What Is Form 2106?
Form 2106, also known as Employee Business Expenses, is an Internal Revenue Service (IRS) tax form used by certain employees to report job-related expenses not reimbursed by their employer. It falls under the broader category of Tax Filings within the U.S. income tax system. Historically, many employees used Form 2106 to deduct ordinary and necessary Business Expenses incurred for their work. An ordinary expense is common and accepted in a specific field, while a necessary expense is helpful and appropriate for business, though not necessarily required. Deductions claimed on Form 2106 could impact an individual's Taxable Income and overall Tax Liability.
History and Origin
The ability for employees to deduct unreimbursed job expenses has been a component of U.S. Tax Law for many years. Prior to the Tax Cuts and Jobs Act (TCJA) of 2017, most employees could deduct these expenses as miscellaneous itemized deductions, subject to a 2% of Adjusted Gross Income (AGI) limitation. However, the TCJA significantly altered the landscape of itemized deductions. Effective for tax years 2018 through 2025, the TCJA suspended the deduction for most miscellaneous itemized deductions, including unreimbursed employee business expenses. This change was a major shift, making Form 2106 largely irrelevant for the majority of W-2 Employee taxpayers during this period2. Despite this, specific categories of employees, such as Armed Forces reservists, qualified performing artists, and fee-basis government officials, retain the ability to use Form 2106 to deduct their job-related expenses.
Key Takeaways
- Form 2106 is an IRS form for reporting certain unreimbursed employee business expenses.
- Prior to the Tax Cuts and Jobs Act (TCJA) of 2017, many employees could use Form 2106; however, this deduction was largely suspended from 2018 through 2025.
- Currently, only specific professions (Armed Forces reservists, qualified performing artists, fee-basis government officials, and employees with impairment-related work expenses) can still use Form 2106.
- The expenses reported on Form 2106, for those eligible, are "ordinary and necessary" for their job.
Interpreting Form 2106
For the limited categories of taxpayers who can still use Form 2106, the form serves to compile and categorize their job-related expenses. These expenses might include vehicle expenses, travel costs (such as lodging and transportation away from the tax home), and certain other job-related expenses. The form requires taxpayers to distinguish between expenses for which they received Reimbursement from their Employer and those that were truly unreimbursed. Properly tracking these expenses is crucial, as only the unreimbursed portion (or a specific type of expense, like mileage) can be considered for deduction by eligible individuals. The result from Form 2106 is then typically carried over to another part of their Tax Returns to affect their total deductible amount.
Hypothetical Example
Consider Maria, a qualified performing artist, in the current tax year. She spent $1,500 on new costumes specifically for her performances, which are not suitable for everyday wear. Her employer did not reimburse her for these expenses. As a qualified performing artist, Maria is one of the few exceptions allowed to deduct unreimbursed employee business expenses. She would gather her receipts for the costumes. On Form 2106, she would list the $1,500 under "Other Business Expenses" in Part I. Since she received no reimbursement, the full amount would be considered for her deduction. This amount, after any applicable limitations within the form, would then be included as an adjustment to income on her federal tax return, reducing her overall Taxable Income.
Practical Applications
Form 2106 continues to have practical applications for specific groups of taxpayers. For instance, an Armed Forces reservist who travels more than 100 miles from home to perform reserve duties can deduct related unreimbursed travel expenses, including mileage, tolls, and parking fees, on Form 2106. Qualified performing artists may deduct a variety of expenses directly related to their artistic services, such as specialized equipment, studio rent, or theatrical clothing. Similarly, fee-basis state or local government officials, who are compensated on a fee basis for their services, use Form 2106 to deduct ordinary and necessary expenses incurred in performing their official duties. Individuals with impairment-related work expenses can also use this form to deduct costs for attendant care or other services that enable them to work due to a physical or mental disability. The official instructions for Form 2106, provided by the Internal Revenue Service (IRS), detail who is eligible and what expenses can be claimed.
Limitations and Criticisms
The most significant limitation of Form 2106, post-2017, is its drastically reduced applicability. The Tax Cuts and Jobs Act (TCJA) suspended the deduction for most unreimbursed employee business expenses from 2018 through 20251. This means that for the vast majority of employees, expenses that were previously deductible, such as union dues, professional association fees, work-related education, job search expenses, and home office expenses for employees, are no longer deductible. This change fundamentally altered Tax Planning strategies for many wage earners, as they can no longer itemize these specific costs on their Tax Returns. The IRS Publication 529, Miscellaneous Deductions, further clarifies that most miscellaneous itemized deductions subject to the 2% AGI limitation were suspended. Critics of this change argue that it removed a valuable avenue for employees to offset genuine work-related costs, effectively increasing their Tax Liability and potentially discouraging certain career-related investments unless covered by an employer's Reimbursement policy.
Form 2106 vs. Schedule A (Form 1040)
Form 2106 and Schedule A (Form 1040) are related but serve distinct purposes in the context of Itemized Deductions. Schedule A is the primary form used by taxpayers to list various itemized deductions, such as medical expenses, state and local taxes, and mortgage interest, when they choose not to take the Standard Deduction. Historically, the total from Form 2106 (representing unreimbursed employee business expenses) would flow into Schedule A as a miscellaneous itemized deduction, subject to the 2% AGI floor.
However, since the TCJA, the connection has changed for most taxpayers. While Schedule A still exists for other itemized deductions, the category for unreimbursed employee business expenses and many other miscellaneous deductions has been suspended until 2026. Therefore, for those few taxpayers still eligible to use Form 2106 (e.g., performing artists or reservists), the amount from Form 2106 is typically deducted as an "adjustment to income" on Schedule 1 of Form 1040, rather than as a miscellaneous itemized deduction on Schedule A. This means these specific deductions are taken "above the line," reducing Adjusted Gross Income (AGI) directly, irrespective of whether the taxpayer chooses to itemize or take the standard deduction. For other taxpayers, Schedule A no longer includes a line for the general employee business expenses that Form 2106 once supported. The IRS's official page for Schedule A (Form 1040) provides the most current information on its use.
FAQs
Who can still file Form 2106?
Only specific categories of taxpayers can still file Form 2106: Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses. For most other employees, this deduction was suspended by the Tax Cuts and Jobs Act of 2017 through tax year 2025.
What kinds of expenses can be claimed on Form 2106?
Eligible expenses, for those who can still file Form 2106, include ordinary and necessary unreimbursed job-related costs such as vehicle expenses, travel expenses (e.g., lodging and transportation while away from home overnight for work), and certain other business expenses unique to the eligible professions.
Does Form 2106 reduce my Adjusted Gross Income (AGI)?
For the specific categories of employees who can still use Form 2106, the deductible amount of expenses calculated on the form generally reduces their gross income to arrive at their Adjusted Gross Income (AGI). This means the deduction is taken "above the line," which can be beneficial regardless of whether they itemize or take the Standard Deduction.
What happens if I received reimbursement from my employer?
If your employer reimbursed you for business expenses, you generally cannot deduct those expenses on Form 2106 if the reimbursement was not included in your income (e.g., Box 1 of your W-2). Form 2106 is primarily for unreimbursed expenses or for expenses where the reimbursement was included in your income. Proper documentation of both expenses and Reimbursement is essential.
Where do the expenses from Form 2106 go on my tax return?
For eligible taxpayers, the deductible amount from Form 2106 is typically reported on Schedule 1 (Form 1040), Line 12 (Adjustments to Income), which then flows to your main Form 1040, reducing your Taxable Income. This is distinct from how most miscellaneous itemized deductions were previously handled on Schedule A (Form 1040).