Every year, millions of Americans spend their own money on business expenses and then wait for reimbursement checks. The problem is that not all expenses qualify for reimbursement, and the rules vary depending on the type of expense and the reason you’re claiming it. According to research, nearly 60% of expense reimbursement claims get delayed or denied because employees don’t understand what qualifies. The <a href=”https://www.legalzoom.com/articles/accountable-vs-nonaccountable-expense-reimbursement-plans”>IRS requires accountable plans to meet three specific criteria</a>: employees must prove a business connection, offer adequate documentation, and return any unsubstantiated reimbursements.
What You’ll Learn in This Article
💰 Which expenses qualify for tax-free reimbursement under federal accountable plans
📋 How to properly document and submit expenses to avoid denials
🚗 The exact mileage rates, meal allowances, and per diem amounts for 2025
❌ The most common mistakes people make that get their reimbursements rejected
✅ State-specific rules and how they affect your reimbursement eligibility
The Core Rule: The Three-Part Test for Reimbursements
Before anything else, you need to understand that the entire reimbursement system depends on one thing: your employer’s accountable plan. An accountable plan is a written or informal arrangement that lets your company reimburse you without treating the money as taxable income. Think of it as your employer saying: “We will pay you back for business stuff without charging you taxes on that money.”
The IRS created <a href=”https://www.irs.gov/individuals/international-taxpayers/nonresident-aliens-and-the-accountable-plan-rules”>three requirements in Treasury Regulation 1.62-2</a> that separate reimbursements that don’t count as income from reimbursements that do. Your employer must have a plan, your expense must have a business connection, and your employer must make you prove what you spent. If your company does this, the money stays out of your income and avoids payroll taxes.
When a plan fails to meet all three requirements, reimbursements become taxable wages. This means your paycheck gets bigger on paper, but so do your taxes. Your employer also pays their share of taxes on that money. The difference between an accountable plan and a nonaccountable plan can cost you hundreds of dollars per year.
Accountable Plans vs. Nonaccountable Plans: The Difference
Your company can run their reimbursement program one of two ways. An accountable plan requires receipts, business reasons, and proof that you spent the money. A nonaccountable plan throws those rules away.
| Element | Accountable Plan | Nonaccountable Plan |
|---|---|---|
| Taxable to employee | No | Yes |
| Requires receipts | Yes, within 60 days | No |
| Requires business purpose | Yes | No |
| Subject to payroll taxes | No | Yes |
| Employee must return excess funds | Yes, within 120 days | No |
Most businesses use accountable plans because they save both the employer and employee money on taxes. When a company uses a nonaccountable plan, everything goes on your Form W-2 as wages, and both you and your employer pay full payroll taxes. That approach costs more and makes paperwork harder.
The Three Requirements You Must Know
Requirement One: Business Connection
Your expense must have a clear business purpose. This means you had to spend the money while doing work for your employer, not for personal reasons. The <a href=”https://spu.edu/depts/finance/pdfs/irs-taxcode.pdf”>IRS requires employees to demonstrate the business purpose</a> of each expense. If you drove to your friend’s house for lunch, that’s personal. If you drove to a client’s office for a meeting, that’s business.
Business connection also means the expense must be ordinary and necessary. An ordinary expense is one that people in your type of job typically spend money on. A necessary expense helps you do your job well. These don’t have to be the most common things you buy, but they should make sense for your work situation.
Requirement Two: Adequate Substantiation
You must prove you spent the money. <a href=”https://www.fylehq.com/blog/expense-reimbursement-policy-irs”>Employees must submit information showing amount, date, location, and purpose</a> within a reasonable timeframe (usually 60 days). For most expenses under $75, you can write down what you bought. For anything $75 or more, you need a receipt. Lodging always requires a receipt, no matter the amount.
When companies ask for “adequate substantiation,” they mean your records must be detailed enough that someone else could look at them and agree you spent that money for business reasons. A receipt with just a date and dollar amount might not be enough. You should include what you bought, why you bought it, who was involved, and how it relates to your job.
Requirement Three: Return of Excess Amounts
<a href=”https://www.bench.co/blog/tax-tips/irs-accountable-plan”>If your company gave you an advance and you didn’t use all of it, you must return the extra money</a>. This must happen within a reasonable timeframe, usually 120 days. The same goes for reimbursements that turn out to be more than what you actually spent. This rule keeps employers from just handing out money with no accountability.
Travel and Transportation Expenses
Travel is one of the biggest categories for reimbursements. The key principle is that only the business portion gets reimbursed. If you combine a business trip with a vacation, your company can only reimburse the business days.
Mileage Reimbursement
When you use your personal car for work, you get reimbursed at the <a href=”https://www.irs.gov/newsroom/irs-increases-the-standard-mileage-rate-for-business-use-in-2025-key-rate-increases-3-cents-to-70-c”>2025 standard mileage rate of 70 cents per mile</a>. This rate includes your gas, oil, maintenance, insurance, and wear-and-tear on the vehicle. You don’t get paid separately for gas if you use the standard mileage rate.
The rate changed from 67 cents per mile in 2024 to 70 cents in 2025. Your employer can choose to pay you more than the standard rate, but any amount over 70 cents gets taxed as income. <a href=”https://ramp.com/blog/mileage-reimbursement-guide-for-employers”>If your company reimburses at 75 cents per mile, the extra 5 cents becomes taxable wages</a>.
You must track your mileage carefully. Keep a log or diary showing the date, starting place, ending place, miles driven, and business purpose for each trip. Personal use commuting (driving from home to your regular office) never qualifies. However, driving between job sites, from a client location to another client location, or from your home office to a client site all qualify.
Airfare, Hotels, and Rental Cars
When you travel away from your regular workplace overnight for business, your company reimburses your actual airline tickets, hotels, and car rentals. <a href=”https://www.fylehq.com/blog/travel-expense-reimbursement”>The business purpose of the expense, the date, time, place, and the cost are required documentation</a>. You need receipts for all of these expenses.
Your airline ticket must be for the most direct route to your destination and the most economical class of service. Buying first-class tickets counts as lavish unless your company approves it or you have a medical reason. Upgrading from economy to business class at your own expense doesn’t qualify unless your company specifically approved the upgrade in advance.
Hotels must be reasonably priced for the area where you’re traveling. There’s no exact dollar limit, but the IRS expects you to choose a standard commercial hotel, not a luxury resort, unless the business purpose requires it. Hotel mini-bars, movie charges, and spa services don’t qualify. However, room charges, taxes, and basic services do qualify.
Rental cars must be economy or mid-size vehicles unless your business needs require something larger. GPS rentals and damage waivers typically qualify, but entertainment options and personal upgrades don’t.
Meals and Per Diem Allowances
Meals during business travel have a twist: only 50% of your meal costs are deductible. This means if you spend $100 on meals while traveling for business, <a href=”https://kpmg.com/us/en/taxnewsflash/news/2025/09/notice-2025-54-per-diem-rates-employee-lodging-meals-incidentals.html”>your company can only deduct $50, and they reimburse you based on that amount</a>.
Instead of tracking every single meal receipt, many companies use a per diem system. <a href=”https://www.natptax.com/news-insights/blog/newly-released-special-per-diem-rates-for-2025-2026/”>The 2025 per diem rate for meals and incidental expenses in the continental U.S. is $80 per day</a>. For travel outside the continental U.S., the rate is $86 per day. These rates already include the 50% limitation built in.
The per diem covers meals, tips, dry cleaning, laundry, and other small necessities. You don’t need receipts for every meal when using per diem. However, you still must document the time, place, and business purpose of your trip. Your company keeps the records; you don’t submit meal receipts.
On your first and last day of travel, you get 75% of the per diem amount since you won’t be away for a full 24 hours. For high-cost cities, <a href=”https://www.natptax.com/news-insights/blog/newly-released-special-per-diem-rates-for-2025-2026/”>the per diem rate is $319 per day, with meals counting as $86</a>.
Local Transportation
When traveling on business, <a href=”https://www.fylehq.com/blog/travel-expense-reimbursement”>expenses like taxi or rideshare fares, local train fare, and car rentals for getting between your hotel and business meetings qualify</a>. Personal transportation like your own car to the airport doesn’t count unless you parked it for the entire trip and the parking fee is reasonable.
Meals and Entertainment Expenses at Home
Business meals and entertainment at your regular location have different rules than travel meals. Your company can only deduct 50% of meal costs when a business purpose exists. However, there’s a critical distinction between meals and entertainment.
Business Meals
A business meal must happen while you’re doing work-related activities. <a href=”https://www.thetaxadviser.com/issues/2023/nov/navigating-around-limits-on-meals-and-entertainment/”>Meal expenses must be ordinary and necessary, have a clear business connection, and not be lavish or extravagant</a>. When you eat lunch with a client to discuss a contract, that’s a business meal. When you grab a sandwich alone at your desk, that’s a personal meal.
Your company needs to know who attended, what business was discussed, and the restaurant name and date. The receipt should show these details or you should write them on the receipt. The meal cost must match what’s typical for that type of restaurant in your area. A $200 meal at a five-star restaurant for one business discussion might be too much, but a $150 meal during a multi-hour client meeting might be reasonable.
Meals at business meetings, conferences, and business lunches with clients all qualify. The 50% limit applies, so your company reimburses half of what you spent on food and beverages.
Entertainment Expenses (The Tricky Category)
Entertainment expenses have a completely different rule from meals. <a href=”https://www.thetaxadviser.com/issues/2023/nov/navigating-around-limits-on-meals-and-entertainment/”>Since 2018, entertainment expenses are not deductible, even if there’s a business connection</a>. This includes tickets to concerts, sporting events, theater shows, and golf outings.
However, meals provided at an entertainment event can still be deducted at 50%. If your company takes clients to a football game and buys them dinner in a box, the dinner is deductible at 50%, but the ticket cost is not deductible at all.
There’s an exception for employee events. Your company can deduct 100% of costs for holiday parties, summer picnics, and company outings for staff only. These are considered employee benefits, not entertainment.
Business Gifts
<a href=”https://hb.cpa/wrapping-up-the-tax-rules-for-business-gifts/”>The usual deduction for business gifts is limited to $25 per recipient per year</a>. If you give a customer a $100 gift, your company can only deduct $25. The gift must be a tangible item you can physically hold, like a coffee mug, notebook, or bottle of wine. You cannot deduct gift cards, cash, or cash equivalents.
Shipping, wrapping, and engraving costs don’t count toward the $25 limit if they don’t add substantial value. However, if you engrave your company name on a gift that costs $4 or less, that small gift doesn’t count against your limit at all.
Client entertainment meals are different from gifts. A $100 lunch with a client can be reimbursed at 50%, giving a $50 deduction. But that same $100 gift box to that client is capped at $25. Companies often choose the meal option because it provides a bigger tax benefit.
Office Supplies and Equipment
Any ordinary supplies you need for your job qualify for reimbursement. This includes pens, paper, folders, printer ink, and notebooks. Your company needs receipts for these items, and the amounts must be reasonable.
Equipment depends on how long it lasts. Items that last less than one year (like printer paper or ink cartridges) are typically expensed and reimbursed immediately. Items that last more than one year (like a desk or filing cabinet) are usually capitalized, meaning they get depreciated over time rather than fully expensed in one year.
Laptop computers, software licenses, and technical equipment generally qualify if they’re required for your job. However, your company might have a policy requiring you to use company-provided equipment instead. <a href=”https://ramp.com/blog/non-reimbursable-expenses”>Personal electronics like headphones, smartwatches, or gadgets typically don’t qualify unless your job requires them</a>.
Professional Development and Training
Professional development and training costs can qualify for reimbursement if they directly relate to your current job. The critical word is “current.” You cannot get reimbursement for education that would qualify you for a different job or career field.
Conferences, seminars, workshops, and courses that help you get better at your current job all qualify. Your company might reimburse registration fees, course tuition, books, exam fees, and travel to attend the training. However, the training cannot be required by law for you to have your current job, and it cannot be part of a program that leads to a new job.
For example, if you’re a programmer and take a course to learn a new programming language used in your current job, that qualifies. If you’re a programmer and get your MBA to move into management, that typically doesn’t qualify because it’s training for a new position. Some companies do pay for professional development with conditions, like requiring you to stay with the company for a set period after completing the training or requiring you to earn a certain grade.
Professional licenses and certifications required for your current job are usually not reimbursable because they’re considered a condition of employment. However, optional certifications that enhance your skills in your current role might be reimbursable. Your company determines which ones qualify.
Home Office Expenses
The rules for home office reimbursements depend on whether you’re an employee or self-employed. <a href=”https://www.cnbc.com/2025/02/11/home-office-deduction-who-qualifies-and-how-to-deduct/employees”>W-2 employees currently cannot deduct unreimbursed home office expenses under current tax law</a>. However, if your employer reimburses you under an accountable plan, those reimbursements can work differently.
Self-employed people and independent contractors who use part of their home as their principal place of business can deduct home office expenses. <a href=”https://www.portebrown.com/newsblog-archive/key-rules-for-home-office-deductions”>The space must be used regularly and exclusively for business purposes</a>. Your home office doesn’t need to be an entire room; a desk in a corner works if you use only that space for work.
Your company can reimburse you for your home office expenses if there’s a documented accountable plan. These expenses include utilities (the portion used for the office), rent or mortgage interest (allocated to the office space), internet (if used only for work), office furniture, and equipment. The simplified option lets you deduct $5 per square foot of home office, up to 300 square feet, for a maximum of $1,500 per year.
Health Savings Accounts and Flexible Spending Accounts
Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) work differently than regular business reimbursements. These are pre-tax accounts your employer sets up for healthcare expenses.
HSA and FSA-Eligible Expenses
<a href=”https://www.truemed.com/blog/hsa-eligible-items”>Typical HSA-eligible expenses include doctor visits, surgeries, prescription medications, dental care, vision care, mental health therapy, and medical equipment</a>. Over-the-counter medicines like ibuprofen, allergy medicine, and cold remedies are eligible. First-aid supplies, bandages, and diagnostic devices also qualify.
Some items need a letter of medical necessity from your doctor. This includes supplements, fitness memberships (if prescribed by your doctor), massage therapy, acupuncture, and saunas. <a href=”https://www.truemed.com/blog/hsa-eligible-items”>The letter proves the item is part of a specific treatment or prevention plan, not just general wellness</a>.
Items that are typically ineligible include cosmetic procedures (unless they treat an injury or deformity), vitamins without a medical necessity letter, gym memberships without a letter, and general wellness products like beauty items.
Dependent Care FSA
A Dependent Care FSA covers childcare, daycare, nanny services, and before/after-school care for children under age 13. It also covers adult daycare and elder care. <a href=”https://hr.umich.edu/benefits-wellness/financial/flexible-spending-accounts/dependent-care-flexible-spending-accounts”>Eligible dependent care expenses are those provided while you and your spouse (if married) were at work or looking for work</a>.
Ineligible expenses include babysitting so you can attend social events, care provided by your child under age 19, overnight camps, and education costs like private school tuition. Transportation to and from daycare can qualify if someone other than the daycare provider provides it.
Insurance Premiums
Most insurance premiums cannot be reimbursed through regular business reimbursement plans. However, there are specific exceptions.
<a href=”https://www.fidelity.com/learning-center/smart-money/hsa-and-fsa-eligible-expenses”>Long-term care insurance premiums can be reimbursed through an HSA up to IRS limits, and health insurance continuation coverage like COBRA can be paid with HSA funds</a>. Health insurance premiums for Medicare coverage (if you’re 65 or older) can also be paid with HSA funds, but supplemental insurance premiums cannot.
Workers’ compensation and disability insurance premiums are not reimbursable. Employer-paid health insurance premiums are already deducted from your pay before taxes, so you cannot get reimbursed for those same premiums through an accountable plan. Double-dipping is not allowed.
The Three Most Common Scenarios and What Happens
Scenario One: The Sales Rep’s Business Trip
| Action | What Happens |
|---|---|
| Sales rep drives to three client meetings in different cities (total 200 miles) using her personal car | She submits mileage at 70¢ per mile and gets $140 reimbursement |
| She stays overnight and eats $80 in meals | Her company reimburses her $40 (50% of meals) |
| She stays at a $120 hotel | She gets full $120 reimbursement |
| She keeps no receipts or documentation | Her reimbursement gets denied for lack of substantiation |
This scenario shows how travel works when properly documented. The sales rep must keep her mileage log, hotel receipt, and meal receipts. Without these, her company can’t reimburse her under the accountable plan rules.
Scenario Two: The Home Office Worker
| Action | What Happens |
|---|---|
| Employee sets up a home office (100 sq. ft. of 1,000 sq. ft. home) | He can use simplified method: 100 sq. ft. × $5 = $500 deduction per year |
| He tries to deduct internet, utilities, and furniture | If he’s a W-2 employee, these are not deductible; if he’s self-employed, he can deduct the business portion |
| He provides no documentation to his employer | His employer doesn’t reimburse because there’s no accountable plan in place |
| His employer creates an accountable plan and reimburses him $500 per year | Reimbursement is tax-free because it meets all three accountable plan requirements |
This shows why having an accountable plan in writing makes a difference. Without it, home office reimbursements become taxable wages.
Scenario Three: The Client Entertainment Disaster
| Action | What Happens |
|---|---|
| Employee takes two clients to dinner and spends $180 | He requests reimbursement for $180 |
| He provides no receipt and no detail about business purpose | His employer denies the claim because there’s no substantiation |
| He provides receipt but no names, no business purpose, no dates | His employer reimburses only $40 (50% of $80, assuming they trust half of it) |
| He provides receipt with client names, dates, business purpose, and all details | His employer reimburses him $90 (50% of $180) |
| He also includes concert tickets ($200) from entertaining the same clients | His employer reimburses $90 for dinner only; concert tickets get $0 because entertainment is not deductible |
Documentation matters tremendously. The same expense can get denied, partially reimbursed, or fully reimbursed (up to the 50% limit) depending on what documentation exists.
Common Mistakes to Avoid
Mistake One: Missing the 60-Day Documentation Window
<a href=”https://wise.com/us/blog/reimbursement-receipts”>The IRS requires reimbursement receipts to be submitted within 60 days of incurring an expense</a>. If you submit a receipt 90 days later, your employer can deny it. Some companies have even stricter policies and require receipts within 30 days.
The clock starts when you spend the money, not when you submit the expense report. If you travel in October and don’t submit your receipts until December, you’ve missed the window. Set phone reminders to submit receipts weekly or use an expense app that uploads receipts immediately.
Mistake Two: Confusing Meals with Entertainment
Many people submit concert tickets, sporting event tickets, or golf outings as meal expenses. These are entertainment, not meals, and they’re not deductible since 2018. The only portion that might be deductible is if you bought food at the event, and that’s only 50% deductible as a meal, not as entertainment.
A business dinner with a client is a meal. Tickets to a show followed by dinner means the dinner might be 50% deductible, but the tickets are not deductible.
Mistake Three: Mixing Personal and Business Expenses
If you drive to the airport to catch a business flight, that’s personal commuting (not deductible). Once you arrive at the business destination, driving between business meetings is deductible. People often blur these lines and try to deduct the drive to the airport.
Similarly, if you travel for business but add vacation days, only the business days’ expenses get reimbursed. Hotel costs for your vacation days, meals on vacation days, and entertainment on vacation days don’t qualify.
Mistake Four: No Receipt for Expenses Under $75
While the IRS allows some flexibility for expenses under $75 (except lodging), most employers require receipts for everything. Don’t assume you can skip receipts for small expenses. Your company’s accountable plan likely requires all expenses to be documented. Check your employee handbook or ask your manager.
Mistake Five: Forgetting About the 50% Meal Limit
Employees often submit meal expense reports expecting 100% reimbursement. Your employer can only reimburse 50% of meal costs. If you spent $100 on meals, expect $50 reimbursement, not $100. This applies to all meals except those covered under per diem allowances.
Mistake Six: Treating Personal Expenses as Business
Haircuts, toiletries, gym memberships, and personal clothing are never deductible as business expenses unless there’s a specific reason. A chef’s chef’s jacket is a business expense. Regular street clothes are personal expenses. A haircut so you look good at work is personal. A specialized treatment as a medical expense through your FSA is different.
Do’s and Don’ts for Reimbursements
Do’s
✅ Do keep detailed records. Write down not just what you spent, but why you spent it, who was involved, and how it relates to your job. A receipt alone isn’t enough. Add notes to the receipt if needed.
✅ Do submit receipts on time. Get your expense report in within 30 to 60 days of spending the money. Don’t wait until the end of the month or quarter. Timely submission is a requirement of accountable plans.
✅ Do separate business and personal expenses. If you make a mixed purchase (like a meal for yourself and a client), split the receipt into business and personal portions. Only the client’s meal is deductible.
✅ Do ask your employer first. Before spending your own money on something that might be reimbursable, ask your manager or HR whether the company will reimburse it. This prevents surprises and ensures you meet their requirements.
✅ Do use your employer’s expense system. If your company has an expense reporting app or form, use it. It’s built to meet their accountable plan requirements and makes reimbursement faster.
Don’ts
❌ Don’t assume similar expenses always qualify. A hotel meal might be 100% deductible if it’s part of travel lodging, but a local restaurant meal is only 50% deductible. Context matters.
❌ Don’t mix gifts and entertainment. You get a $25 cap for gifts and a 50% cap for meals at entertainment events, but tickets themselves are not deductible. Choose the treatment that gives you the best result.
❌ Don’t expense commuting costs. Driving from home to your regular office never qualifies, even if you work from home some days. This is the most commonly made mistake.
❌ Don’t ignore lavish or extravagant limits. There’s no magic dollar amount, but if the expense seems over-the-top, it probably won’t be reimbursed. A $500 dinner for two people is likely too much. A $100 dinner for ten people probably fine.
❌ Don’t submit photocopies instead of original receipts. Use original receipts or digital copies (like photos). Faded or unclear receipts can be rejected.
❌ Don’t wait until the end of the year to submit everything. Submitting a year’s worth of receipts in December creates confusion and might miss the 60-day window. Submit as you go.
Pros and Cons of Accountable Plans
Pros
✅ Tax-free reimbursements: Properly reimbursed expenses don’t count as income, so you pay no income tax on them.
✅ No payroll taxes: Your employer avoids paying their portion of Social Security and Medicare taxes on reimbursements, which saves them money and can incentivize them to use accountable plans.
✅ Clear rules: An accountable plan eliminates confusion about what does and doesn’t get reimbursed because the company documents the policy.
✅ Employee protection: With a formal accountable plan, employees know they’ll be reimbursed as long as they follow the rules. There’s no favoritism or guesswork.
✅ Lower cost than regular raises: Employers can attract employees through reimbursement policies instead of raising base salaries, which saves on benefits calculations and payroll taxes.
Cons
❌ Documentation burden: You have to keep every receipt and write down details for every expense. This takes time and effort.
❌ Reimbursement delays: Companies process reimbursements on their schedule, not immediately. You might wait weeks for your money back.
❌ 50% meals limit: You never get back 100% of meal costs; it’s always 50%, which can feel unfair for legitimate business meals.
❌ Three-month reconciliation: If you don’t return advances or excess amounts within about 120 days, the company can treat it as taxable income, creating an unwelcome tax bill.
❌ Strict rules for home office: If you’re a W-2 employee, you can’t get home office reimbursements unless your employer has a specific accountable plan for it, and it still has limits.
Federal Law and State Nuances
The federal accountable plan rules apply everywhere in the United States. <a href=”https://www.irs.gov/pub/irs-drop/rr-05-52.pdf”>An arrangement qualifies as an accountable plan only if it satisfies all three requirements in Treasury Regulation 1.62-2</a>. These federal rules set the floor for reimbursements.
Some states add their own rules on top of federal requirements. <a href=”https://www.fylehq.com/blog/expense-reimbursement-policy-irs”>Businesses must reimburse only legitimate business expenses, require proper documentation within 60 days, and have employees return excess advances within 120 days</a>, and individual states might require faster timelines. For example, California requires employers to reimburse employees for all business expenses within a specific timeframe. New York and other states have similar laws.
The best approach is to assume your state follows federal law at minimum and then check whether your specific state adds stricter requirements. Your company’s HR department should know your state’s rules.
Key Entities and How They Work Together
The IRS sets the rules through regulations and publications. Your employer creates or follows an accountable plan that meets IRS requirements. Your manager or HR department administers the plan by reviewing and approving or denying reimbursement requests. Your payroll department processes reimbursements and ensures they’re handled correctly for tax purposes.
You, the employee, gather receipts, document your expenses, submit requests on time, and return any excess amounts. The company’s accountant or tax person reviews the accountable plan each year to make sure it still complies with IRS rules, which change occasionally.
External accountants and tax professionals sometimes audit these plans to ensure companies are handling them correctly. The IRS can also audit an accountable plan if they believe it doesn’t meet the three requirements, which would result in reclassifying reimbursements as taxable wages for everyone in the plan.
FAQs
Can I get reimbursed for my daily commute to my regular office?
No. Daily commuting from home to your regular workplace is personal, not business-related, and never qualifies for reimbursement under any circumstances, even if you carpool or use public transportation.
What if my company doesn’t have an accountable plan—do reimbursements still count as income?
Yes. If your company reimburses expenses without an accountable plan in place, the reimbursements are taxable wages subject to income and payroll taxes for both you and your employer.
Do I need to keep receipts for expenses under $50?
Not always. The IRS allows some exceptions for small expenses under $75, but your company’s policy might be stricter. Always check your employee handbook or ask HR about your specific company’s requirements.
Can my company reimburse me for a professional certification course that would qualify me for a different job?
No. Reimbursements for education or training that would qualify you for a new job or career field are not reimbursable under accountable plan rules because they don’t meet the business connection requirement.
If I combine a business trip with vacation, what portion gets reimbursed?
Only the business portion. If you travel three days for business and two days for vacation, expenses for only three days get reimbursed. Travel costs to get to the destination are fully reimbursed if business is the primary purpose.
Can I deduct the full cost of a business meal, or is it always 50%?
It’s always 50%. Your employer can deduct only half of meal costs for themselves and half for providing meals to clients or employees. The 50% limit applies whether you use per diem or track actual expenses.
What counts as “adequate documentation” for an expense?
Adequate documentation includes the receipt, the date, the amount, the business purpose, and the location. For meals and entertainment, include who attended and what business was discussed. For travel, include the business reason for the trip.
If I submit an expense report late, can my employer still reimburse me?
Maybe, but it’s not required. The 60-day guideline for submitting receipts is part of the accountable plan requirement. Submissions after 60 days can be denied, though some employers accept late submissions at their discretion.
Can an employer reimburse me for gifts I bought for clients?
Yes, up to $25 per recipient. Your employer can deduct a maximum of $25 for gifts given to each individual customer or client per year. The gift must be a tangible item, not a gift card or cash.
Are personal protective equipment or uniforms reimbursable?
It depends. Uniforms required by your job (like a chef’s white jacket or a nurse’s scrubs) are usually reimbursable. Regular personal clothing is not reimbursable. Check whether your job requires specific attire and ask your employer.
Can I use HSA or FSA funds for over-the-counter vitamins?
Only with a letter of medical necessity. Over-the-counter vitamins and supplements are not automatically HSA- or FSA-eligible. You need written documentation from your doctor showing the vitamin is part of your treatment plan.
Related reading
- Are Reimbursements Really Taxable? Avoid this Mistake + FAQs
- Do Reimbursed Expenses Go on a 1099? (w/Examples) + FAQs
- Is Reimbursed Mileage Taxable? (w/Examples) + FAQs
- Are Airlines Required to Reimburse for Delays? (w/Examples) + FAQs
- How to Reimburse an Employee in QuickBooks Online (w/Examples) + FAQs
- Are Employers Required to Reimburse Mileage at the IRS Rate? (w/Examples) + FAQs
- What Expenses Can An S-Corp Deduct? + FAQs