Unreimbursed Employee Expenses on PA-40 Schedule UE, Allowable Employee Business Expenses

For PA PIT purposes, allowable employee business expenses are similar to, but not the same as, expenses for federal purposes. Pennsylvania law only permits expenses required to perform the duties of a job or profession. An allowable Pennsylvania employee business expense must be all of the following:

Ordinary, customary, and accepted in the industry or occupation;

Actually paid while performing the duties of the employment;

Reasonable in amount and not excessive;

Necessary to enable the proper performance of the duties of the employment; and

Directly related to performing the duties of the occupation or employment.

A taxpayer may deduct 100 percent of the Pennsylvania-allowable unreimbursed employee business expenses unless a specific provision or limitation applies. Unlike federal rules and limitations for percentage and accounting of the expenses, Pennsylvania law contains no such provisions.

Allowable expense do not include expenses where the taxpayer:

Received a fixed-mileage allowance or a per-diem allowance for the allowable business expense, and neither the employee, nor the employer, included the allowance in compensation; or

Accounted for the allowable expenses to an employer and the employer reimbursed the expenses in the exact amount of the expenses.

Do not include such reimbursements in gross compensation. Do not claim such expenses on a PA Schedule UE.

Note: Expenses may not be deducted based upon federal per-diem allowances. Only those expenses actually paid while performing the duties of employment may be deducted.