What Are Impairment-Related Work Expenses?

Impairment-related work expenses (IRWEs) are a category of tax-deductible costs for individuals with disabilities. These expenses, if necessary for employment, can reduce a person’s taxable income. Understanding what qualifies as an IRWE, who is eligible, and the correct procedure for claiming them is useful for taxpayers with physical or mental impairments.

Defining Impairment-Related Work Expenses

The Internal Revenue Service (IRS) defines an impairment-related work expense as a cost that allows an individual with a physical or mental disability to work. To qualify, the impairment must substantially limit one or more major life activities, such as walking, speaking, or working. For an expense to be deductible as an IRWE, it must be a direct result of the impairment and necessary for the individual to perform their job duties.

The expense must also be an unreimbursed cost, meaning if an employer, insurance policy, or vocational rehabilitation agency pays for it, it cannot be deducted. Additionally, the expense must be reasonable, reflecting the standard charge for that item or service in the taxpayer’s community.

Examples of qualifying IRWEs are varied and specific to the individual’s needs. They can include:

• The cost of attendant care services, such as a reader for a visually impaired employee or an interpreter for a hearing-impaired employee, specifically at the worksite.
• Specialized transportation required to commute to and from work because the impairment prevents the use of public transit.
• Modifications to work equipment, such as an adapted computer for someone with limited manual dexterity.
• The cost of a service animal trained to assist with work-related tasks.

These expenses must be primarily for business use and not for personal activities. For instance, while a standard wheelchair is a medical device, the cost of a specialized wheelchair needed specifically to navigate a particular work environment could be considered an IRWE. The direct connection between the expense, the impairment, and the ability to remain employed is what qualifies the cost.

Differentiating from Other Deductions

A clear distinction exists between impairment-related work expenses and other types of deductions, particularly medical expenses. While an item may seem medical in nature, its classification for tax purposes depends on its use. An expense is an IRWE only if it is necessary for work, and it cannot be claimed as both a medical expense on Schedule A and an IRWE. Medical expenses are only deductible to the extent they exceed 7.5% of adjusted gross income (AGI), whereas IRWEs do not have this limitation.

The advantage of IRWEs lies in their separation from other unreimbursed employee business expenses. The Tax Cuts and Jobs Act of 2017 suspended the deduction for most miscellaneous itemized deductions, including unreimbursed employee expenses, for tax years 2018 through 2025. However, IRWEs were specifically excluded from this suspension and remain deductible.

This treatment means IRWEs are not subject to the AGI percentage floors that previously applied to miscellaneous itemized deductions. Because IRWEs are exempt from this threshold, the full amount of the qualifying expense can be deducted. This makes it important for taxpayers to correctly identify and separate these costs from both medical expenses and any non-deductible general employee expenses.

Required Information and Documentation

Properly claiming impairment-related work expenses requires record-keeping and documentation. A taxpayer must gather proof to substantiate the expenses, which includes maintaining detailed records such as receipts, canceled checks, and invoices for every expense claimed.

Beyond proof of payment, documentation should also establish the nature of the impairment and the work-related necessity of the expense. A letter from a physician can verify the physical or mental impairment. It is also helpful to have a statement from an employer that outlines how the specific expense enables the employee to perform their job duties.

The primary document for calculating this deduction is Form 2106, Employee Business Expenses. This form is used to detail and total the qualifying costs. In Part I of the form, the taxpayer will enter their specific IRWEs, which requires a breakdown of expenses, such as vehicle expenses or other business costs.

How to Claim the Deduction

Once all documentation has been gathered and Form 2106 is completed, the deduction is claimed on the annual tax return. The process involves transferring the calculated total from Form 2106 to the appropriate schedule. This action requires the taxpayer to itemize deductions rather than taking the standard deduction.

The total amount of IRWEs, as figured on Form 2106, is carried over to Schedule A (Form 1040), Itemized Deductions. Specifically, the total is entered on the line designated for certain miscellaneous deductions. This schedule is then attached to and filed with the main Form 1040 tax return.

After filing the return, all supporting documentation, including receipts, letters, and a copy of the completed Form 2106, should be retained. Taxpayers should keep these records for at least three years from the date the tax return was filed, as the IRS may request them for verification.