Learning Center
We keep you up-to-date on the latest tax changes and news in the industry.
Tax Reform Suspends the Tax Deduction for Employee Business Expenses
Article Highlights:
- Employee Business Expenses
- Miscellaneous Itemized Deductions Subject to the 2% AGI Floor
- Accountable Reimbursement Plan
- Occupations Impacted
However, this new limitation does not apply to individuals who are self-employed. For this group of taxpayers, expenses such as business use of their personal vehicle, business-related travel, work-related education, and use of a qualified home office for business continue to be tax-deductible on their business schedules. Furthermore, tax reform actually provides them with more liberal expensing options and, for some, even a special deduction of 20% of qualified business income.
In addition, this limitation does not affect employees whose employers reimburse employee business expenses under an “accountable plan,” a business-expense reimbursement plan under which the employer can reimburse employees tax-free for business expenses. On the other hand, some employers may reimburse expenses without having an “accountable plan,” in which case the reimbursement is included in the employees’ W-2 wages; since the expenses are not deductible under the new law, the reimbursement will end up being taxable.
The loss of employee business expenses as a deduction will impact certain types of employment more than others. Examples of some big losers, assuming the increased standard deduction does not make up for the loss of the deduction, will include:
Long-Haul Truckers who have to pay for their own meal and lodging expenses while on the road.
Firefighters – Many are required to pay firehouse dues, which for some have been deductible expenses, as well as uniform expenses.
Outside Sales Employees – Many work remotely away from the employer’s business location and incur travel and home office expenses.
Entertainers, including actors, musicians, and the like who always have substantial costs for costumes, agent fees, and other employee business expenses.
Union Members, including those with sizeable union dues.
Educators, including teachers and other educators who work in elementary and secondary schools who have unreimbursed expenses for classroom supplies. Even though they are allowed a $250 above-the-line deduction, that doesn’t begin to cover most teachers’ expenses.
Tradespeople who are required to provide their own tools of the trade.
The only possible remedy for the loss of this deduction is for an employee to negotiate an “accountable plan” with the employer. To be an accountable plan, the following three conditions must be met: (1) the expenses covered under the plan must be business related; (2) employees must be required by the plan to substantiate the covered expenses; and (3) if employees receive advances, the plan must require them to return any amounts in excess of their substantiated expenses. Failing to return the excess advance amount will cause that amount to be taxable to the employee.
For questions related to the loss of this deduction or about how the change will impact a specific tax situation, please give this office a call.
Want our best tax and accounting tips and insights delivered to your inbox?
Sign up for our newsletter.
Benefits of having a business advisor
Your CFO, Reimagined as a Financial Doctor
Diagnosing root causes, prescribing solutions, and guiding your property business toward long-term wealth.
Our CFO | Advisor
Raquel is a passionate business owner. Now, she is returning to her grassroots with a twist - guiding clients with her expertise as a CPA, she can advise your company as your trusted CFO and Advisor.
-
Raquel Deodanes, MS, CPA
Co-Founder✅ CPA with Real-World Experience – I help property managers stay profitable, tax-efficient, and cash flow positive.
✅ Tax Strategist – Former advisor at California’s revenue agency.
✅ Trusted by 4,000+ Businesses – Experience across CA, FL, TX, NV, and beyond.
✅ Real Estate Investor – I understand the financial realities of property management.
✅ Entrepreneur – I’ve built businesses and know the challenges you face.
Frequently Asked Questions
-
We diagnose financial inefficiencies, treat problems like poor cash flow or rising costs, and guide you to long-term financial health. That includes cleaning up your books, forecasting cash flow, optimizing operations, and helping you grow your portfolio with confidence — just like a doctor builds a custom care plan for a patient.
-
Bookkeepers record transactions. CPAs file your taxes. We connect the dots — helping you understand your numbers, strategically improve them, and make smarter decisions throughout the year. We work alongside your existing team to drive performance, not just compliance.
-
If you're unsure where your cash is going, struggling with rising costs, planning to scale, or just tired of reacting instead of planning — now is the right time. We help you get ahead of problems, not just clean up after them.
-
Clients typically see improved cash flow, cleaner books, higher NOI, better financial reporting, and a lot less stress at tax time. More importantly, you gain clarity, confidence, and control over your business — and a partner who helps you grow it.
Pricing
Painless, transparent pricing.
Let us take away your stress and give you back your time. Choose your perfect package today.
Base
-
Dedicated finance expert
-
Bookkeeping with accrual basis
-
Includes P&L, balance sheet, and cash flow statements
Core
-
Includes everything in Base, PLUS
-
Industry KPIs and financial ratios
-
Monthly virtual 1-hr meetings
-
Monthly rolling budget forecasts
Growth
-
Includes everything in Base, CORE
-
Budget vs. actuals variance analysis and review
-
Payroll and HR Platform