Are advertising expenses deductible for a W2 employee?
I (34, single male) am a W2 employee working as a Mortgage Loan Originator. I work from home and am expected to find my own clients. Are my marketing/advertising and other business expenses tax deductible? They amount to about 8% of my gross income.
Unfortunately, I have some bad news for you. As a result of the Tax Cuts and Jobs Act (TCJA), starting with 2018, no unreimbursed employee business expenses (that would include marketing/advertising) are deductible anywhere on your individual income tax return. Prior to TCJA, if employees had out-of-pocket expenses for which they were not reimbursed, they could attempt to deduct them on Schedule A (itemized deductions) to the extent they exceeded 2% of adjusted gross income. So such expenses were tax deductible, but in actuality, it was still difficult to actually get any tax benefit because you had to clear that 2% threshold and then you still needed to have enough itemized deductions to itemize.
Instead of just leaving you with an answer but no possible remedy, I have two ideas.
First, see if you can get any business expenses reimbursed by your employer. If they reimbursed the exact amount of expenses you turned in (and substantiated with receipts), the reimbursement would be tax-free to you AND a business write-off to the employer. A win-win for both of you and a LOSE for IRS. Perhaps negotiate this instead of an increase in pay in the future.
Second, see if you can create a sole proprietorship (be an independent contractor) on the side with other clients. That opens up the possibility for you to deduct some (not all) your business expenses. It would be illegal/unethical to deduct business expenses that relate directly to your work as a W-2 employee, but you could deduct expenses that relate directly to your status as independent contractor as well as expenses that benefit both activities.
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Adam Dickreiter, CPA