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Ask The Experts: Tax Deductions
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Q: My husband and I operate a corporation together, although business has slowed considerably. Last October, my husband got a job as a full-time employee for a government agency in Alaska, but he does most of the work remotely (there are others in the office who are also based elsewhere). However, he is required to show up in-person for two weeks each in January and April. We are wondering what, if any, of his related expenses can be deducted? Here are some examples of things we have purchased that we hope can be deducted:
- A second cell phone to be on-call at all times
- Plane tickets to Alaska for his face-time with his employer
- Internet/phone plans for teleconferences with his employers and fellow staff while working remotely
- Transportation, food and lodging while in Alaska
A: The business expenses, including all those you mentioned, will be deductible but won’t be included on the corporate tax return but instead must be included on your Schedule A, Itemized Deductions. The key point is that any expenses that he incurs in connection with his full-time job that are not reimbursed will be deductible.
The downside is that the non-reimbursed employee business expenses are subject to limitation. Only the amount that is over 2 percent of your Adjusted Gross Income will end up being deductible on the return. In other words, if he has $2,500 in employee business expenses, and your AGI per your tax return is say, $100,000, then 2 percent of that gross income, or $2,000, will be the “floor” for deductibility, meaning the deduction will end up being $500.
If your total costs are close to the floor for deductibility,
you might consider getting a bit more aggressive with things like business meals, strategic planning meals, office supplies, and things like that which you already spent anyway but most likely were related to business and could be included. My best guess is that you and your husband had a dinner
or lunch or something like that at least once a month, where the entire meal conversation was solely dedicated
to managing the business.
Keith Hall, NASE Tax Expert