The Tax Cuts and Jobs Act made many sweeping changes to the tax system. One of the biggest changes under this new law is the elimination of the unreimbursed employee business expense beginning with 2018 tax returns.
This change means effectively that employees will no longer be able to offset their taxable income by common business expenses they incur during the year.
Be aware that this change under the TCJA does not have an effect on the expenses that non-wage earning self-employed individuals (e.g., individuals filing Schedule C or Schedule F) are allowed to claim to offset their income subject to the self-employment tax.
Prior to 2018, employees were allowed to claim deductions for their unreimbursed business expenses as itemized deductions on their tax return. Under these older rules, an employee's deduction for their unreimbursed employee business expenses could only be claimed if they itemized deductions (as opposed to claiming the standard deduction), and was only allowed to the extent the total of these expenses exceeded 2% of their AGI.
The TCJA not only eliminated this deduction for employee business expenses, but also eliminated all other miscellaneous itemized deductions subject to the 2% floor.
The elimination of these deductions under the TCJA are scheduled to be reinstated beginning in 2026.
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