A Possible Early Return of the Employment Expense Deduction

In 2018, the Tax Cut and Jobs Act (TCJA) suspended deductions for unreimbursed items like uniforms, licenses, continuing education: and for those traveling for work, meals, mileage, and lodging in excess of reimbursements. These were set to return in the 2026 tax year.

Over a year ago (4/15/21), the Tax Fairness for Workers Act was introduced in both the House (HR 2549) and the Senate (S 1157) in an effort to brings these provisions back sooner. The bills would return employment related expenses as an itemized deduction and additionally, allow a direct deduction for union dues. In recent months, both bills have gained a significant roster of co-sponsors – 59 in the House and 17 in the Senate including Senators Schumer and Sanders.

Our take

With an election year looming, the Democrats will look to score some points with the blue-collar working class. All of the co-sponsors of the Bill are Democrats (Sanders in an independent but caucuses with the Democrats). Prior to TCJA, truckers, traveling healthcare providers and others who had to pay for their own travel and work expenses derived a significant benefit from these deductions. However, the return of these deductions is more eye candy than real substance as TCJA doubled the standard deduction so that fewer taxpayers would need to “itemize”. A taxpayer “itemizes” deductions when the combination of the medical, state / local taxes, charity, mortgage interest exceeds the standard deduction. If the bill passes, employment expenses will now be added to that list. The union dues deduction will have a more significant impact as it is not an “itemized” deduction but a direct deduction against taxable income. Previously, before TCJA, it was an itemized.

Who will benefit?

Since the standard deduction is a high hurdle to clear (over 12K for singles and 24K for married), the individuals that will likely benefit are ones with notable mortgage interest deductions and real estate taxes in ADDITION to their job expenses. Union dues only apply to a smaller percentage of taxpayers, so the benefit is narrower and targeted.

A better way

It would be better if these expenses were allowed as regular deductions like the proposal for union dues, however the historic abuse would need some hurdles to clear to make it sustainable. That unfortunately is not likely to happen as the reason for the changes in TCJA was to shift the burden to the employer.

If you want to follow the progress of these bills, www.congress.gov is a website that allows you to receive alerts when any bill has a change or progress

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