out of pocket


Written By: Ehsan Jahandarpour

Out-of-pocket expenses (or out-of-pocket costs) are direct outlays of cash which may be later reimbursed. In operating a vehicle, gasoline, parking fees and tolls are considered out-of-pocket expenses for the trip. Insurance, oil changes, and interest are not, because the outlay of cash covers expenses accrued over a longer period of time. The services rendered and other in-kind expenses are not considered out-of-pocket expenses, nor are depreciation of capital goods or depletion. Organizations often reimburse out-of-pocket expenses incurred on their behalf, especially expenses incurred by employees on their employers’ behalf. In the United States, out-of-pocket expenses for such things as charity, medical bills, and education may be deductions on federal income taxes, according to IRS regulations. To be out of pocket is to have expended personal resources, often unexpectedly or unfairly, at the end of some enterprise.