If you are an employee with large unreimbursed business expenses then you either need to ask for a raise immediately of prepare for a potentially large tax increase. One of the most common types of occupations affected is outside sales representative however any employee in any occupation with work-related expenses would be affected the same way. Effective January 1, 2018 the following expenses are no longer deductible by employees:
- Auto expenses or mileage allowance.
- Business liability insurance premiums.
- Damages paid to a former employer for breach of an employment contract.
- Depreciation on a computer your employer requires you to use in your work.
- Dues to a chamber of commerce if membership helps you do your job.
- Dues to professional societies.
- Educator expenses.
- Home office or part of your home used regularly and exclusively in your work.
- Job search expenses in your present occupation.
- Laboratory breakage fees.
- Legal fees related to your job.
- Licenses and regulatory fees.
- Malpractice insurance premiums.
- Medical examinations required by an employer.
- Occupational taxes.
- Passport for a business trip.
- Repayment of an income aid payment received under an employer’s plan.
- Research expenses of a college professor.
- Rural mail carriers’ vehicle expenses.
- Subscriptions to professional journals and trade magazines related to your work.
- Tools and supplies used in your work.
- Travel, transportation, meals, entertainment, gifts, and local lodging related to your work.
- Union dues and expenses.
- Work clothes and uniforms if required and not suitable for everyday use.
- Work-related education.
The tax law change means that a typical outside sales person loses a tax deduction of about $3,500 per year. In other words a typical tax increase for this occupation is $3,500. It would take a raise of about $300 per month to make up for the tax increase. Of course, it could be larger or smaller. depending on the unique situation.
If a pay raise cannot be negotiated then it might make sense to consider becoming a subcontractor and not an employee.
Another option is to establish an accountable expense plan and reimburse these expenses through the employer.
I am available to discuss the details under any of these options.