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Lesson · Business · tax

Turn personal costs into business deductions.

An accountable plan lets your business reimburse you for home office, mileage, and phone — a deduction for the business, tax-free to you.

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IN WRITING
Signed by employer and employee, adopted in your company records

How it works

An accountable plan has 3 tests

1
Business connectionThe expense exists because of the business
2
SubstantiationReceipt, date, amount, purpose, business nexus
3
Return of excessAny overpayment goes back to the company

THE MATH

Same $6,000 of real expenses

Added to W-2: $6,000Not income to you
Payroll tax: about $918No payroll tax
Income tax on $6,000Tax-free reimbursement
Deduction: yesDeduction: yes

Key points

Out-of-pocket costs you may be skipping

✓
Home office share
✓
Cell phone
✓
Internet & cloud storage
✓
Personal vehicle miles
✓
Tools, monitors, software
✓
Training & courses

How it works

Put these deadlines in the document

30
Advance paidNo more than 30 days before the expense
60
SubstantiateReceipts turned in within 60 days of the expense
120
Return excessUnused advance back within 120 days

SUBSTANTIATION

How much proof is enough

Contemporaneous logPaper or card receipt
Date, amount, purposeLog plus the receipt
Business nexus requiredBusiness nexus required

Free download

The The Accountable Plan field guide — one page

The strategy, the checklist, the key numbers, and links to the actual tax code. Print it, take it to your CPA. Free, no strings.

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Field guide · PDF

The Accountable Plan

Cliff notes + checklist + the law

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The law behind it

Primary sources

Verify against the source before you rely on it. This is education, not legal or tax advice.

26 U.S.C. Sec. 62(a)(2)(A) — Reimbursed expenses under an accountable plan are excluded from the employee's income.law.cornell.edu/uscode/text/26/62
26 CFR Sec. 1.62-2 — The accountable-plan rules: business connection, substantiation, and returning excess.law.cornell.edu/cfr/text/26/1.62-2
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