Deducting Unreimbursed Partner Expenses on Individual Income Tax Returns

It’s not unusual for a partner to incur expenses related to the partnership’s business. For example, partners in service partnerships may incur entertainment expenses in developing new client relationships. They may also incur expenses for transportation to get to and from client meetings, professional publications, continuing education, and home office.

As long as the expenses are the type a partner is expected to pay without reimbursement under the partnership agreement or firm policy, the partner can deduct the expenses on Schedule E of Form 1040. Conversely, a partner can’t deduct expenses if the partnership would have honored a request for reimbursement. The best way to eliminate any doubt about the proper tax treatment of unreimbursed partnership expenses is to install a written firm policy that clearly states what will and won’t be reimbursed.