How to Claim Work-Related Expenses: Reimbursement Rules, Accountable Plans, and Tax Treatment

Employees regularly spend their own money on business-related purchases -- fuel for client visits, supplies for a project, meals during travel. According to IRS rules, unreimbursed employee business expenses are no longer directly deductible on personal tax returns for most W-2 workers (a change introduced by the Tax Cuts and Jobs Act of 2017 and extended through 2025). That makes employer reimbursement programs the primary path for employees to recover these costs without a tax hit.

Understanding how reimbursement works, what qualifies, and how to document expenses properly protects both employees and employers.

What Are Work-Related Expenses?

A work-related expense is any cost an employee incurs while performing duties for their employer. The IRS draws a clear line: the expense must be "ordinary and necessary" for your job, not a personal choice (IRS Publication 463).

Common work-related expenses include:

• Travel -- airfare, rental cars, rideshares, trains, and mileage for business trips (the 2026 IRS standard mileage rate is 72.5 cents per mile)
• Lodging -- hotel or other accommodation costs during overnight business travel
• Meals -- food costs while traveling or meeting with clients (typically reimbursed in full by the employer, though only 50 percent is deductible for the company)
• Supplies and equipment -- tools, materials, or devices purchased for work tasks
• Professional development -- conference fees, training courses, and certification exams required or encouraged by the employer
• Communication -- business-use portion of personal phone or internet service
• Uniforms and safety gear -- specialized clothing or equipment required by the job and not suitable for everyday wear

How Accountable Plans Work

The IRS defines two types of reimbursement arrangements: accountable plans and nonaccountable plans. The distinction matters because it determines how reimbursements are taxed.

Accountable Plan Requirements

Under an accountable plan, reimbursements are excluded from the employee's taxable income and are not subject to withholding or employment taxes. To qualify, the plan must meet three conditions:

1. Business connection -- the expense must relate directly to the employee's job duties
2. Adequate accounting -- the employee must provide receipts, invoices, or other documentation showing the amount, date, place, and business purpose of each expense within 60 days of when it was incurred
3. Return of excess amounts -- any reimbursement that exceeds the documented expense must be returned to the employer within 120 days

These timeframes are IRS safe harbors. If your company's policy uses shorter windows, that is also acceptable.

Nonaccountable Plans

If a reimbursement arrangement fails any of the three accountable plan tests, the IRS treats the entire reimbursement as taxable wages. The employer must include it on the employee's W-2 and withhold income tax, Social Security, and Medicare taxes. This outcome is worse for everyone, so most well-run businesses structure their reimbursement programs as accountable plans.

Step-by-Step Process for Claiming Expenses

1. Know Your Company's Policy

Before spending your own money, review your employer's expense reimbursement policy. It should specify what categories are reimbursable, any spending limits or pre-approval requirements, the submission deadline, and the required documentation.

2. Keep Documentation at the Point of Purchase

Capture receipts immediately. Photograph them with your phone or use an expense tracking app that lets you snap and categorize receipts on the spot. The IRS requires records showing:

• The amount spent
• The date of the expense
• The place or vendor
• The business purpose

For mileage, maintain a log with the date, starting location, destination, business purpose, and miles driven.

3. Submit an Expense Report

Most companies use a standardized expense report form or software. Attach all receipts and include a brief description of the business purpose for each line item. Timely submission matters -- delaying beyond your company's deadline (or the IRS 60-day safe harbor) can result in denied reimbursements or taxable treatment.

4. Await Approval and Payment

Your manager or finance team will review the report, verify documentation, and approve or reject individual line items. Approved amounts are typically paid via direct deposit, often on the next payroll cycle or within a set number of business days.

What Qualifies for Reimbursement?

Not every expense an employee incurs during the workday is reimbursable. To qualify under most company policies and IRS rules, an expense must meet these conditions:

• Directly related to job duties -- commuting from home to the office generally does not qualify, but travel between job sites does
• Incurred while performing work -- the expense must occur in the course of doing your job, not during personal time
• Supported by documentation -- no receipt, no reimbursement is a standard policy for good reason
• Within policy limits -- if the company caps hotel reimbursement at $200/night, spending $350 means the excess comes out of your pocket
• Submitted on time -- late claims may be denied outright

Special Cases

Remote Workers

Employees working from home may incur expenses for internet, phone service, office furniture, or supplies. Whether these are reimbursable depends on company policy and, in some states, on legal requirements. States like California, Illinois, and Iowa require employers to reimburse necessary business expenses, including remote work costs.

Per Diem Allowances

Some employers use per diem rates instead of actual-expense reimbursement for travel. As long as the per diem does not exceed the federal rates published by the General Services Administration (GSA), it is treated as an accountable plan reimbursement without requiring individual meal receipts.

Self-Employed Individuals

If you are self-employed or a freelancer, work-related expenses are deducted directly on Schedule C rather than through an employer reimbursement program. See our guide on freelance expense tracking for details.

How Employers Should Structure Reimbursement

Employers benefit from a clear, written expense reimbursement policy. A strong policy should:

• Define eligible expense categories and any dollar limits
• Require pre-approval for large or unusual expenses
• Set submission deadlines that align with IRS safe harbors
• Specify required documentation (receipts, mileage logs, business purpose descriptions)
• Outline the review, approval, and payment process
• State consequences for policy violations, including fraudulent claims

Using an integrated finance management platform that ties expense submissions to invoicing and reporting reduces administrative overhead and improves accuracy.

Key Takeaway

Work-related expense reimbursement is a structured process with clear IRS rules. Employees who document purchases promptly and follow their company's accountable plan recover costs without tax consequences. Employers who maintain well-defined policies protect themselves from compliance risk and keep payroll tax obligations accurate.

Related Articles:

• What Are Payroll Expenses?
• Why Should You Track Your Business Expenses Daily?
• Freelance Expense Tracking
• List of Common Tax Deductions for Owner-Operator Truck Drivers