Common but Overlooked Tax Deductions for Employees

Introduction

Federal tax changes under the Tax Cuts and Jobs Act (TCJA) narrowed the ability of typical W‑2 employees to claim workplace expenses, but several important deductions remain available to employees who meet specific IRS rules. This guide explains the most commonly overlooked employee deductions in plain language, highlights who can still claim them, explains documentation rules, and shows how to report them correctly on your return. (IRS guidance: see IRS pages on educator expenses, Form 2106, and business travel.)

Why employees often miss deductions

• Many taxpayers assume all unreimbursed job expenses disappeared after 2017. While the TCJA suspended miscellaneous itemized deductions for most employees through 2025, a number of exceptions and above‑the‑line opportunities remain.
• Confusion about employer reimbursements: expenses paid under an accountable plan are not deductible because they aren’t taxable to you. Conversely, unreimbursed expenses that meet narrow IRS rules can sometimes still be claimed.
• Poor records: without receipts, mileage logs, or proof of business purpose, otherwise legitimate deductions are frequently disallowed.

In my practice advising employees and small business owners, I regularly see clients miss straightforward deductions because they conflate self‑employment rules with W‑2 employee rules. The difference matters for recordkeeping and which forms you use.

Key categories and eligibility (what to watch for)

1) Educator expenses (above‑the‑line)

• Eligible educators (K–12 teachers, instructors, counselors, principals) can claim certain unreimbursed classroom expenses as an above‑the‑line deduction on Schedule 1. This deduction does not require itemizing and reduces your adjusted gross income (AGI).
• Typical eligible expenses include books, supplies, computer equipment, and other materials used in the classroom. Keep receipts and note how each purchase was used for qualified educational activities. (See IRS guidance on educator expenses.)

2) Employee business expenses for narrow special categories (use Form 2106)

• Although most W‑2 employees cannot deduct unreimbursed employee expenses, the IRS still allows deductions for specific groups using Form 2106, such as: active‑duty members of the Armed Forces on active duty who move due to military orders, qualified performing artists, certain fee‑basis state or local government officials, and qualified reservists. Publication 463 and the Form 2106 instructions describe these exceptions.
• If you fall into one of these categories, the procedures and limits differ from self‑employment deductions; use Form 2106 to report allowable expenses.

3) Business travel, meals, and vehicle expenses (limited cases)

• Travel and vehicle expenses related to work can be deductible, but for most employees these are deductible only if they meet an exception (see Form 2106 groups above) or if the employer does not provide reimbursement and the expenses are ordinary and necessary business costs.
• The IRS publishes a standard mileage rate you can use to calculate automobile deductions; always check the current year rate before claiming mileage. Maintain a contemporaneous mileage log showing date, business purpose, start and end miles, and total business miles. (See Publication 463 and the finhelp mileage guides: Mileage Deduction and How to Document Miles and Vehicle Use for Tax Deductions).

4) Home office — usually not for W‑2 employees

• The home office deduction remains available to self‑employed individuals who use part of their home regularly and exclusively for business. For most W‑2 employees, the TCJA suspension eliminated the ability to claim a home office deduction for unreimbursed employee expenses through 2025. If you operate a side business as a sole proprietor or qualify as a home‑based business owner, you can still claim the home office deduction using IRS rules (and should review our Home Office Deduction guide).

5) Education and training expenses

• Costs for education that maintains or improves skills required in your current job may be deductible, but expenses that qualify you for a new trade or meet the minimum requirements of your employer generally do not qualify. If you’re unsure whether a course is deductible, keep detailed records showing how the training relates directly to your current job duties. Some education costs may instead qualify for education tax credits; compare options before claiming.

6) Professional dues, licenses, and subscriptions

• Membership dues, licensing fees, and required subscriptions that are unreimbursed can be deductible only in limited situations for employees (again, see exceptions noted above). If you’re self‑employed or an eligible special category employee, these expenditures are more often deductible.

7) Uniforms and required clothing

• Clothing is deductible only if it’s required by your employer, not suitable for everyday wear, and not reimbursed. Keep purchase receipts and an explanation from your employer if possible.

8) Job search expenses (rare)

• Expenses for a job search in your current occupation used to be deductible for employees who itemized, but the TCJA suspension removed most miscellaneous deductions, including job search costs, through 2025 for employees who are not in an eligible special category.

Recordkeeping best practices (what I recommend)

• Keep receipts, invoices, and bank or credit card statements for every item you plan to deduct.
• For mileage, use a contemporaneous log (date, business purpose, starting/ending odometer readings or GPS record). Smartphone mileage apps can help, but keep a backup manual record if possible.
• Save employer communications about required tools, uniform policies, or reimbursement policies. A written policy showing your employer’s nonreimbursement can help support a claim if you fall into an exception category.
• Keep records for at least three years after filing; for some circumstances, six years may be appropriate. If the IRS suspects fraud or if you omitted income, longer retention is prudent. Refer to IRS recordkeeping guidance for exact timelines.

How to report and claim deductions

• Above‑the‑line deductions such as educator expenses are reported on Schedule 1 of Form 1040 and reduce AGI.
• Eligible special categories use Form 2106 and may still itemize certain expenses where allowed. Publication 463 explains travel and car expenses; Form 2106 instructions explain which employees qualify and how to calculate allowable amounts.
• Reimbursements under an accountable plan: if your employer reimburses you under an accountable plan and the amounts are substantiated and returned if in excess, these reimbursements are not taxable and you cannot deduct those expenses.

Example from practice

A client working as a K–12 teacher paid for classroom supplies and a classroom subscription service out of pocket. Because the educator expense deduction is an above‑the‑line deduction, she reduced her AGI without itemizing. Another client—an Army reservist—used Form 2106 to deduct unreimbursed travel costs related to required reserve duties and maintained a mileage log that withstood review when we filed an amended return.

Common mistakes and how to avoid them

• Misclassifying expenses: don’t assume a work‑related purchase is deductible just because it helps your job—confirm it meets IRS rules for “ordinary and necessary” or the specific exception that applies to employees.
• Guessing on mileage: always substantiate miles with a log. Round numbers invite questions during audits.
• Overlooking education options: compare deductions vs. credits for education expenses — sometimes a credit (e.g., Lifetime Learning Credit) delivers more tax benefit than a deduction.

When to consult a tax professional

• If you believe you’re in a special category (performing artist, reservist, fee‑basis official) that allows employee expense deductions, consult a tax professional to ensure you use Form 2106 correctly.
• For complex reimbursements, stock‑based compensation, multi‑state travel, or repeated home‑office questions, professional advice prevents costly mistakes.

Authoritative sources and where to read more

• IRS — Educator expenses; Form 2106 instructions; Publication 463 (Travel, Gift, and Car Expenses). (See IRS.gov for the latest pages.)
• FinHelp internal guides: Home Office Deduction, Mileage Deduction, Educator Expenses Deduction.

Professional disclaimer

This article is educational and does not replace individualized tax advice. Tax law is subject to change; the TCJA suspension of certain employee miscellaneous deductions remains in effect through 2025, and IRS rules can change after that. Consult a qualified tax professional or the IRS website before claiming deductions for the current tax year.

Bottom line

Many employees mistakenly believe all job‑related deductions vanished after the TCJA. While the suspension narrowed options for W‑2 workers, meaningful deductions remain—notably educator expenses and specific categories of employees eligible under Form 2106—and strong documentation is essential. Evaluate your situation against IRS rules or consult a tax pro to determine what you can legitimately claim and how to document it.