Can I Write Off Tools for Work as an Employee?
Learn if you can write off work tools as an employee under current tax law. Understand the impact of recent changes on your expenses.
While it was once common for employees to claim such expenses on their tax returns, recent changes in tax law have significantly altered this landscape. Most employees will find that the cost of tools purchased for their jobs is generally no longer deductible on their federal income tax returns.
Understanding Unreimbursed Employee Expenses
Unreimbursed employee expenses are costs that an employee pays for their job that are not repaid by their employer. These expenses must be considered ordinary and necessary for performing job duties.
An ordinary expense is one common and accepted in a particular industry or profession, while a necessary expense is helpful and appropriate for the business. Tools for work, such as specialized equipment or instruments required for job performance, typically fall into this category.
Historically, these types of expenses were deductible as “miscellaneous itemized deductions” on an individual’s federal income tax return. Taxpayers could claim the portion of these expenses that exceeded 2% of their adjusted gross income (AGI) if they chose to itemize their deductions. This meant that only the amount above this 2% threshold provided a tax benefit.
Impact of Current Tax Law on Tool Deductions
The Tax Cuts and Jobs Act (TCJA) of 2017 brought substantial changes to federal tax law, including the treatment of unreimbursed employee expenses. For tax years 2018 through 2025, the TCJA suspended most miscellaneous itemized deductions that were subject to the 2% AGI limitation. This suspension directly impacts the deductibility of tools for work purchased by W-2 employees.
The temporary suspension of these deductions is set to continue until the end of 2025. While some limited exceptions exist for specific professions, such as certain armed forces reservists or qualified performing artists, these generally do not apply to the broader employee population.
Practical Considerations for Employees
The primary avenue for addressing these expenses now lies with employer reimbursement. If an employer reimburses an employee for work-related tools, this reimbursement is generally not considered taxable income to the employee, provided certain conditions are met.
For reimbursements to be non-taxable, they must be part of an “accountable plan” established by the employer. An accountable plan requires that the expenses have a business connection, employees adequately substantiate their expenses with documentation like receipts within a reasonable timeframe, and any excess reimbursements are returned to the employer.
A reasonable timeframe often means substantiating expenses within 60 days and returning excess amounts within 120 days. This structure allows both the employer to deduct the reimbursed expense and the employee to receive the reimbursement tax-free.
Employees are encouraged to communicate with their employers about policies for necessary tools and potential reimbursement options, as this is the most effective way to offset these work-related costs.