A Guide to Tax Deductions Employees Can Take

As an employee, it’s important to stay on top of all the tax deductions available to you. Knowing what can be deducted and how will help you maximize your returns and reduce your taxes throughout the year. So, Edgewater CPA Group breaks down the various types of tax deductions employees can take and how they can utilize them.

1. Auto & Travel

Employees who use their personal vehicles for work-related activities can deduct auto expenses from their taxes. This includes the cost of gas, oil changes, repairs, registration fees, insurance premiums, tolls, and parking fees. If a vehicle is used exclusively for business purposes, you can use the standard mileage rate or actual expenses to calculate your tax deduction.

For travel expenses, employees can deduct travel costs. This includes airplane tickets and hotel accommodations while on an out-of-town business trip. The IRS also allows you to deduct 50% of meal and incidental costs while on the trip. Other deductible travel costs include public transportation fares and car rentals.

2. Home Office

The home office is now one of the most popular deductions employees can take. These expenses include the cost of additional furniture for the workspace, internet, and technology costs. In addition, employees may be able to deduct part of their mortgage interest, rent, property tax, energy bills, and insurance premiums that relate to their workspace.

In order to make these deductions, taxpayers must first use an exclusive area of their home used exclusively for work purposes. Furthermore, in order to claim the deduction for an item like a computer or additional furniture, there must be evidence that it was bought specifically for business purposes only.

3. Clothes or Uniforms

The Internal Revenue Service (IRS) allows employees to deduct the cost of any clothing and uniforms. However, items must be worn as a condition of employment. Clothing and uniforms must be ordinary and necessary business expenses, not luxury items or stylish clothing, and be required for work.

Additionally, the IRS requires all uniform purchases to be separately stated on tax returns. If an employer provides uniforms or other clothing for employees to wear at work, then those articles cannot be deducted from an employee’s taxes since it is considered taxable income from the employer’s point of view.

Let’s Get You Ready for Tax Time

Need help with your business tax preparations for this upcoming tax season? Contact Edgewater CPA Group in Carmel, IN. We specialize in all things taxes and business, including controller and tax resolution. Schedule your consultation today when you call (317) 386-7021.