Tax deductions from work-related expenses: IRS Form 2106

How to Fill Out IRS Form 2106

If you are an employee who has unreimbursed expenses related to your job, you may be able to deduct them on your tax return using IRS Form 2106. This form allows you to report your ordinary and necessary expenses that you paid or incurred during the year for your work. In this article, we will explain what Form 2106 is, who can use it, what expenses are deductible, how to fill it out, and where to file it.

Table of Contents

• What is Form 2106?
• Who can use Form 2106?
• What expenses are deductible?
• How to fill out Form 2106
• Where to file Form 2106

What is Form 2106?

Form 2106 is a tax form that employees use to claim deductions for unreimbursed expenses related to their work. Unreimbursed expenses are those that your employer does not pay or reimburse you for, but that are necessary for you to perform your job. For example, if you have to travel to a client’s location and pay for your own gas, tolls, parking, and meals, those are unreimbursed expenses that you can deduct on Form 2106.

Who can use Form 2106?

Not all employees can use Form 2106 to deduct their work-related expenses. You can only use Form 2106 if you meet one of the following conditions:

• You are an Armed Forces reservist, a qualified performing artist, a fee-basis state or local government official, or an employee with impairment-related work expenses.
• You have travel expenses as a member of the National Guard or military reserves that are more than the amount of your travel reimbursement.
• You have deductible employee business expenses that are not reimbursed by your employer and that are not subject to the 2% of adjusted gross income (AGI) limit. These include expenses for travel away from home overnight, transportation between workplaces, and meals and entertainment.

Let’s look at some examples of employees who can use Form 2106 to deduct their work-related expenses are:

– A professional violinist who works as a freelance musician and has to buy her own instruments, sheet music, and costumes. She is a qualified performing artist because she meets the income and performance tests.
– A state prosecutor who works on a fee basis and has to pay for his own office supplies, legal research, and transportation. He is a fee-basis state or local government official because he is paid by the case or by the service he performs.
– A teacher who has a hearing impairment and has to buy a special device that amplifies the sound in the classroom. She is an employee with impairment-related work expenses because she needs the device to perform her job duties.
– A military reservist who travels 200 miles from his home to his reserve unit once a month and receives a travel allowance of $100. He has travel expenses as a member of the National Guard or military reserves that are more than the amount of his travel reimbursement because his actual expenses exceed his allowance.

Finally, some examples of employees who do not qualify to get a work-related expense deduction:

– A teacher who works at a public school and spends their own money on classroom supplies cannot use Form 2106 to deduct those expenses. They are not a fee-basis state or local government official, and their expenses are subject to the 2% of AGI limit. They may be able to claim the educator expense deduction instead, which is an adjustment to income on Schedule 1.
– A lawyer who works for a law firm and has to entertain clients and attend conferences cannot use Form 2106, because their meals and entertainment expenses are subject to the 2% of AGI limit and must be reported on Schedule A.
– A cashier who works at a grocery store and has to wear a uniform cannot use Form 2106, because they do not meet any of the conditions listed above. Their uniform expenses are considered personal expenses and are not deductible at all.

If you do not meet any of the conditions listed above, you cannot use Form 2106 and you cannot deduct your unreimbursed employee expenses. However, you may still be able to claim some tax benefits for your work-related expenses, such as the standard mileage rate for business use of your car, or the home office deduction if you use part of your home exclusively and regularly for business.

What expenses are deductible?

If you qualify to use Form 2106, you can deduct the following types of expenses:

• Vehicle expenses: You can deduct the costs of operating and maintaining your car, truck, or other vehicle that you use for work purposes. You can either use the standard mileage rate or the actual expense method to calculate your deduction. For 2023, the standard mileage rate is 58 cents per mile. If you use the actual expense method, you can deduct the actual costs of gas, oil, repairs, maintenance, tires, insurance, registration fees, licenses, and depreciation. However, you must reduce your deduction by the percentage of personal use of your vehicle.
• Travel expenses: You can deduct the costs of travel away from your tax home (your main place of work) for work purposes. This includes airfare, train fare, bus fare, taxi fare, car rental, lodging, meals (subject to a 50% limit), tips, parking fees, tolls, and other incidental expenses. However, you cannot deduct travel expenses if your trip is mainly personal or if you are commuting between your home and your regular workplace.
• Meals and entertainment expenses: You can deduct 50% of the cost of meals and entertainment that are directly related to or associated with your work. This includes meals and entertainment that you have with clients, customers, or business associates while discussing business matters. However, you cannot deduct lavish or extravagant expenses or those that are mainly personal or social.
• Other business expenses: You can deduct any other ordinary and necessary expenses that you pay or incur for your work. These include union dues, professional dues, subscriptions, licenses, education expenses, uniforms, tools, supplies, equipment, and home office expenses. However, you must be able to show that these expenses are required by your employer or by the law, and that they are not personal or capital expenses.

How to fill out Form 2106

To fill out Form 2106, you will need to have records of your income and expenses for the year. You will also need to know the percentage of business use of your vehicle and your home office, if applicable. Here are the steps to fill out Form 2106:

1. Download Form 2106 from the IRS website or get a copy from your local IRS office.
2. Enter your name and Social Security number at the top of the form.
3. Check the box that applies to your occupation: Armed Forces reservist, qualified performing artist, fee-basis state or local government official, or employee with impairment-related work expenses.
4. Part I: Enter your vehicle expenses in Section A. If you have more than one vehicle, use a separate column for each vehicle. Enter the total miles you drove each vehicle during the year, the miles you drove each vehicle for work purposes, and the percentage of business use. If you use the standard mileage rate, multiply your business miles by the rate and enter the result on line 10. If you use the actual expense method, enter your total vehicle expenses on line 9 and multiply them by the percentage of business use on line 10. Add lines 9 and 10 and enter the result on line 11.
5. Part I: Enter your parking fees and tolls in Section B. Enter the total amount you paid for parking fees and tolls for work purposes on line 12.
6. Part I: Enter your travel expenses in Section C. Enter the total amount you paid for travel away from home overnight for work purposes on line 13. Enter the total amount you paid for meals and entertainment for work purposes on line 14. Multiply line 14 by 50% and enter the result on line 15.
7. Part I: Enter your other business expenses in Section D. Enter the total amount you paid for other business expenses for work purposes on line 16. If you have any home office expenses, enter them on line 17. Add lines 16 and 17 and enter the result on line 18.
8. Part I: Add lines 11, 12, 13, 15, and 18 and enter the result on line 19. This is your total employee business expenses.
9. Part II: Enter your reimbursements in Section E. Enter the total amount of reimbursements you received from your employer for your employee business expenses on line 20. If your employer included these reimbursements in box 1 of your Form W-2, check the box on line 21.
10. Part II: Subtract line 20 from line 19 and enter the result on line 22. This is your deductible employee business expense.
11. Transfer the amount from line 22 to Schedule A (Form 1040), Itemized Deductions, as instructed on Form 2106.

Where to file Form 2106

You must attach Form 2106 to your Form 1040 when you file your tax return. You can file your tax return by mail or electronically using IRS e-file or a tax software program. You must also keep a copy of Form 2106 and all your receipts and records of your income and expenses for at least three years after you file your tax return.