New Rules for Deducting Unreimbursed Employee Business Expenses

There are new rules for deducting unreimbursed employee business expenses on your PA-40 Personal Income Tax Return. The Department of Revenue now requests that supporting documentation is necessary when claiming these expenses. Taxpayers now need to submit a letter from their employer indicating that the expenditures were necessary and not reimbursed. If the employer letter is not available then the State will accept a signed affidavit or a copy of the employer’s employee expense reimbursement policy.

Generally, expenses that may qualify as an unreimbursed employee business expense include:

  • Travel and mileage
  • Certain mobile phone uses
  • Uniforms (required by the employer that are not suitable for street wear)
  • Small tools
  • Office supplies
  • Professional license fees
  • Some moving expenses
  • Certain educational costs
  • Union dues, agency fees or initiation fees

The Department of Revenue strongly encourages taxpayers to keep their receipts for 7 years, and document the purpose of the business related expense when it is incurred otherwise undocumented expenses can be disallowed.

You can claim a deduction for an unreimbursed employee business expense by filing a PA Schedule UE, Allowable Employee Business Expenses form along with your PA-40 Personal Income Tax Return.

For more information about this, contact your tax professional at Isdaner & Company at 610.668.4200.