W2 Car Salesman making 90% on commissions - what expenses can I actually deduct on my tax return?

Ugh, that's really frustrating to hear. So even though commissions are 90% of my income, since I'm W2 I'm just out of luck? What about state taxes? I'm in California - can I still deduct these expenses on my state return at least?

You're in luck with California! California hasn't conformed to this part of the federal tax changes, so you can still claim unreimbursed employee business expenses on your California state tax return. You'd need to file Schedule CA (540) and include these deductions. Just remember that for California, these expenses still need to be ordinary and necessary for your work, and they must exceed 2% of your AGI to be deductible. Keep detailed records and receipts for everything. The money you spent on training courses, client lunches (with limitations), your cell phone (business portion), and industry subscriptions could potentially qualify for the California deduction.

I'm curious - did they help you with figuring out what percentage of things like your phone bill or car expenses could be deducted on state returns? I never know how to calculate that stuff and I'm afraid of making mistakes.

Sounds like just another paid service trying to take advantage of desperate people. Did they actually find anything a regular tax preparer wouldn't know about? Or is this just an ad?

They actually have a specific tool that helps calculate the business percentage for mixed-use items like phones and vehicles. You answer questions about your usage patterns and they determine a supportable business-use percentage. Really helped me feel confident about those calculations. As for being "just another paid service," I was skeptical too. But they found several California-specific deductions my previous tax guy missed completely. They also showed me how to properly document everything so I'm protected if I ever get audited. They specialize in salespeople on commission, which makes a big difference compared to general tax preparers who might not know all the specific rules for our situation.

Does this actually work? I've tried calling the IRS like 5 times this year and gave up after being on hold for hours. How long did it take for you to actually get through to someone?

This sounds like BS honestly. The IRS isn't going to give you personalized tax advice over the phone. They'll just direct you to their publications or tell you to consult a tax professional. Waste of money.

I was connected with an IRS agent in about 45 minutes rather than the 3+ hours I waited the last time I tried calling on my own. The system holds your place in line and calls you when you're about to be connected, so you don't have to listen to hold music for hours. You're right that they won't give detailed tax planning advice, but they absolutely can clarify specific rules and how they apply to your situation. My client specifically asked whether certain commission-based expenses could qualify for any deductions given his W2 status, and the agent explained exactly what the current rules allow. They also clarified the documentation requirements for state-level deductions. It's not tax planning advice - it's confirmation of how existing rules apply to specific situations.

That's interesting - I've never heard of that option. Would the dealership have to agree to this arrangement? And wouldn't I lose benefits like health insurance if I wasn't a W2 employee anymore? Also wondering about how taxes work with an S-corp vs being an employee.

Yes, the dealership would need to agree to this arrangement - not all will. My brother-in-law negotiated this after being their top salesman for several years when he had leverage. You would potentially lose traditional employee benefits like health insurance and 401k matching, which is a significant downside. You'd need to purchase your own health insurance (possibly deductible as a business expense) and set up your own retirement accounts like a SEP IRA or Solo 401k. For taxes, you'd pay yourself a reasonable salary from the S-corp (which incurs regular payroll taxes), but additional profit can be taken as distributions that aren't subject to self-employment tax. This can result in tax savings. You'd also have much more flexibility in deducting legitimate business expenses. It's definitely more complex and requires good bookkeeping, but the tax savings can be substantial if your expenses are high.

I need to jump in here because this suggestion could lead to audit trouble. The IRS is very clear that expenses must be allocated properly between different activities. You can't take expenses that are clearly related to your W2 job and artificially assign them to a side business just to get a deduction. If you have a legitimate side business, then yes, you can deduct expenses that are actually for that business. But creating a side business just to deduct W2 expenses, or improperly allocating W2 job expenses to a side business, could be considered tax fraud.

Sorry, I should have been clearer. I wasn't suggesting creating a fake business or misallocating expenses! I meant that if OP already has a legitimate side business, some expenses that benefit both activities (like a cell phone used for both) could have the appropriate portion allocated to the side business. Many salespeople I know do have side gigs like consulting or training, and properly allocating shared expenses is totally legitimate. But you're absolutely right that you can't just make up a business or improperly allocate expenses that are purely for your W2 job.

This is really helpful advice, especially the point about tracking everything even though we can't deduct it federally right now. I hadn't thought about the 2026 expiration date - that gives me hope that this situation might improve in a couple years. The education credits angle is interesting too. Some of those sales training courses I mentioned taking were pretty expensive, so if they could qualify for education credits instead of business deductions, that might actually work out better. Do you know if there are specific requirements for training to qualify as education credits for someone who's already working in sales? Also, I'm curious about your experience approaching your sales manager about expense reimbursement. What kind of expenses were they most willing to cover, and how did you frame the conversation? I'm worried about seeming like I'm complaining about costs or asking for special treatment.