This guide covers U.S. federal tax reporting only. It's also written for Australian-based readers who have U.S. employment or filing obligations. It does not decide what you can deduct in Australia, which is a separate question under Australian rules.
The latest final form is for tax year 2025. The IRS 2026 versions are drafts marked "Not for filing," so check the IRS form page before you file.
Key Takeaways
- Form 2106 calculates eligible employee business expenses, but only four taxpayer groups can use it.
- Eligible groups: reservists, qualified performing artists, fee-basis officials, and employees with impairment-related work expenses.
- Vehicle costs use either standard mileage or actual expenses, never both. Commuting is excluded.
- Keep receipts, mileage logs, business purpose notes and reimbursement records.
What Is IRS Form 2106?
Form 2106 is titled "Employee Business Expenses." The 2025 version calculates eligible expenses and reimbursements. You attach it to Form 1040, 1040-SR, or 1040-NR.
Ordinary and necessary, in plain terms
An ordinary expense is common and accepted in your line of work. A necessary expense is helpful and appropriate, though not essential. Examples include a reservist's travel to a drill location and workplace attendant care for a disabled employee.
How it differs from other forms
- Sole proprietors and independent contractors report business expenses on Schedule C, not Form 2106.
- Employer reimbursement paperwork is separate from this form.
- Form 2106-EZ is gone. The IRS archive lists it only through tax year 2017, so don't use it.
Who Can File Form 2106 Under Current IRS Rules?
Holding a W-2 and having unreimbursed costs isn't enough. Most employees cannot deduct unreimbursed expenses as miscellaneous itemized deductions for tax years 2018 to 2025.
The One Big Beautiful Bill Act (Public Law 119-21, section 70110) removed the scheduled end date, so the suspension continues for years after 2025. Form 2106 survives only for the four exceptions below.
| Category | 2025 conditions |
|---|---|
| Armed Forces reservist | Travel more than 100 miles from home in connection with reserve services. The deduction is capped using federal per-diem rates for lodging, meals and incidentals, plus standard mileage, parking, ferry and toll costs. |
| Qualified performing artist | Employee of at least two employers, with at least $200 from each. Performing-arts expenses must exceed 10% of related gross income, and AGI before this deduction must be $16,000 or less. Married taxpayers generally file jointly unless they lived apart all year. |
| Fee-basis official | Employee of a state or local government, paid wholly or partly on a fee basis. |
| Impairment-related work expenses | Physical or mental disability, with attendant care or other workplace-connected costs that let you work. |
Reimbursements and accountable plans
An accountable plan requires three things:
- A business connection for the expense
- Substantiation within a reasonable period
- Return of any excess advances
Under IRS Publication 15, safe harbors are 30 days for an advance, 60 days to substantiate and 120 days to return excess.
Payments that fail these tests are treated as wages. Form 2106 does not revive deductions that are otherwise suspended.
Employee versus contractor
A W-2 employee follows the rules above. Freelancers, independent contractors and sole proprietors use Schedule C instead.
What Expenses Can Be Reported on Form 2106?
Part I of the 2025 form is organised by line:
- Line 1: vehicle expenses
- Line 2: parking, tolls and other transportation
- Line 3: travel other than meals
- Line 4: other expenses other than meals
- Line 5: meals
- Lines 6 to 10: totals, reimbursements and the deductible amount
Part II covers vehicle details, standard mileage (line 22), actual costs (lines 23 to 29) and depreciation (lines 30 to 38).
Direct work expenses
These need a clear work connection and must pass the ordinary-and-necessary test. For impairment-related filers, IRS instructions point to attendant care and other workplace-connected costs. They don't list specific devices, so don't assume any particular equipment qualifies.
Vehicle expenses
Pick one method per vehicle. The IRS business standard mileage rates are 67 cents per mile for 2024, 70 cents for 2025 and 72.5 cents for 2026.
- Standard mileage generally must be chosen in the first year an owned vehicle is used for business.
- Actual costs include fuel, oil, repairs, insurance, tires and licence fees.
- Parking and tolls can be reported separately from mileage.
- Fuel is part of actual costs, so you can't add it on top of standard mileage.
- Home-to-regular-workplace commuting is not deductible.
- Travel between workplaces, to a customer or to a temporary workplace may qualify, depending on the facts.
Travel, meals and entertainment
Business meals are generally limited to 50%. Travel meals and lodging require travel away from home that needs sleep or rest.
- 2025 standard meal allowance: $68 per day for most continental U.S. localities (some places run higher)
- Entertainment paid after 2017 is generally non-deductible
Common errors
- Claiming personal or commuting costs
- Deducting amounts your employer fully reimbursed
- Using unsupported estimates
- Claiming excessive costs unrelated to your duties
How to Complete and File Form 2106
Start with your records
Gather these before you touch the form:
- Receipts (required for lodging and other expenses of $75 or more, with exceptions)
- Mileage logs with dates, places and business purpose
- Employer reimbursement statements and your W-2
- Records supporting any impairment-related expense
Part I
Enter vehicle expenses, parking and tolls, overnight travel, other expenses, then meals. Total them, subtract reimbursements, and calculate the net deductible amount. The instructions separate reimbursements reported as wages from those included in the calculation.
Part II
Record vehicle-use information and separate business from personal miles. Then complete the standard mileage line or the actual-cost and depreciation lines, not both.
Where it goes
For 2025, reservist, performing artist and fee-basis official deductions go to Schedule 1 (Form 1040), line 12. Impairment-related expenses go to Schedule A, line 16, or Schedule A (Form 1040-NR), line 7. Attach Form 2106 to your return.
Form 2106 is not a standalone filing, and no separate mailing address exists. The IRS e-file page doesn't guarantee Form 2106 acceptance in every workflow, so confirm with your software. Amended returns use Form 1040-X.
Final review
- Confirm you fit one of the four categories.
- Remove commuting and duplicate costs.
- Reconcile reimbursements.
- Recheck the math.
- Keep your substantiation.
- Talk to a tax professional if multiple countries, amendments or doubtful eligibility are involved.
What If Form 2106 Does Not Apply?
Employees outside the four groups generally cannot use it to deduct unreimbursed costs. Self-employed people, contractors and sole proprietors report on Schedule C instead. Form 2106 is not a universal business-expense form.
Employer reimbursement
A compliant accountable plan can remove the need for an employee deduction entirely. Under that plan, the employer:
- Reimburses costs with a business connection
- Requires timely substantiation
- Collects any excess back
A note for Australian-based taxpayers
US citizens and resident aliens living abroad generally stay subject to U.S. filing rules based on filing status, age and gross income. That's not true of every Australian tax resident, so check your own position.
Form 2106 addresses U.S. federal reporting only. Australian deductions follow the ATO's criteria. The expense must be:
- Incurred
- Work-related
- Recorded
- Not private, capital or reimbursed
U.S. state tax needs its own analysis.
VJM Global's U.S.-compliant tax and accounting professionals can help Australian businesses and individuals with U.S. tax-compliance questions. They don't replace Australian tax advice.
Frequently Asked Questions
What is Form 2106 used for?
It calculates eligible employee business expenses and reimbursements for qualifying taxpayers. Eligibility is limited under current IRS rules.
Who can file Form 2106?
Armed Forces reservists, qualified performing artists, fee-basis state or local officials, and employees with impairment-related work expenses. Check the instructions for your tax year.
Can I deduct business expenses as an employee?
Generally not on a federal return, since unreimbursed employee expenses are suspended. Exceptions depend on your category, the expense, the tax year and any reimbursement.
What tax form do I use to claim mileage?
Qualifying employees use Form 2106, Part II. Independent contractors and sole proprietors use Schedule C. Your status decides the route.
Can I deduct both mileage and gas?
No. For one vehicle, choose standard mileage or actual expenses. Fuel belongs to actual costs, so claiming both double-counts it.
What can be considered a business expense?
An ordinary and necessary cost, meaning common in your work and helpful to it. Examples include qualifying travel and workplace attendant care. Personal and commuting costs are excluded.
