Deductions a W-2 Tech Can and Cannot Take

Why this matters

Every spring, techs hear from a brother-in-law or an old-timer at the supply house that you can write off your tools, boots and truck miles. For a W-2 employee filing a federal return, that has not been true since 2018, and the 2025 tax law made it permanent. Meanwhile, the same law created a deduction that a lot of techs actually qualify for and many will miss: a temporary deduction for overtime pay. The money a W-2 tech can save at tax time comes from different places than most people think, and the biggest lever is not on the return at all. It is how your employer pays you for the tools in the first place.

This card is current as of 2026 and covers federal rules plus the state layer that still differs. It is general information, not tax advice; tax rules in this area changed in 2025 and are still being clarified, so confirm anything here against the current IRS page or with a preparer before you file.

What you cannot deduct on a federal return

Start with the list, because this is where the money is not.

Unreimbursed employee business expenses are not deductible federally. That covers:

• Hand and power tools you buy for the job, and tool insurance
• Work boots, uniforms, and protective gear
• Union dues
• License and certification renewals, continuing education
• Mileage in your own vehicle for work, and tolls and parking you were not reimbursed for
• Your phone bill, even if the shop requires you to use it
• A home office or a garage used to store work inventory

Before 2018, these were miscellaneous itemized deductions, claimed on Form 2106 and Schedule A, and only the part above 2 percent of your adjusted gross income counted. The 2017 tax law suspended them for 2018 through 2025. Federal legislation enacted in July 2025 made the suspension permanent. So this is no longer a temporary gap to wait out.

The narrow exceptions that can still deduct unreimbursed work expenses federally: Armed Forces reservists traveling more than 100 miles for duty, qualified performing artists, fee-basis state or local government officials, and people with disabilities claiming impairment-related work expenses (for example, an attendant at the workplace). Educators have their own separate deduction. A residential service tech is almost never in any of these groups.

Things that were never deductible anyway: your commute, personal use of a company truck (that is income, not a deduction; see related: The Take-Home Truck and Its Tax Treatment), and ordinary clothing you could wear off the job, even if you only wear it to work.

Why it is like this: the same 2017 law roughly doubled the standard deduction, so most W-2 workers stopped itemizing at all. Even when these expenses were deductible, a tech who took the standard deduction got nothing from them.

What can actually lower a W-2 tech's tax

In rough order of how much it is likely to be worth to a tech.

1. Being reimbursed instead of deducting. Money your employer pays you for tools, mileage or a phone under an accountable plan (a reimbursement arrangement with substantiation and return of any excess) is not income at all. No income tax, no Social Security, no Medicare. A tool allowance paid as a flat amount with no accounting is wages. The design of those plans is a sibling card's slice; see related: Tool Allowances, Reimbursements and Taxes.

2. Pre-tax payroll deductions. Contributions to a 401(k), a health savings account through payroll, a flexible spending account, and health premiums through a cafeteria plan come out before income tax, and the cafeteria-plan items before payroll tax too. This happens automatically, but only for the amounts you elect. See related: Reading a Benefits Enrollment Packet.

3. The qualified overtime deduction (2025 through 2028). The 2025 law lets eligible workers deduct the premium portion of overtime that the Fair Labor Standards Act requires, meaning the extra half in time-and-a-half, not the whole overtime check. Key conditions, current as of 2026:

• It applies to tax years 2025 through 2028 and then expires unless Congress extends it.
• It has an annual cap set in the statute, higher for joint filers, and it phases out above an income threshold.
• You can take it whether or not you itemize.
• It reduces income tax only; Social Security and Medicare still apply to the overtime.
• Only FLSA-required overtime counts. A state's daily overtime premium (California's after 8 hours in a day, for example) that the FLSA would not have required, or overtime the employer pays voluntarily beyond what the law requires, does not qualify under the IRS's guidance so far.
• Married couples generally must file jointly to claim it.
• For 2025 the IRS allowed reasonable methods to figure the amount, because employers were not yet required to report it separately; from 2026 the amount is expected to be reported on your W-2 or a statement. Check the IRS's current page on the overtime deduction.

A tech who is wrongly treated as exempt, or whose flat-rate pay has no overtime line, has no reported premium to deduct, which is one more reason to check that overtime is being paid right. See related: Overtime Rights a Tech Should Know.

4. The qualified tips deduction (2025 through 2028). Voluntary tips from customers, in an occupation on the Treasury's list of occupations that customarily receive tips, can be deductible up to a cap. The list Treasury published in 2025 includes several home-service occupations. A mandatory service charge is not a tip. If customers hand you cash or add a tip on the card reader, ask payroll whether it is being reported, because an unreported tip cannot be deducted.

5. Car loan interest on a new personal vehicle (2025 through 2028). Interest on a loan taken after 2024 to buy a new car or pickup for personal use, with final assembly in the United States, can be deductible up to a cap, with an income phase-out. This is for your own vehicle, not the company truck.

6. Other items most techs can reach: traditional IRA contributions (deductible depending on income and whether you have a workplace plan), health savings account contributions made outside payroll, student loan interest, and credits such as the Retirement Savings Contributions Credit (the Saver's Credit) for lower and moderate incomes.

Where the state layer differs

States set their own rules, and some never followed the 2017 change. California and New York still allow unreimbursed employee business expenses as itemized deductions on the state return, subject to a 2-percent-of-income floor. Pennsylvania allows them on its own schedule, without that floor, for expenses that are necessary to the job and not reimbursed. Several other states have their own versions. States also decide individually whether to follow the new overtime, tips and car-loan deductions, and some have already declined. Check your own state revenue department's current instructions, and keep your tool and boot receipts for the state return even though the federal one ignores them.

Worked example: one year, three answers

A W-2 tech in Pennsylvania, hourly base rate R. In the year: 2,080 straight-time hours and 300 overtime hours, all FLSA-required overtime over 40 in a workweek. Unreimbursed purchases: tools 120 R, boots 10 R, and a license renewal 4 R, for a total of 134 R. The tech's federal marginal rate is 12 percent. Assume income is below the overtime deduction's phase-out and the premium is below the cap.

Federal, the overtime deduction. Overtime pay is 300 hours at 1.5 R, which is 450 R. The deductible premium is the extra half only: 300 hours at 0.5 R, which is 150 R. At a 12 percent marginal rate, that saves 150 R times 0.12, or 18 R, roughly two and a quarter days of base pay at eight hours a day.

Federal, the tools. 134 R of unreimbursed expenses: deduction zero.

Pennsylvania, the tools. Pennsylvania's flat personal income tax rate is 3.07 percent. Deducting 134 R on the state schedule saves 134 R times 0.0307, which is about 4.1 R.

The comparison that matters most. Suppose instead the shop reimbursed the same 134 R under an accountable plan. Nothing is deducted because nothing was taxed. Compare it with the shop paying the tech an extra 134 R in wages to cover tools: that extra pay would lose 12 percent federal income tax plus 7.65 percent Social Security and Medicare, a combined 19.65 percent, which is 134 R times 0.1965, or about 26.3 R, before state tax. So the same tool money is worth about 26.3 R more to the tech as a reimbursement than as wages, against the 4.1 R that the best available deduction recovers. That is why the conversation to have is with your employer about reimbursement, not with a preparer about write-offs.

What changes the answer.

• The same tech in California: the tools are deductible on the state return only above 2 percent of income, and only if the tech itemizes there. Total pay is 2,080 R plus 450 R, or 2,530 R; 2 percent of that is about 50.6 R, so only 134 R minus 50.6 R, about 83.4 R, would count. And the California daily-overtime premium does not count toward the federal overtime deduction unless the FLSA would have required it anyway.
• A higher earner: past the phase-out threshold, the overtime deduction shrinks and then disappears, and its value falls toward zero.
• A 1099 contractor: none of this card applies. A self-employed tech deducts tools and mileage as business expenses on Schedule C and pays self-employment tax instead; see related: Going 1099: The Tax Math a Tech Misses.

Mistakes worth avoiding

• Paying a preparer to itemize tools on a federal return. If someone offers to deduct your tools federally as a W-2 employee, ask which exception they think you meet.
• Claiming the whole overtime check. The deduction is the premium, about a third of total overtime pay at time and a half (150 R of 450 R above).
• Throwing away receipts. Your state may still use them, and so might a reimbursement claim.
• Assuming the temporary deductions are permanent. The overtime, tips and car-loan deductions run through 2028 as written.

References

• IRS, guidance on the qualified overtime compensation deduction and the qualified tips deduction (2025 legislation), current-year Form 1040 instructions
• IRS Publication 529, Miscellaneous Deductions (what remains deductible, including the narrow employee exceptions)
• Pennsylvania Department of Revenue, Schedule UE instructions; California Franchise Tax Board and New York Department of Taxation, itemized deduction instructions
• See related: Tool Allowances, Reimbursements and Taxes, Overtime Rights a Tech Should Know, Going 1099: The Tax Math a Tech Misses, Reading Your Pay Stub as a Technician