Is there a federal law requiring expense reimbursement?

No general one. The FLSA only prohibits unreimbursed expenses from pushing effective pay below minimum wage (or into overtime violations). Broader duties come from state statutes and company policy.

Which states require expense reimbursement?

California and Illinois are the strongest; Massachusetts, Montana, New Hampshire, North and South Dakota, Iowa and others impose requirements of varying scope. California's §2802 extends to phone and home-internet shares for required remote work.

Are expense reimbursements taxable income?

Not under an accountable plan — business connection, timely substantiation, and return of excess advances. Flat allowances without receipts are non-accountable and taxable as wages.

Can employees deduct expenses their employer won't reimburse?

Federally, generally not — the unreimbursed employee expense deduction has been suspended since 2018 (limited exceptions apply, and some states still allow deductions). Employer reimbursement is usually the only recovery.

When Must Employers Reimburse Employee Expenses? (By State)

There is no general federal law requiring expense reimbursement. The federal floor is indirect: under the FLSA, unreimbursed business expenses cannot drive an employee's effective pay below minimum wage. The real mandates are state-level — California, Illinois, Massachusetts and a growing list require employers to reimburse "necessary" business expenses — and contract-level, where your own policy or offer letter creates the obligation.

This is general information, not legal advice — consult an employment attorney for specific situations.

The federal baseline: the FLSA backstop

Requiring a minimum-wage worker to buy uniforms, tools or fuel without reimbursement violates the FLSA in any week the cost dips their effective rate below minimum wage (or cuts into overtime). For higher earners, federal law is silent — which is why the state layer matters.

The state mandates

California (Labor Code §2802): the strongest — employers must indemnify "all necessary expenditures" incurred in the course of duties, including a reasonable share of personal phone and home-internet costs for required remote work. Class actions here are routine.
Illinois (Wage Payment and Collection Act): necessary expenses within the employer's knowledge; policy caps allowed if reasonable.
Massachusetts, Montana, New Hampshire, North Dakota, South Dakota, Iowa (and DC/Seattle rules): reimbursement requirements with varying scope and deadlines.
Everywhere else: the FLSA floor plus whatever the company promised.

Remote work turned this from travel-desk trivia into headline exposure: states with necessary-expense statutes have applied them to home office costs, and the safest posture is a stipend or defined reimbursement for required remote workers.

What "necessary" typically covers

Business travel (per the documentation in the business travel checklist), business mileage in personal vehicles (log rules here), required tools and uniforms, client entertainment where required, and the remote-work utilities share in strict states. Commuting and voluntary comfort purchases stay personal.

The tax overlay: accountable vs. non-accountable

However the legal duty falls, the tax treatment turns on plan design. An accountable plan (business connection + substantiation + return of excess — the backbone described in what an expense receipt policy should include) keeps reimbursements off W-2s. A non-accountable plan — flat allowances without substantiation — is taxable wages. And since 2018, employees cannot deduct unreimbursed business expenses federally (the miscellaneous itemized deduction was suspended), which raised the stakes of employer reimbursement considerably: what the company doesn't pay, the employee simply loses.

Practical rules for both sides

Employers: publish a policy with deadlines and receipt standards; reimburse promptly (some statutes set deadlines); treat remote-work costs deliberately, not by silence; keep records to tax standards.

Employees: submit on time with the documentation your policy demands — the substantiation habits in what receipts you need for an expense report — and keep copies until paid. In mandate states, denied necessary expenses are wage claims; the receipt trail is the claim.

The bottom line

Federal law sets a minimum-wage backstop; states like California and Illinois set real mandates; your policy sets the rest — and the accountable-plan rules decide whether reimbursements arrive taxed or clean. Whoever you are in that chain, the documentation is the leverage.

When Must Employers Reimburse Employee Expenses?