Form 2106, Employee Business Expenses: Eligibility and Deductions

Form 2106 for employee business expenses is now available to only four narrow groups of W-2 workers: Armed Forces reservists traveling more than 100 miles from home, qualified performing artists who meet a strict income test, fee-basis state or local government officials, and employees with impairment-related work expenses. The Tax Cuts and Jobs Act of 2017 suspended the miscellaneous itemized deduction that most employees used to claim unreimbursed job costs, and the One Big Beautiful Bill Act of 2025 made that repeal permanent. If you don’t fit one of the four categories, there is no federal deduction for job expenses your employer doesn’t reimburse, no matter how large the amount.¹

The Four Groups Still Eligible

Confirm you belong to one of these categories before you fill in a single line.

Armed Forces reservists. Members of the Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve, the Army or Air National Guard, and the Reserve Corps of the Public Health Service can deduct unreimbursed travel for reserve duties performed more than 100 miles from home. The deduction is capped at the federal per diem rate for lodging, meals, and incidentals, plus the standard mileage rate for driving, plus parking, ferry fees, and tolls.¹

Qualified performing artists. Every prong of the test must be met: work for at least two performing-arts employers during the year, earn at least $200 from each, have allowable business expenses exceeding 10 percent of your gross performing-arts income, and have adjusted gross income of $16,000 or less before subtracting those expenses. Married artists generally must file jointly, and the $16,000 cap applies to combined AGI.²

Fee-basis state or local government officials. If a state or political subdivision employs you and pays you in whole or in part on a fee basis, you qualify. The category covers certain elected officials, notaries, and similar positions compensated per transaction rather than by salary.¹

Employees with impairment-related work expenses. If a physical or mental disability requires you to pay for goods or services to do your job, such as an attendant, adaptive equipment, or workspace modifications, those costs are deductible. These expenses flow to Schedule A rather than reducing AGI directly.³

For every group, the expenses must be unreimbursed. If your employer repays you under an accountable plan, that reimbursement is already excluded from your wages and there is nothing left to deduct.⁴

Why Everyone Else Lost the Deduction

Before 2018, any W-2 employee could deduct unreimbursed job expenses as a miscellaneous itemized deduction above a 2-percent-of-AGI floor.³ The TCJA suspended that category through 2025, and the One Big Beautiful Bill Act made the repeal permanent. Home office costs, continuing education, union dues, professional licenses, job-search expenses, work clothing — a typical employee can deduct none of them on a federal return. If your employer doesn’t offer an accountable reimbursement plan and you fall outside the four groups above, you absorb the cost.

What Counts as a Deductible Expense

Every expense must be ordinary and necessary for your work. Ordinary means common in your line of work. Necessary means helpful and appropriate for doing your job. The cost must have been paid or incurred during the tax year, and your employer must not have reimbursed it.

Travel Away From Home

When your work requires overnight travel away from your tax home, airfare, train tickets, rental cars, lodging, and local transportation at your destination are deductible.⁵ Meals during travel are deductible at 50 percent of actual cost, or you can use the federal per diem rate for your destination published by the General Services Administration.

The IRS watches one distinction closely: the assignment must be temporary. Travel to a work location expected to last one year or less is deductible. The moment you realistically expect the assignment to run beyond a year, expenses become nondeductible, even if the assignment ends sooner than that.⁵

Local Transportation

Driving your personal vehicle during the workday for business purposes — visiting clients, moving between job sites, going from your regular office to a temporary work location — is deductible. Commuting from home to your regular workplace is not, regardless of distance.¹ Parking and tolls at business destinations qualify; parking at your regular office does not.

Tools, Uniforms, Education

Specialized tools, safety equipment, and uniforms unsuitable for everyday wear are deductible, along with the cost of cleaning and maintaining those uniforms. Education that maintains or improves skills required for your current job qualifies. Education that prepares you for a new career does not.

Impairment-Related Costs

For employees with a disability, the cost of goods or services needed to perform the job — a reader, an interpreter, specialized transportation to work, adaptive technology — counts as an impairment-related work expense. These costs sit outside the 2-percent floor that historically limited other miscellaneous deductions.³

How the Form Is Built

Form 2106 has two parts. Part I totals your expenses and subtracts any reimbursements. Part II handles vehicle expenses separately.

Part I: Expenses and Reimbursements

Line 1 pulls in vehicle expenses calculated in Part II.
Line 2 is for parking fees, tolls, and local transportation that did not involve overnight travel. Commuting is excluded.
Line 3 captures lodging and transportation connected with overnight travel away from your tax home. Meals belong on a different line.
Line 4 catches other business costs: education, business gifts, trade publications, tools, uniforms.
Line 5 is for meals during overnight travel and other deductible business meals. The 50-percent limit is applied later in the calculation.¹

Line 7 is where employer reimbursements go, specifically those reported in Box 12 of your W-2 with code L. Don’t enter reimbursements already included in Box 1 wages. Line 10 gives you the final deductible amount after reimbursements and the meal reduction.

Part II: Vehicle Expenses

Part II asks for basic information about the car: when you placed it in service, total miles for the year, business miles, commuting miles, and other personal miles. You then pick one of two calculation methods.

The standard mileage rate multiplies your business miles by the IRS rate, which for 2026 is 72.5 cents per mile.⁶ Of that 72.5 cents, 26 cents is treated as depreciation, which matters if you later sell the vehicle.

The actual expense method requires you to track every vehicle cost — fuel, oil, repairs, insurance, registration, tires, depreciation — then multiply by business-use percentage. Passenger-vehicle depreciation is capped under Section 280F.⁷

Your first-year choice constrains you later. Start with the standard mileage rate and you can switch to actual expenses later, but only using straight-line depreciation going forward. Start with actual expenses and claim MACRS depreciation, Section 179, or bonus depreciation, and you can never move to the standard mileage rate for that vehicle.⁸ For a leased vehicle, your chosen method applies for the entire lease.

Where the Deduction Lands on Your Return

The path from Form 2106 to the rest of your return depends on which eligible group you belong to.

Reservists, qualified performing artists, and fee-basis government officials report the Line 10 amount on Schedule 1 (Form 1040), Line 12, under “Certain business expenses of reservists, performing artists, and fee-basis government officials.”⁹ This is an above-the-line deduction that reduces AGI directly, so you get it whether or not you itemize. A lower AGI can also expand eligibility for other benefits that phase out at higher incomes. Attach the completed Form 2106 to your return.

Reservists have an extra wrinkle. Only the portion of Line 10 tied to travel more than 100 miles from home goes on Schedule 1, and the amount is capped at the federal per diem and standard mileage rate regardless of actual spending.¹⁰

Employees with impairment-related work expenses take a different route. Their Line 10 amount goes to Schedule A, Line 16, under “Other Itemized Deductions.”¹¹ Because these expenses are specifically excluded from the 2-percent floor, they remain fully deductible even after the permanent repeal of other miscellaneous deductions. The trade-off: you have to itemize. If the standard deduction gives you a better overall result, you lose the benefit.

Records the IRS Expects

The IRS can disallow a deduction entirely if you can’t substantiate it, so recordkeeping is where most Form 2106 claims live or die. The standard is contemporaneous documentation, meaning records created at or near the time of the expense, not reconstructed at tax time.

Each expense needs the amount, date, place or vendor, and business purpose. Meals need a fifth element: the business relationship of the people present. Keep receipts for any expense of $75 or more, and for all lodging regardless of amount. Expenses under $75 still need a log entry even without a receipt.

A mileage log records the date of each trip, starting location and destination, business purpose, and miles driven. You also need odometer readings at the beginning and end of the year, and whenever you start or stop using the vehicle for business.

Keep everything for at least three years from the date you file, which is the standard IRS assessment window. Underreport income by more than 25 percent and the window stretches to six years. Fraudulent or unfiled returns have no time limit.¹²

Statutory Employees and the Self-Employed Don’t Use Form 2106

Statutory employees — full-time life insurance salespeople, certain delivery drivers, home workers, and traveling salespeople — receive a W-2 with the “Statutory employee” box checked. They do not use Form 2106. Their income and expenses go on Schedule C instead.¹³ Self-employed workers and independent contractors are in the same place: Schedule C, not Form 2106.

What a Weak Claim Can Cost

Claiming expenses you can’t support can cost more than the denied deduction. If the IRS finds that an underpayment resulted from negligence or disregard of the rules — including failure to make a reasonable attempt to meet recordkeeping requirements — the accuracy-related penalty is 20 percent of the underpayment.¹⁴ That sits on top of the additional tax you owe once the deduction is disallowed, plus interest running from the original due date. Keeping clean records costs far less.

1
Internal Revenue Service. Instructions for Form 2106
2
Office of the Law Revision Counsel. 26 USC 62 – Adjusted Gross Income Defined
3
Office of the Law Revision Counsel. 26 USC 67 – 2-Percent Floor on Miscellaneous Itemized Deductions
4
Internal Revenue Service. Revenue Ruling 2003-106
5
Internal Revenue Service. Topic No. 511, Business Travel Expenses
6
Internal Revenue Service. The Standard Mileage Rates and Maximum Automobile Fair Market Values Have Been Updated for 2026
7
Internal Revenue Service. Revenue Procedure 2026-15
8
Internal Revenue Service. Topic No. 510, Business Use of Car
9
Internal Revenue Service. 2025 Schedule 1 (Form 1040)
10
Internal Revenue Service. Publication 3 – Armed Forces Tax Guide
11
Internal Revenue Service. 2025 Instructions for Schedule A (Form 1040)
12
Internal Revenue Service. Topic No. 305, Recordkeeping
13
Internal Revenue Service. Statutory Employees
14
Internal Revenue Service. Accuracy-Related Penalty