During the last week and a half since I posted about common trip-ups for calculating income for wage earners, I have had quite a few inquiries about what, exactly, an unreimbursed business expense is. And while many of the concerns have been quite irrelevant, it is a common issue I run into for clients, and there is obviously quite a bit of misunderstanding around these write offs, so I decided to dedicate a post to them.

Unreimbursed business expenses have nothing to do with owning a business or your day-to-day work costs. Unreimbursed business expenses are most commonly for work related education, such as continuing education for financial service professionals  or teachers, additional designations for EMTs or mechanics, or classes to maintain a license. Other common expenses I have encountered are: tools and safety equipment required to do your job, uniforms with the name of the company on them, chamber of commerce dues, and union dues. If any of these items are declared as a write-off on your taxes, or if you know you file a form 2106, then it can impact your ability to qualify for a mortgage.

Normally, a wage earner’s income is simply their W-2 income plus any other sources of income they declare. But unreimbursed business expenses reduce your taxable income dollar for dollar, which in turn lowers your income for the purpose of obtaining a mortgage dollar for dollar.

Now, there are ways to avoid this if we can prove the expense is a one time expense and will not be repeated year after year, but it can be complicated. For this reason, it is advisable to contact a lending professional to help you determine if your can exclude the unreimbursed business expense.

If you have any questions about unreimbursed business expenses and how they might impact your ability to get a loan, please contact me. And if you have anything to add about unreimbursed business expenses, please leave a comment.