If you are an employee, you may be able to deduct all or part of your employee business expenses as an itemized deduction on schedule A of your Form 1040. Employee business expenses include the cost of business travel away from home, local transportation, entertainment, gifts, and other ordinary and necessary expenses related to your job.

Deductible travel expenses are the ordinary and necessary expenses of traveling away from your tax home on business. They include the cost of transportation, meals, and lodging. For travel expense purposes your tax home is the general area of your principal place of business. It is not necessarily where you have your family residence. Refer to Topic 511 for additional information on business travel expenses.

Deductible local transportation expenses are the ordinary and necessary expenses of going from one work place to another when you are in the area of your tax home. They also include the cost of getting from your home to a temporary workplace either within or outside the area of your tax home. The cost of commuting between your home and your regular work place each day is never deductible. Transportation expenses include the cost of travel by car, air, rail, bus, taxi, etc., but do not include meals or lodging. For information on transportation expenses related to your car, refer to Topic 510.

Business entertainment expenses and business gift expenses may be partly deductible. For information on business entertainment expenses, see Topic 512. You can order Publication 463, Travel, Entertainment, Gift, and Car Expenses, for additional information on business and transportation.

You must keep records to prove the expenses you deduct. For general information on record keeping, see Topic 305.

If your employer reimbursed you or gave you an allowance for your travel, transportation, entertainment, gift, and other work-related business expenses under an accountable plan, these payments are not shown on your Form W-2. You do not include the payments in your income, and you can deduct only the amount of your expenses that exceeds the reimbursement.

To be an accountable plan, the reimbursement or allowance arrangement must meet three requirements:

1. It covers only expenses that are deductible as employee business expenses.
2. It requires you to adequately account for the expenses within a reasonable time period.
3. It requires you to return any excess reimbursement or allowance within a reasonable time period.

If your employer's reimbursement arrangement does not meet all three requirements, the payments you received should be included in the wages shown on your Form W-2. You must report the payments as income, and you can deduct your expenses as though you were not reimbursed.

If you were reimbursed for travel or transportation under an accountable plan, but at a per diem or mileage rate that exceeds the IRS approved rate, the excess should be included in the wages on your Form W-2. If your actual expenses exceed the approved rate, you can deduct the excess. For information about the approved per diem and mileage rates, get Publication 463.

Generally, you must use Form 2106 or 2106-EZ to figure your deduction for employee business expenses and attach it to your Form 1040. Your deductible expense is then taken on Schedule A, Form 1040, as a miscellaneous itemized deduction subject to the 2% of adjusted gross income limit. The 2% limit is discussed in Topic 508. Publication 529, Miscellaneous Expenses, also discusses the 2% limit and explains some of the other expenses that are deductible as employee business expenses.

You can order publications and forms by calling 1-800-829-3676, or download them from this web site.

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