The goal of the massive 2018 tax overhaul was to put more money back in working Americans' pockets. But these changes have caused many workers to lose out on key tax breaks, including a deduction for unreimbursed business expenses. If you're a salaried employee who previously got to claim these costs on your tax return, know that as of the 2018 tax year, that option is, unfortunately, off the table.
What are unreimbursed business expenses?
Unreimbursed business expenses are costs that you, as an employee, incur in the course of doing your job. For example, if you're required to maintain a separate cellphone for work but your employer won't pay its monthly bill, that's an expense you previously would've been able to write off. Similarly, if you're required to travel to business conferences on your own dime, prior to 2018, that would've been fair game as a deduction. But thanks to the recent tax changes, employees can no longer write off these costs, and the result might be financially painful.
Now, keep in mind that prior to 2018, salaried workers could only deduct unreimbursed business expenses that exceeded 2% of their adjusted gross income (AGI). This meant that if your AGI was $60,000, you could only deduct unreimbursed expenses above the $1,200 mark. As such, many workers who were forced to absorb such expenses never actually got a tax break from them in the first place. On the other hand, employees who spent a lot out of pocket in the course of their jobs no doubt capitalized much more, and they're the ones who are apt to be far less happy when they file their 2018 returns.
That said, these new roles don't apply to folks who are self-employed or run their own businesses. If you fall into these categories, you're still allowed to deduct expenses you incur in order to make money, and they don't need to exceed 2% of your AGI -- you can claim any valid expense that's needed to do your job.
Employees need to speak up
If you're a salaried employee and spend a fair amount of your own money to cover business expenses your company won't pay for, you shouldn't remain silent about it. Now that the unreimbursed business expenses deduction is no longer an option, you have even less to gain by bearing the burden of paying for things needed to do your job. Therefore, it makes sense to have a conversation with your employer and ask for a little help.
For example, if you're usually asked to attend three conferences a year for work purposes, you might request that your employer cover the cost of your entry fees, while you agree to absorb the cost of driving and parking. Or, you might ask your employer to pay for any equipment you use at home that enables you to help out on weekends or after hours.
For better and worse, the 2018 tax overhaul is changing the way filers do their taxes. If you stand to get hurt by the fact that the unreimbursed business expenses deduction has gone away, ease the pain by asking your employer for more help in covering those costs. At the same time, explore other options for lowering your tax burden, especially since a number of key deductions did survive last year's shake-up.