What Is Form 2106: Employee Business Expenses?
Form 2106: Employee Business Expenses is a tax form distributed by the Internal Revenue Service (IRS) used by employees to deduct ordinary and necessary expenses related to their jobs. Ordinary expenses are generally considered common and accepted in a particular line of business, while necessary expenses are those that are helpful in conducting business.
Starting in the tax year 2018, unreimbursed employee business expenses could no longer be claimed as a tax deduction for the majority of taxpayers. Currently, the only people who can use Form 2106 are Armed Forces reservists, qualified performing artists, fee-based state and local government officials, and employees with impairment-related work expenses. Prior to 2018, any employee with unreimbursed work expenses could use Form 2106 to claim those expenses as a miscellaneous itemized deduction.
- Form 2106 is used by employees to deduct ordinary and necessary expenses related to their jobs.
- This form is used by Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses.
There was another version of the form. Form 2106-EZ: Unreimbursed Employee Business Expenses was a simplified version and was used by employees claiming a tax deduction because of unreimbursed expenses related to their jobs. This form was discontinued after 2018 after the Tax Cuts and Jobs Act (TCJA) went into effect.
Taxpayers used to have two options for claiming job-related expenses as a tax deduction. They could take this above-the-line deduction, or they could claim an itemized deduction for unreimbursed job expenses for W-2 income. Tax reform eliminated the itemized deduction option when the Tax Cuts and Jobs Act (TCJA) went into effect in 2018.
Form 2106 is available on the IRS website.
Who Can File Form 2106: Employee Business Expenses?
According to the IRS, only the following taxpayers can use Form 2106:
- Armed Forces reservists
- Qualified performing artists
- Fee-basis state or local government officials
- Employees with impairment-related work expenses
- Prior to 2018, any employee with unreimbursed work expenses could use Form 2106 to claim those expenses as a miscellaneous itemized deduction
How to File Form 2106: Employee Business Expenses
There are two parts to Form 2106. Part I tabulates all employee business expenses and reimbursements. This part then calculates whether, and which, expenses were eligible for a tax deduction. These include vehicle expenses, parking, toll, transportation charges, and other business expenses. The filer also includes any reimbursements made by the employer.
Part II deals more specifically with vehicle expenses. Filers have two choices. They can use the standard mileage rate, which means multiplying the IRS mileage rate for the tax year by the number of business-qualifying miles driven. The mileage rate factors in gasoline and repair expenses, plus wear-and-tear on the average car. For 2021, it is set at 56 cents per mile (down from 57.5 cents in 2020).
The second method is to calculate actual expenses. These include gasoline, oil, repairs, insurance, registration, and depreciation which is factored with the use of a table in the instructions. You are not able to deduct interest on car loans. There are also limits on car valuations. Whether you used standard mileage or actual expenses, expenses incurred commuting to and from work are not considered eligible business expenses.