What Counts as a Business Expense for Employees?

What usually counts (and what usually doesn't)

It counts when the job required the cost and the cost mainly serves the work — personal cell phones used for work calls, home internet for required remote work, business miles in a personal car, required tools, unique uniforms, and training travel the employer ordered. It usually does not count when the item is ordinary street clothes, a personal lifestyle choice, or a cost the employer never required — including employee-chosen co-working spaces.

Federal law only protects the minimum-wage floor: required tools cannot push pay below the federal minimum. A handful of states go further and require reimbursement of necessary work costs even for higher-paid workers. California and Illinois are the strictest everyday examples.

How to decide on a real cost

• Ask: did we require this for the job, or did the employee choose it?
• Phones, home internet, and required gear for remote work are high-risk categories in California and Illinois.
• Business miles are the high-dollar cousin — use a clear rate and a real log.
• Write the categories you will reimburse before people spend money.
• Keep work location in the record — duty often follows where people work, not HQ.

Where employers get this wrong

• Treating every Amazon-bought desk gadget as reimbursable without a job requirement.
• Refusing phone costs because the plan was unlimited (fails in California).
• Ignoring home internet for full-time remote workers in duty states.
• Pointing people to a tax deduction that ordinary W-2 employees largely no longer have.
• Promising reimbursement in a handbook, then never paying (creates duty even in agreement-based states).

Reimburse what the job required — document the rest

If the work needed the phone, the internet line, the miles, or the tool, fund it under a written policy and keep the trail. If the purchase was optional personal gear, say no early and consistently. When the answer depends on state law, start with California and Illinois, then check whether anyone works in another duty state.