IRS Instruction 2106 – IRS Forms, Instructions, Pubs 2026 – In today’s complex tax landscape, understanding how to deduct employee business expenses can save you significant money. IRS Form 2106, “Employee Business Expenses,” allows certain qualifying employees to report and deduct job-related costs that aren’t reimbursed by their employer. While the Tax Cuts and Jobs Act of 2017 eliminated unreimbursed employee expense deductions for most workers, specific groups like Armed Forces reservists and qualified performing artists can still benefit. This comprehensive guide breaks down the latest IRS instructions for Form 2106 for the 2025 tax year, helping you navigate eligibility, calculations, and filing with confidence.
Whether you’re searching for “how to fill out Form 2106” or “2025 standard mileage rate for business,” we’ll cover everything using official IRS sources to ensure accuracy.
What Is IRS Form 2106 and Its Purpose?
Form 2106 is a tax form used by eligible employees to calculate and deduct ordinary and necessary business expenses related to their job. An ordinary expense is one that’s common in your field, while a necessary expense is helpful and appropriate—though not always required. These might include vehicle costs, travel, meals, or other work-related outlays.
The form’s primary purpose is to figure the allowable deduction for unreimbursed expenses, which you then report on Schedule 1 (Form 1040) or Schedule A, depending on your category. Importantly, due to tax law changes, only specific employees can use it—most others must treat excess reimbursements as taxable wages if from a nonaccountable plan.
Key related publications for deeper reading include IRS Publication 463 (Travel, Gift, and Car Expenses), Publication 529 (Miscellaneous Deductions), and Publication 946 (How To Depreciate Property).
Who Qualifies to Use Form 2106 in 2025?
Not everyone can file Form 2106. The suspension of miscellaneous itemized deductions under section 67(h) limits it to these groups:
- Armed Forces Reservists: Members of reserve components, such as the Army National Guard or Air Force Reserve.
- Qualified Performing Artists: Those who worked for at least two employers in the performing arts, earned $200+ from each, had expenses over 10% of performing arts income, and had adjusted gross income (AGI) of $16,000 or less (or combined for joint filers).
- Fee-Basis State or Local Government Officials: Paid on a fee basis by a state or subdivision.
- Employees with Impairment-Related Work Expenses: Costs for attendant care or other disability-enabling expenses at work.
If you’re in one of these categories and your deductible expenses exceed reimbursements (not included in Form W-2 box 1), use the IRS flowchart in the instructions to confirm eligibility. Rural mail carriers with qualified reimbursements don’t need the form, as those are treated under an accountable plan.
For example, if you have job-related vehicle or travel expenses and partial reimbursement, you may qualify—but commuting costs are never deductible.
What’s New in the 2025 IRS Instructions for Form 2106?
The 2025 instructions include several updates to reflect inflation adjustments and depreciation rules:
- Standard Mileage Rate: Increased to 70 cents per mile for business use of your vehicle (up from previous years; see Notice 2025-05).
- Depreciation Limits on Vehicles:
- Under section 179: Maximum expense election is $2,500,000 (phased down if costs exceed $4,000,000). SUV limit is $31,300 (Rev. Proc. 2024-40).
- Under section 280F (for passenger autos placed in service in 2025):
- With section 168(k) bonus depreciation: $20,200 (year 1), $19,600 (year 2), $11,800 (year 3), $7,060 (later years).
- Without bonus: $12,200 (year 1), $19,600 (year 2), $11,800 (year 3), $7,060 (later years) (Rev. Proc. 2025-16).
- Meal Allowances: Use the federal per diem rates from GSA.gov/perdiem for 2025, or specified rates for foreign travel.
- Lease Inclusion: Applies if vehicle fair market value exceeds $62,000 for leases starting in 2025.
These changes ensure deductions align with current economic conditions. Always check IRS.gov for future developments.
Step-by-Step Guide: How to Fill Out Form 2106?
Filling out Form 2106 involves Part I (Figuring Expenses) and Part II (Vehicle Expenses). Use actual expenses or the standard mileage rate—but choose wisely, as you can’t switch easily later.
Part I: Employee Business Expenses and Reimbursements
- Enter Expenses (Lines 1–6):
- Line 1: Vehicle expenses (from Part II).
- Line 2: Parking, tolls (0 if commuting only).
- Line 3: Travel (lodging, transportation for overnight away from tax home).
- Line 4: Other expenses (education, tools; exclude meals).
- Line 5: Meals (50% deductible; use standard allowance with records).
- Line 6: Total expenses.
- Reimbursements (Line 7): Enter employer reimbursements not in W-2 box 1. Allocate using the worksheet if needed (e.g., prorate meals).
- Deductible Amount (Lines 8–10): Subtract reimbursements, apply 50% meal limit, and report on Schedule 1 (line 12) or Schedule A (line 16) based on your category.
Part II: Information on Your Vehicle
- Section A: Provide dates, total miles, business miles, commuting details, and business use percentage.
- Section B (Standard Mileage): Multiply business miles by 70 cents (line 22).
- Section C (Actual Expenses): List gas, repairs, leases, etc.
- Section D (Depreciation): Calculate basis, apply section 179/special allowance, use depreciation method (e.g., 200% declining balance), and apply limits.
If using multiple vehicles, attach additional forms. Records are crucial—keep logs for miles, receipts for $75+ expenses.
Vehicle Expense Calculations: Standard Mileage vs. Actual Costs
Choose between:
- Standard Mileage Rate: Simple—70 cents per business mile. Must use in the first year for owned vehicles; not for fleet operations (5+ vehicles).
- Actual Expenses: More detailed—include gas, maintenance, depreciation. Prorate by business use percentage. Better if high costs.
Commuting doesn’t count; tax home is your main work location. For conversions from personal use, use fair market value as basis.
Depreciation Details and Limits for 2025
Depreciation recovers vehicle cost over time. Key points:
- Basis: Adjusted cost or fair market value.
- Methods: 200% DB for >50% business use; straight line otherwise.
- Section 179 and Bonus Depreciation: Elective expensing up to limits; bonus allows 100% in first year if qualified.
- Limits: As noted above; excess carries forward.
Use Form 4562 for complex calculations. See Pub. 946 for more.
Key Definitions and Reimbursement Types
- Tax Home: Your regular workplace; no deduction if itinerant.
- Accountable Plan: Reimbursements require substantiation and excess return— not taxable.
- Nonaccountable Plan: Excess is income.
- Incidental Expenses: Tips, fees; optional $5/day if no meals.
Reimbursements: Include third-party if applicable; qualified for rural carriers.
Special Rules, Exceptions, and Tips for Filing
- No deductions for entertainment or club dues post-2017.
- Meals limited to 50%; no travel if job >1 year (exceptions apply).
- Leases: Reduce by inclusion amount if FMV >$62,000.
- Tips: Consult a tax professional if unsure; keep detailed records to avoid audits.
For the latest PDF, download from IRS.gov. This guide is for informational purposes—always verify with official sources or a tax advisor.