This may be a question for an expert, but thought maybe others have experience and could chime in. We're young parents/homeowners who try to do our taxes on our own, and this is only the second year it's actually made sense to itemize deductions.
My understanding is that most employee business expenses deductible on the federal level are not deductible on the state level in NJ. It seems there are exceptions though, for reimbursements that are included as income on your W2, if the amount being deducted matches the amount reimbursed.
For example, if you take a business trip, and your company reimburses you for travel, you cannot deduct these expenses, because in most cases your company's reimbursements are not included as income on your W2.
Nor can you deduct for non-reimbursed business expenses. I work from home and incur expenses for which my company does not reimburse me. I cannot deduct these from my NJ income, even though I can deduct from my federal income.
However, what about a stipend that is paid to cover expenses ahead of time? My wife gets a cell phone stipend once yearly, since they do not provide a company phone and she is required to use it for work. This stipend is included in her taxable income, though it's not listed separately on her W2 (you can see it on her pay-stub). The amount of her actual expense exceeds the amount of the stipend, so we'd plan on deducting only the amount of the stipend. Is this allowed, if we follow the rules for including a copy of the relevant federal 2106 (see below) and letter explaining? Not that it would be a problem, but is this inviting an audit?
Here is the section copied from the NJ 1040 instructions:
"Employee Business Expenses.
Employee business expenses are not deductible for New Jersey income tax purposes. However, you may exclude from the amount reported on Line 14 reimbursements for employee business expenses reported as wages on your W-2 provided that:
1. The expenses for which you are reimbursed are job-related expenses; 2. You are required to and do account for these expenses to your employer; and 3. You are reimbursed by your employer in the exact amount of the allowable expenses.
If you receive excludable reimbursements for employee business expenses which are included in your wages on your W-2, enclose a statement explaining the amount you are excluding and your reasons for excluding this amount. Also enclose a copy of your Federal Form 2106."
This may be a question for an expert, but thought maybe others have experience and could chime in. We're young parents/homeowners who try to do our taxes on our own, and this is only the second year it's actually made sense to itemize deductions.
My understanding is that most employee business expenses deductible on the federal level are not deductible on the state level in NJ. It seems there are exceptions though, for reimbursements that are included as income on your W2, if the amount being deducted matches the amount reimbursed.
For example, if you take a business trip, and your company reimburses you for travel, you cannot deduct these expenses, because in most cases your company's reimbursements are not included as income on your W2.
Nor can you deduct for non-reimbursed business expenses. I work from home and incur expenses for which my company does not reimburse me. I cannot deduct these from my NJ income, even though I can deduct from my federal income.
However, what about a stipend that is paid to cover expenses ahead of time? My wife gets a cell phone stipend once yearly, since they do not provide a company phone and she is required to use it for work. This stipend is included in her taxable income, though it's not listed separately on her W2 (you can see it on her pay-stub). The amount of her actual expense exceeds the amount of the stipend, so we'd plan on deducting only the amount of the stipend. Is this allowed, if we follow the rules for including a copy of the relevant federal 2106 (see below) and letter explaining? Not that it would be a problem, but is this inviting an audit?
Here is the section copied from the NJ 1040 instructions:
"Employee Business Expenses.
Employee business expenses are not deductible for
New Jersey income tax purposes. However,
you may exclude from the amount
reported on Line 14 reimbursements for
employee business expenses reported as
wages on your W-2 provided that:
1. The expenses for which you are reimbursed
are job-related expenses;
2. You are required to and do account
for these expenses to your employer;
and
3. You are reimbursed by your employer
in the exact amount of the allowable
expenses.
If you receive excludable reimbursements
for employee business expenses
which are included in your wages on your
W-2, enclose a statement explaining the
amount you are excluding and your reasons
for excluding this amount. Also enclose
a copy of your Federal Form 2106."
Please help. Thanks!