Tools Tax Deduction Act
- Sponsor
- Rep. Budzinski, Nikki [D-IL-13]
- Committees
- Ways and Means Committee (primary)
- Last action
- Mar 18, 2025
Bottom line
The bill provides new and reinstated tax deductions for employees' work-related expenses, aiming to reduce their taxable income.
What it actually does
This bill amends the Internal Revenue Code of 1986 to allow employees to deduct certain work-related expenses. Specifically, it creates an 'above-the-line' deduction for construction tools, personal protective clothing and gear, and other necessary work expenses. It also reinstates the miscellaneous itemized deduction for other employee business expenses, which was suspended by the Tax Cuts and Jobs Act of 2017, making them subject to the 2-percent adjusted gross income floor.
Proponents argue
Supporters argue this bill provides much-needed tax relief for working Americans, particularly those in trades and professions who incur significant unreimbursed costs for tools, safety gear, and other job necessities. They contend it makes the tax code fairer by recognizing legitimate business expenses for employees, similar to how self-employed individuals can deduct such costs, and helps offset the financial burden on essential workers.
Opponents contend
Critics might argue that expanding tax deductions adds complexity to the tax code and could lead to a reduction in federal tax revenue, potentially increasing the national deficit. Some may also contend that reinstating miscellaneous itemized deductions disproportionately benefits higher-income earners who are more likely to itemize, rather than providing broad relief to all taxpayers.
The bill is very short and clear, making it highly accessible for a quick and thorough understanding.
Section 2(a)
Above-the-Line Deduction for Certain Employee Expenses
This provision amends the tax code to allow employees to deduct certain work-related expenses directly from their gross income, before calculating their adjusted gross income (AGI). This means these deductions are available to all taxpayers, not just those who itemize. The specific expenses covered are construction tools, personal protective clothing and gear, and other necessary expenses required for an individual to perform their job.
Supporters argue
Proponents argue this deduction directly supports working families by reducing the tax burden on essential work-related purchases, ensuring that employees are not taxed on the income they spend to perform their jobs. They highlight that this is particularly beneficial for those in physically demanding jobs where specialized equipment is mandatory.
Critics contend
Opponents might argue that creating new specific deductions adds complexity to the tax code and could be difficult for the IRS to administer, potentially leading to disputes over what constitutes 'necessary' expenses. They may also point to the revenue loss associated with expanding deductions.
Tradeoffs
This provision balances the goal of providing tax relief to employees with the potential for increased complexity in tax filing and a reduction in federal tax revenue. It also addresses the tension between treating employee expenses similarly to self-employed business expenses.
Section 2(b)
Reinstatement of Miscellaneous Itemized Deduction for Other Employee Business Expenses
This provision amends the tax code to reinstate the miscellaneous itemized deduction for employee business expenses, which was suspended from 2018 through 2025 by the Tax Cuts and Jobs Act (TCJA). It creates an exception to the general suspension of miscellaneous itemized deductions, allowing employees who itemize their deductions to claim these expenses again, subject to the existing 2-percent adjusted gross income (AGI) floor.
Section 2(c)
Effective Date
This section specifies that the changes made by the bill, including both the new above-the-line deduction and the reinstatement of the miscellaneous itemized deduction, will apply to taxable years beginning after December 31, 2025. This means the provisions would take effect for the 2026 tax year.