Changes to Work-Related Tax Deductions

Mar 26, 2019

MoneyLife100You may incur certain costs related to doing your job, but do you know which ones are deductible on your federal tax return? The Tax Cuts and Jobs Act made changes to work-related deductions that you should know about as you prepare to finalize your 2018 tax return. Below, the Pennsylvania Institute of Certified Public Accountants (PICPA) provides an update and advice on steps you can take to minimize any added tax burden. 

Unreimbursed Expenses

Many organizations cover the expenses workers incur as part of their jobs, but some do not – or only cover them partially. Before the new tax law took effect in 2018, you were able to deduct unreimbursed business expenses that exceeded 2 percent of your adjusted gross income. That included money spent on travel, entertainment, professional society dues, work-related education, uniforms, home office expenses, and costs for seeking a new job, among other things. Beginning with the 2018 tax year (the return you are filing this year), those deductions are no longer available. 

What’s an Employee to Do? 

Be sure you understand your employer’s reimbursement policy, and find out if your state requires employers to reimburse workers for work-related expenses and mileage. If your employer will reimburse you, don’t forget to document and claim all your expenses. If a cost isn’t covered, track the money you spend and see if you can make a case to have your employer pay them since organizations can deduct them as business expenses. Be aware that if work expenses push your net pay below the federal minimum wage, federal law mandates that your employer must cover those expenses. 

Costs of Moving for a Job

Suppose you land your dream job, but you’re going to have to relocate as a result. In the past, you were eligible to deduct expenses for a move that was work-related and for a job that was at least 50 miles farther from your home than your current position. In addition, you had to work full time for no less than 39 weeks at the new location in the first year (longer for self-employed workers). Beginning with your 2018 return, those deductions are gone (although there are exceptions for those in the armed forces). With that in mind, it’s a good idea to inquire about the prospective employer’s policy on moving costs to see if the organization will reimburse you. If they don’t, you’ll have to factor the added costs into your decision to accept a new position. Remember, moving expenses aren’t the only potential cost to consider if you’re thinking of relocating for a job. You’ll want to know, for example, how the cost of buying or renting a home and property taxes compare with prices in your current community, and you should be aware of any potential differences in the overall cost of living. Also, consider whether you’ll need new furniture or, if you’re downsizing, somewhere to store belongings that were better suited to a larger home. Many people leave their old job a little early so they can focus all their energy on the relocation, so add that lost income to your list of moving costs. Seeing what a relocation may cost can help you determine whether a new position is the best step for you. 

Turn to Your CPA

Have more questions about the impact of recent tax law changes or the best ways to minimize your tax bill? Your local CPA can offer guidance on all of your financial questions. To find a CPA in your area or for more tips on filing your 2018 taxes, visit www.picpa.org/taxhelp.

 
About PICPA

The Pennsylvania Institute of Certified Public Accountants (PICPA) is a premiere statewide association of more than 22,000 members working in public accounting, industry, government, and education. Founded in 1897, the PICPA is the second-oldest state CPA organization in the United States.

Money & Life Tips are a joint effort of the AICPA and the Pennsylvania Institute of Certified Public Accountants (PICPA), as part of the profession’s nationwide 360 Degrees of Financial Literacy program.