
If your employer does reimburse you, the deductibility of the expense depends on the type of reimbursement plan you have. There are two types of employer reimbursement plans: an accountable plan and a non-accountable plan.
An accountable plan
Under an accountable plan, your employer’s reimbursement or allowance arrangement must require you to: (a) adequately account your expenses to your employer, and (b) return any excess reimbursement or allowance.
The rules under an accountable are as follows:
• Your employer must reimburse you for all the work-related expenses that you incurred, upon you accounting to your employer for all your expenditure.
• These reimbursements are not taxable, and your employer should not include them in wages on your Form W-2.
• You cannot claim a deduction for any amount for which you have been reimbursed.
A non-accountable plan
Under a non-accountable plan:
• You do not account to your employer for the work-related expenses that you incurred.
• The entire reimbursement that you receive is included as wages in box 1 of your Form W-2, and is treated as taxable income.
• You are allowed to deduct all your eligible work-related expenses. These expenses are figured on Form 2106, Employee Business Expenses, and deducted on Schedule A.
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