We have been getting this question a bit this year already and we would love to help clarify – at least in part. If I can separate ‘expenses’ into three main categories I can address each of them in a simpler manner.

 

Personal expenses – which are things like mortgage interest for your home, donations to charity, or perhaps some additional sales tax (like a new vehicle purchase). Personal expenses are still a deduction on your tax return. The thing is, we add up all the personal expenses and say, ‘we can reduce your income by THIS much’ for the calculation of taxable income -OR- use the free, no questions asked, ‘standard deduction’. The change for 2018 is that the standard deduction is so much higher than it was in 2017. It is entirely possible that your personal expenses are less than the standard deduction this year. That is not entirely a bad thing. Using a deduction that is greater than your personal expenses is essentially reducing your income by MORE than you actually paid – which is great!

Employee expenses which are expenses you incur while receiving a regular paycheck (that takes out taxes). Expenses could be miles to visit clients or other work sites, safety clothing and equipment, a portion of cell phone use, etc. Employee expenses are the expenses that were sadly removed from the tax code. They were previously calculated as part of the itemized (personal) deductions. The increased standard deduction may still be higher than if you could use your employee expenses – meaning you still didn’t really ‘lose’ them. However, that is the confirmed change for all employees – whether it’s your main job or side job, work from home, or heavy travel jobs, no expenses as an employee are included for 2018 tax purposes.

Business expenses which are very similar to employee expenses, but instead involves expenses incurred while self-employed, working contract, or owning a business, sometimes referred to as “1099 jobs”. Business expenses are 100% still a deduction for 2018. It is still incredibly vital to your tax return and your overall financial health to use all your expenses for this type of income.

 

Charles Steinmetz

Senior Tax Professional