This Act allows employees to deduct certain necessary work-related expenses, such as tools and safety gear, directly from their gross income when calculating federal income taxes, starting in 2026.
Nicole (Nikki) Budzinski
Representative
IL-13
The Tools Tax Deduction Act aims to make it easier for employees to deduct necessary work-related expenses, such as tools and safety gear, from their federal income taxes. This legislation allows certain job expenses to be deducted "above the line," lowering Adjusted Gross Income even for those taking the standard deduction. Furthermore, it removes the 2% floor threshold for miscellaneous employee business expenses starting in 2026 if taxpayers itemize.
Tools Tax Deduction Act: Employees Get 'Above-the-Line' Deduction for Work Gear Starting 2026
The newly proposed Tools Tax Deduction Act is straightforward: it aims to give employees a significant tax break on the gear they need to do their jobs. Starting in tax years after December 31, 2025, this bill makes it much easier for employees to deduct the cost of necessary work items like construction tools, personal protective equipment, and specialized clothing.
The 'Above-the-Line' Game Changer
This is the biggest win for the average worker. Currently, if you take the standard deduction (which most people do), you can't deduct unreimbursed employee expenses. This bill changes that by allowing deductions for necessary work items—like that expensive set of wrenches a mechanic needs, or the specialized safety gear a factory worker must buy—to be taken “above the line” (SEC. 2). What does that mean for you? It means these costs are subtracted directly from your gross income before calculating your Adjusted Gross Income (AGI). This lowers your taxable income even if you claim the standard deduction, putting real money back in the pockets of tradespeople and others who have to buy their own necessary equipment.
Removing the 2% Tax Floor
For those who itemize their deductions, the bill offers another key change, also kicking in after 2025. Right now, if you itemize and deduct miscellaneous employee business expenses, you can only deduct the amount that exceeds 2% of your AGI—a threshold that often wipes out the deduction entirely. The Tools Tax Deduction Act effectively removes this 2% floor for miscellaneous itemized deductions that are directly related to your work as an employee (SEC. 2). So, if you’re a traveling salesperson incurring unreimbursed mileage or a software developer buying specialized non-depreciable equipment, you can deduct those costs without having to hit that high 2% hurdle.
Who Benefits and What’s the Catch?
This legislation is a clear benefit for employees, especially those in the trades, manufacturing, or specialized service industries who are required to purchase and maintain their own equipment. Think of the electrician who shells out hundreds for a new meter or the welder who needs specialized helmets and gloves—they get the biggest immediate relief from the “above-the-line” deduction. The bill is essentially acknowledging the reality that many employers require workers to supply their own essential gear, and the worker shouldn't have to pay taxes on the money they spent just to be able to show up and perform their duties.
However, the language does leave a little room for interpretation. The bill refers to “necessary items related to your place of employment” (SEC. 2). While it specifically calls out construction tools and protective clothing, tax agencies will need to clarify exactly what counts as “necessary.” This medium level of vagueness could lead to some initial confusion over what expenses qualify, and workers should be prepared to keep meticulous records to prove their purchases are truly essential to their specific job function. Ultimately, this bill provides a tangible financial break for workers, but you’ll have to wait until 2026 to see it on your tax return.