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Pennsylvania Schedule UE - Allowable Employee Business Expenses Instructions
For all schedules, enter the complete name and SSN of the taxpayer reporting the income or claiming the expenses. If filing a schedule jointly, enter the complete name and SSN of the taxpayer listed first. Each taxpayer must submit a separate schedule for each separately owned business, profession or farm. You and your spouse may file these schedules jointly:
PA Schedules A, B and J - these schedules do not show any losses or expenses.
- You may submit Federal Schedule B if you do not have any Capital Gains Distributions and your amounts are exactly the same for Pennsylvania.
- You cannot submit a Federal Schedule K-1 in lieu of PA Schedule J.
PA Schedule SP – see the instructions beginning on Page 33 for when to include this schedule.
PA Schedule O – see the instructions beginning on Page 30 for when to include this schedule.
FILING TIP: If a joint return including IRC Section 529 Tuition Account Program deductions for both taxpayers is filed, schedules reporting the income on a separate basis for each taxpayer should be included, so that the Department may calculate the income limitations.
You and your spouse must file these schedules separately, each reporting only your own income, expenses, and net income (losses):
PA Schedule UE – a separate schedule for each employer or job.
- You may only submit a Federal Schedule 2106 when your unreimbursed travel expenses are the same for Pennsylvania and you do not have any miscellaneous expenses.
PA Schedules C, C-EZ and F – separate schedules for each commercial activity, unless both own each of the businesses or farms jointly.
PA Schedules D, D-1, D-71 – separate schedules for each taxpayer.
- You may submit Federal Schedule D only when reporting sales where your federal and PA basis are the same, you do not have any losses, and you are not reporting any capital gains distributions from mutual funds on the Federal Schedule D.
PA Schedule E – follow the instructions on the schedule.
- You may submit Federal Schedule E, Part 1 only for rental property and only when reporting income, not losses.
PA Schedules G-R (with G-S/G-L) and T – separate schedules for each taxpayer.
PA Schedule OC – a taxpayer and spouse must file separate PA-40 tax returns if one or both are claiming any credits on this schedule.
Reproducing PA Returns and Schedules You may not make photocopies of the schedules in this booklet, or prepare your own facsimile schedules. Also, do not submit a photocopy of your PA-40 form.
Multiple Schedules If you have multiple Schedules A, B, D, E, or J due to entries beyond the capacity of the forms, include the total income for that form on one form only.
PA SCHEDULE UE (LINE 1b)
Allowable employee business expenses for PA purposes are similar to, but not the same as, expenses for federal purposes. PA law only permits expenses required to perform the duties of a job or profession.
Allowable Pennsylvania Employee Business Expenses Must Be:
- Ordinary, customary, and accepted in the industry or occupation in which you work;
- Actually paid while performing the duties of your employment;
- Reasonable in amount and not excessive;
- Necessary to enable you to properly perform the duties of your employment; and
- Directly related to performing the duties of your occupation or employment
IMPORTANT: You may deduct 100 percent of your PA allowable unreimbursed employee business expenses. PA law does not have federal expense and percentage accounting limitations and thresholds.
You did not incur an allowable business expense during the year if you:
- Received a fixed mileage allowance or a per diem allowance for the allowable business expense, and neither you, nor your employer, included the allowance in your compensation; or
- Accounted for your allowable expenses to your employer and your employer reimbursed you in the exact amount of your expenses.
Do not include such reimbursements in gross compensation. Do not claim such expenses on a PA Schedule UE.
If your employer does not reimburse you, you may reduce your compensation by your allowable expenses. If your reimbursement is more than your allowable expenses, you must report the excess as taxable compensation on Line 1a.
EXAMPLE: Dave earned compensation of $30,000. He incurred allowable vehicle and travel employee business expenses of $3,000, and was reimbursed $3,500. He must complete a PA Schedule UE. He includes the excess $500 as compensation. His total net taxable compensation is $30,500.
Sole proprietors, partners, shareholders, or other self- employed individuals should not use PA Schedule UE to claim expenses.
CAUTION: Nonresidents must use PA Schedule NRH to apportion expenses for PA Personal Income Tax purposes. A copy of PA Schedule NRH may be obtained by using one of the Forms Ordering Services listed on Page 3. Part- year residents may only claim 100 percent of unreimbursed business expenses or use form 2106 to report the expenses if expenses were incurred only while providing services in Pennsylvania or while a PA resident. Include a statement indicating the method used to determine the expenses for the period of residency (PA Schedule NRH may also be used for this purpose).
Pennsylvania Does Not Allow The Following Business Expenses, Even If Allowed for Federal Purposes:
- Personal, living, or family expenses
- Dues to fraternal organizations, professional societies, Chambers of Commerce, or recreational club memberships
- Dues and subscriptions to publications, including trade and professional publications
- Political candidate or campaign contributions
- Charitable contributions
- Commuting expenses
- Cost of meals while working late, unless while traveling away from home overnight on business
- Childcare or elderly care expenses
- Life, disability income and health insurance premiums 26 PA-40 www.revenue.state.pa.us
- Contributions to deferred compensation plans or other pension plans
- Legal fees (except to recover back wages), fines, penalties and bad debts
- Bribes, kickbacks, or other illegal payments
- Job hunting or other pursuit of employment expenses
- Malpractice insurance premiums, except when allowed in Part A
- Moving expenses, except when allowed in Part E
- Educational expenses, except as allowed in Part F
- Capital expenditures
FILING TIP: You must file a separate PA Schedule UE for each employer. Spouses may not report joint expenses on a PA Schedule UE, even if filing jointly.
General Instructions Enter the name of the taxpayer claiming the expenses and the SSN shown first on the return. Enter all the employer information, and briefly describe the job or position for which you incurred the expenses you are claiming. Enter only the expenses incurred for the employer listed on this schedule.
Keep Your Records The Department has the legal authority to require evidence that the expenses you claim on a PA Schedule UE are allowable for PA purposes. Keep your necessary documents, receipts, vouchers and other records for at least four years.
PA Schedule UE - Side 1. Side 1 of this schedule is for the most common expenses claimed on PA income tax returns.
Part A. Direct Employee Business Expenses
You pay these expenses directly or through a withholding arrangement with your employer. These expenses are necessary to perform or maintain your job. Itemize the nature and amount of the expenses you are claiming in Part A.
1.Union Dues. Union dues, assessments, and initiation fees are allowable business expenses if:
- Such payments are a condition of continued membership in the union, and membership is related directly to your present job; or
- Such payments are a required wage deduction under an agency shop agreement.
2.Work Clothes and Uniforms. The costs of purchasing and maintaining uniforms and work clothing to protect you from bodily injury are allowable business expenses if the uniforms and clothing are both:
- Of a type specifically required by the employer to be purchased as a condition of continued employment; and
- Not adaptable to general usage.
3.Small Tools and Supplies. Expenditures for small tools and supplies that your employer does not provide, but you must have to perform the duties of your job, are allowable business expenses. Depreciation is the annual deduction you must take to recover the cost of business property having a useful life beyond the tax able year. If any of these tools or supplies has a useful life of more than one year, you depreciate or amortize the cost in Part G. See the Depreciation – PA Limitations instructions beginning on Page 10 for more information.
4.Professional License Fees, Malpractice Insurance, and Fidelity Bond Premiums. Trade, professional, or occupational licenses or fees required as a condition of employment are allowable business expenses. Include malpractice insurance and fidelity bond premiums where required by law or by your employer.
5.Total Direct Employee Business Expenses. Add Lines 1 through 4.
Part B. Business Travel Expenses
6. Vehicle Expenses: Standard Mileage Rate. Enter the amount from your Federal Form 2106 or Federal Form 2106-EZ. Otherwise, enter your business miles and the federal milea.ge allowance. Then, calculate your allowable business mileage expense.
Commuting Expenses. You cannot deduct the costs of public transportation or driving a car between your home and your main place of work. These are personal commuting expenses. You cannot deduct commuting expenses no matter how far your home is from your regular place of work. Commuting costs between different jobs for different employers are also not allowable.
CAUTION: If you cannot or do not file a Federal Form 2106 or Federal Form 2106-EZ, follow the federal rules for determining your allowable expenses. If using one of the Federal Forms 2106, you must itemize Line 4, "Business Expenses" from these forms in Part C of PA Schedule UE.
Vehicle Expenses - Actual. Pennsylvania does not follow the federal floor limitations on allowable expenses. You may always claim your allowable actual expenses for PA purposes. Start with your federal form and adjust for PA purposes.
7. Enter your actual expenses from your Federal Form 2106.
8. Add back the "Inclusion Amount" since this rule does not apply for PA purposes.
9. Depreciation. You may use any generally accepted depreciation method except either of the bonus depreciation elections enacted for federal purposes in 2002 and 2003. See DIFFERENCES BETWEEN PA PIT AND IRS beginning on Page
10. If using a different method for PA purposes, enter the method you used and the adjusted expense here. 10. Actual Travel and Mileage Expenses. Add Lines 7, 8, and 9.
Other Business Travel Expenses
Enter the actual amount of these expenses that you incurred, or the amount from your Federal Form 2106 or Federal Form 2106-EZ.
11. Parking fees, tolls, and transportation
12. Travel expenses while away from home overnight
13. Meals and entertainment expenses
IMPORTANT: Meals and entertainment expenses are 100 percent allowable. However, meals while not in overnight traveling status (e.g. meals while working late) are not allowable. See the PA PIT Guide for additional information.
14. Total Business Travel Expenses. Add Lines 6 or 10, and Lines 11, 12, and 13.
Part C. Miscellaneous Expenses
Include the PA allowable expenses that you report on your Federal Form 2106 in the space provided. You must include a separate statement that itemizes and describes in detail these expenses. Additional examples of expenses that you may claim include:
- Breakage fees or cash shortages you must pay to your employer;
- Fees or income included in your PA taxable compensation on your Form W-2 that you are required to pay to your employer as a condition of employment;
- Costs incurred by blind employees to pay readers who assist them in performing their job duties;
- Business gifts must be ordinary, necessary, reasonable, and actually incurred for business purposes. Pennsylvania does not follow federal percentage limits on such expenses.
CAUTION: You may be a statutory employee for federal purposes. However, PA law does not have a similar provision. As a statutory employee, you may have to claim your income as compensation and your expenses on PA Schedule UE. For more information on statutory employees see Chapter 7 of the PA PIT Guide found on the Department’s Web site. As an employee, you must claim your expenses on PA Schedule UE. If you are self- employed, you must report your business activity on Line 4 of your PA-40 and enclose the necessary PA Schedule C.
15. Total Miscellaneous Expenses. Enter the total of the miscellaneous expenses you listed.
FILING TIP: If you do not have expenses for your office or work area (Part D), moving (Part E), education (Part F), or depreciation (Part G), complete Side 1, and include your allowable unreimbursed employee business expenses on Line 1b of your PA-40.
Total Allowable PA Employee Business Expenses
Lines A through G. Enter the amounts of your allowable expenses from each part of PA Schedule UE that you completed.
H. Total Expenses. Add the expenses you are claiming from each Part of PA Schedule UE.
CAUTION: If you are a nonresident or part-year resident who earned income and incurred expenses within and outside Pennsylvania, you must complete PA Schedule NRH.
I. Reimbursements. If your employer included your reimbursement in PA taxable compensation on your Form W-2, do not enter that reimbursement here. If your employer did not include your reimbursement on your Form W-2, enter the amount you received from your employer.
J. Net Expense or Reimbursement.
- If Line H is more than Line I, include your unreimbursed expenses on Line 1b of your PA-40.
- If Line I is more than Line H, include your excess reimbursements on Line 1a of your PA-40.
PA Schedule UE - Side 2
Part D. Office or Work Area Expenses
You may claim these expenses when your employer does not provide you with a suitable work area and you can answer YES to each of these questions:
D1. Does your employer require you, as a condition of employment, to maintain a suitable work area away from the employer's premises?
D2. Is this work area the principal place where you perform the duties of your employment?
D3. Do you use this work area regularly to perform the duties of your employment?
If your employer provides a suitable work area, or you answer one or more of the above questions NO, you cannot claim any office or work area expenses.
Actual Office or Work Area Expenses
Lines a to h. Enter the actual expenses you incurred if you are claiming office or work area expenses on this schedule. Include statements detailing property maintenance and other apportionable expenses from Lines f and g.
Line i. Add Lines a through h.
Line j. Calculate the percentage of your property that you use for business.
Line k. Apportioned Expenses. Multiply Line i byLine j.
Line l. Total Office Supplies. Enter the actual cost of supplies that you use exclusively for business purposes.
16. Total Office or Work Area Expenses. Add Lines k and l.
Part E. Moving Expenses
You may deduct moving expenses incurred to retain employment. You may also deduct moving expenses to report to a new location after obtaining employment. However, you must meet the Distance Test described below.
You may deduct allowable expenses you incur in moving yourself, your immediate family, your household goods, and your personal belongings, including the cost of transportation to your new home, using your actual out-of-pocket costs or the federal mileage allowance. You may deduct expenses for storing household goods, for meals and lodging on the way, including such costs on the day you arrive, and parking fees and tolls.
You may not deduct expenses for:
- selling or purchasing a house;
- breaking a lease; house hunting;
- securing lodging prior to moving;
- seeking new employment;
- moving for your own convenience;
- relocating to a new job or workplace less than 35 miles farther than your old commute to work; or
- moving anywhere other than within or into Pennsylvania.
Distance Test. Your new workplace must be at least 35 miles farther from your old residence than your old workplace was. EXAMPLE: If your old workplace was three miles from your old residence, your new workplace must be at least 38 miles from your old residence. Measure the distance using the shortest of the most commonly traveled routes. To determine if you meet this test, complete Lines E1, E2, and E3.
IMPORTANT: If you are in the military, you do not have to meet the distance test if your move is a permanent change of duty station. If you, your spouse, and dependents are moving to the new duty station from different locations, you may claim all the allowable expenses.
17. Enter your actual allowable transportation expenses as described above.
18. Enter your actual qualifying expenses for travel, meals, and lodging, as described above.
19. Total Moving Expenses. Add Lines 17 and 18.
Part F. Education Expenses
The federal and PA rules for educational expenses are similar, but not exactly the same. For PA purposes, costs for education expenses that you pay or incur are allowable only if:
- The education is specifically required by law or by your employer to retain an established employment status or rate of compensation; and
- The education is not part of a program that would qualify you for a new occupation, trade, or business, even if you do not intend to enter that new occupation, trade, or business. Unlike federal rules, you may not deduct education expenses that you incur to maintain or improve your skills.
EXAMPLE: Anthony is a licensed professional in a position that, by law, requires a specific number of continuing education credits every other year. If Anthony fails to obtain these credits, he will lose his license. Anthony also takes courses in using a computer to improve his job performance. Anthony may claim the cost of his continuing education courses. He may not claim the computer courses.
You must answer question F1. If you answer YES, continue. If you answer NO, you may not claim any education expenses. You must answer questions F2 and F3. If you answer NO to both questions, continue. If you answer YES to either question, you may not claim any education expenses.
Enter the name of the college, university, or educational institution you attend, and your specific course of study. Your education must meet the requirements described above.
20. Enter the amount of tuition or fees you actually paid.
21. Enter the costs of your books and other materials required for your courses.
22. Enter the cost of travel. Pennsylvania follows the federal rules for travel expenses for education.
CAUTION: You may not deduct costs of travel as educational expenses by claiming that the travel itself constitutes a form of education.
23. Total Education Expenses. Add Lines 20, 21, and 22.
Part G. Depreciation Expenses
Depreciation is the amount you can claim over the useful life of property you use in performing the duties of your employment. A depreciation expense is allowable if the property:
- Has a useful life exceeding one year; and
- Is required to be regularly and predominantly used to perform the duties of employment; and
- Is required and not provided or supplied by your employer. PA law allows generally accepted depreciation methods and current expensing. PA law does not allow federal bonus depreciation. PA law limits IRC Section 179 expensing. See DIFFERENCES BETWEEN PA PIT AND IRS beginning on Page 10.
Once you have elected a depreciation method, you must consistently use it and may not change it without permission from the PA Department of Revenue. For each asset, enter the depreciation method elected and the expense.
FILING TIP: Do not use Part G to report all depreciation. Use Part B for vehicles, and Part D for office or work area depreciation.
24. Total Depreciation Expenses. Enter the total of columns E and F.
Pennsylvania Tax Help Links
- » Pennsylvania Form PA-40
- » Pennsylvania Form PA-V
- » Pennsylvania Form PA-8453
- » Pennsylvania Form REV-1630
- » Pennsylvania Schedule A/B
- » Pennsylvania Schedule C
- » Pennsylvania Schedule D
- » Pennsylvania Schedule E
- » Pennsylvania Schedule F
- » Pennsylvania Schedule G-S
- » Pennsylvania Schedule G-L
- » Pennsylvania Schedule J-T
- » Pennsylvania Schedule O
- » Pennsylvania Schedule OC
- » Pennsylvania Schedule SP
- » Pennsylvania Schedule UE
- » Pennsylvania Schedule W-2S
- » Additional Pennsylvania forms
- » Additional Pennsylvania State Income Tax Return Form, e-File, and Government Information
- » Access tax help for additional states