The TCJA killed unreimbursed employee business expenses as a deduction. If you’re an S-corp owner who pays for business stuff personally, you used to claim those on Schedule A. You don’t anymore. The fix is an accountable plan: the S-corp reimburses you for the same expenses, and the reimbursement is not income to you and is a deduction for the corp.
What an accountable plan requires
Three things, from the regulations:
- Business connection. The expense has to be a legitimate business expense, the kind the corp would otherwise reimburse a regular employee for.
- Substantiation. You give the corp a receipt, log, or other documentation of what the expense was and what business purpose it served. Within a reasonable time (60 days is the safe harbor).
- Return of excess. If the corp advanced you money and you didn’t spend it all on business, you return the excess within 120 days.
Miss any of these and the reimbursement becomes wages: payroll-taxed to you and the corp, included in your W-2.
The biggest opportunity: the home office
If you work from a dedicated space in your home (regular and exclusive use for the business), you can submit a home office expense report monthly. The corp reimburses you for a portion of your mortgage interest, property taxes, utilities, insurance, repairs, and depreciation, in the percentage of square footage used for business.
Your office is 200 sq ft of a 2,000 sq ft home = 10%. Your annual home costs are $48,000. The corp reimburses you $4,800 a year tax-free.
Vehicle mileage
Submit a mileage log monthly. The corp reimburses you at the IRS standard mileage rate (70 cents/mile for 2025). The rate covers gas, depreciation, maintenance, and insurance. If you drive 15,000 business miles, the corp reimburses you $10,500 tax-free.
What you do NOT want to do
- Take "round number" distributions for $1,000/month "for expenses." That’s a non-accountable plan: all taxable.
- Reimburse without a written plan in place at the start of the year. The plan can be one page, but it has to exist.
- Reimburse for spousal or personal items mixed in with business. Tax-wise, the corp expenses are limited to actual business spending.
- Pay yourself rent for a home office (instead of reimbursing): that creates self-rental income on your personal return, defeating the strategy.
The paperwork
You need: a written accountable plan adopted by board resolution (one page), a monthly expense report you sign and submit to the corp, copies of receipts/logs, and corp checks (or ACH transfers) labeled as reimbursements. The corp books the payments as expense items, not as wages.
The setup takes about 30 minutes and protects $5,000-$20,000+ of deductions a year for most S-corp owners with a home office and business driving.