If you hold a state or local government position paid at least partly through fees you collect from the public, Form 2106 is how you claim the fee-basis government official deduction for unreimbursed employee business expenses. You total ordinary and necessary costs on the form, then move line 10 to Schedule 1 (Form 1040), line 12, where the amount reduces your adjusted gross income before you choose between the standard deduction and itemizing. Nearly every other W-2 employee lost this write-off after 2017; fee-basis officials kept it because their deduction lives in a separate section of the Internal Revenue Code and flows through as an adjustment to gross income.1Office of the Law Revision Counsel. 26 USC 62 – Adjusted Gross Income Defined
Who Qualifies
Two conditions have to be met at the same time. You must be an employee of a state or one of its political subdivisions (a county, city, township, or similar body), and your position must be compensated in whole or in part on a fee basis.1Office of the Law Revision Counsel. 26 USC 62 – Adjusted Gross Income Defined Justices of the peace, local registrars of vital statistics, constables, some county clerks, and certain sheriffs or judges whose pay is tied to filings, case fees, or other charges collected from the public typically fit.2Social Security Administration. Social Security Handbook 1015 – Positions Compensated Solely by Fees
The fees have to be payment collected directly from the public for services you perform. Money that comes from government funds and simply carries the label “fee” is still salary for federal tax purposes. If fees are the primary source of compensation but you also receive a salary, your position is still fee-based unless your state’s law provides otherwise.
Keep a copy of the statute, ordinance, or employment agreement that establishes how your fees are assessed and paid. Without that documentation, the IRS can disallow the entire above-the-line deduction if it questions your status.
Expenses You Can Deduct
The costs have to be ordinary and necessary for performing your official duties. Ordinary means common in your kind of work; necessary means helpful and appropriate, not indispensable.
Vehicle and Travel
Personal-vehicle use on official business can be deducted at the IRS standard mileage rate of 72.5 cents per mile for 2026, or by tracking actual costs for gas, insurance, repairs, and depreciation.3Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents Per Mile You pick one method for the year. Whichever you choose, keep a contemporaneous log recording the date, destination, business purpose, and miles for each trip. Reconstructing it in April doesn’t satisfy the requirement.
Lodging and incidental costs on trips that require you to sleep away from your tax home are deductible. Ordinary commuting between home and your regular workplace is not.
Meals
Business meals are deductible at 50 percent of cost.4Office of the Law Revision Counsel. 26 USC 274 – Disallowance of Certain Entertainment, Etc., Expenses The temporary 100-percent deduction for restaurant meals expired at the end of 2022. The meal must have a clear business purpose and cannot be lavish or extravagant.
Supplies, Bonds, and Licenses
Office supplies, specialized equipment, professional reference materials, and continuing education directly tied to your duties all qualify. Surety bond premiums required by your position are deductible, as are fees to maintain a required professional license or certification, provided the government entity does not reimburse you.
Records the IRS Expects
Documentary evidence (a receipt, invoice, or similar record) is required for any expense of $75 or more, and for every lodging expense regardless of amount.5Internal Revenue Service. Revenue Ruling 2003-106 – Expense Reimbursement Arrangements Each record needs to show the vendor, amount, date, and a description specific enough to connect the expense to your official duties. A credit card line reading “$47.82 at Office Depot” won’t hold up without something showing what you bought and why.
For vehicle expenses, your log must track total miles driven during the year alongside business miles so the percentage split can be verified. Under the actual expense method, keep gas receipts, repair invoices, insurance bills, and depreciation worksheets.
Hold supporting documents for at least three years after filing, which is the general statute of limitations for the IRS to assess additional tax.6Internal Revenue Service. Topic No. 305, Recordkeeping The window extends to six years if you underreport gross income by more than 25 percent, so keeping records longer is the safer default.
Filling Out Form 2106
Form 2106, Employee Business Expenses, has two parts.7Internal Revenue Service. Form 2106 – Employee Business Expenses If your records are already organized by category, the form is mechanical.
Part I: Expenses and Reimbursements
Section A collects your total unreimbursed costs broken into categories: vehicle expenses, parking and tolls, travel (lodging and transportation other than your car), meals, and other business expenses. Section B captures reimbursements your government entity provided that were not already included in your W-2 wages.
Section B trips people up. If your county reimbursed you $500 for mileage and reported that amount on your W-2, it does not go in Section B because it was already taxed. If instead you received $500 under an accountable plan and it was excluded from your W-2, enter it here so it offsets your claimed expenses.
Part II: Vehicle Expenses
Part II applies only if you deduct vehicle costs. The standard mileage rate method multiplies business miles by 72.5 cents for 2026. The actual expense method totals real costs and applies the business-use percentage. If the vehicle is used 50 percent or less for business, you lose accelerated depreciation and must use straight-line depreciation instead.8Office of the Law Revision Counsel. 26 USC 280F – Limitation on Depreciation for Luxury Automobiles
Run both methods before deciding. Standard mileage is simpler and fits most officials with moderate driving. Actual expenses can produce a larger deduction on an older vehicle with heavy repair costs or high annual mileage. Once you’ve used actual expenses for a vehicle, you generally can’t switch to the standard rate for that same car in a later year.
Line 10 of Form 2106 is your total allowable deduction.
Where the Deduction Lands on Your Return
The line 10 figure moves to Schedule 1 (Form 1040), line 12, the line designated for business expenses of reservists, performing artists, and fee-basis government officials.9Internal Revenue Service. 2025 Instructions for Form 2106 The Schedule 1 total then reduces your adjusted gross income on page 1 of Form 1040 before the standard deduction or itemized deduction line. Lower AGI also loosens income-based thresholds that control other tax breaks, such as education credits and IRA contribution deductibility.
Attach Form 2106 to your return. Tax software handles the attachment automatically when you e-file. After filing, the IRS may ask for documentation to verify both your fee-basis status and the expenses claimed, so keep the statute or agreement, mileage logs, and receipts ready. An expense you can’t substantiate will be disallowed, and interest can be assessed on any resulting underpayment.
Self-Employment Tax on Fee Income
The deduction on Form 2106 is only half the tax picture for a fee-basis official. If you are compensated solely by fees, the Social Security Administration treats you as self-employed for payroll tax purposes. Fee income is subject to self-employment tax under SECA rather than the FICA withholding that salaried employees see.2Social Security Administration. Social Security Handbook 1015 – Positions Compensated Solely by Fees The self-employment tax rate is 15.3 percent (12.4 percent for Social Security and 2.9 percent for Medicare), and you pay both halves.
If you receive both a salary and fees, the salary portion may be covered under your state’s Section 218 Agreement with the Social Security Administration, meaning standard FICA withholding applies to it. A state can also exclude salary-and-fee positions from its agreement entirely. If your position is excluded, none of your compensation is covered under the agreement, though the salary may still be subject to mandatory Social Security if you are not a member of a public retirement system.10Social Security Administration. POMS SL 60001.625 – Fee-Based Public Officials
Two practical points follow. Budget for self-employment tax and consider quarterly estimated payments to avoid an underpayment penalty. And deduct the employer-equivalent half of your self-employment tax (7.65 percent) as a separate above-the-line adjustment on Schedule 1, which offsets some of the cost.