Tool Tax Reimbursement Programs for Technicians

Technicians have two ways to get reimbursed for the taxable portion of the money they have invested in their tools. They can itemize tool purchases on their year-end income taxes or they can participate in a tool tax reimbursement program through a payroll deduction program at work. Since many techs are not in a position to itemize on their taxes and the IRS may not always credit all claimed, a tool tax reimbursement program is often the only and best alternative.Technicians who purchase their own tools and use them at work are paid wages for their time, talent and tools. They also pay taxes on those wages in the form of State, Federal Income taxes, Medicare and Social Security. Based upon many experts and court case interpretations of Section 62 of the Internal Revenue Code, technicians are allowed to recapture the taxes that they have paid on the portion of their wages that covers tool purchases. For instance, a technician who owns $10,000 worth of tools can generally recoup about $1,600 in taxes taken from his wages for his/her tool purchases. A tool tax reimbursement program returns those taxes to the technician.Working with an administrator of tool tax reimbursement programs is the preferred method for companies to get reimbursements back for their employees. The administrator works with the employer to create a “pre-tax deduction plan” through the company’s existing payroll system. Similar to a 401k plan or cafeteria plan, this deduction is removed from the technician’s pay each week. The deduction, however, is returned to the technician in the form of a non-taxed check. The average results are a $30 to $50 increase in the employee’s weekly paycheck.Companies with employees that have tools as a condition of employment would greatly benefit from an accountable plan tool tax reimbursement program.