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Taxes help 26. Taxes help   Car Expenses and Other Employee Business Expenses Table of Contents What's New Introduction Useful Items - You may want to see: Travel ExpensesTraveling Away From Home Tax Home Temporary Assignment or Job What Travel Expenses Are Deductible? Travel in the United States Travel Outside the United States Conventions Entertainment Expenses50% Limit What Entertainment Expenses Are Deductible? What Entertainment Expenses Are Not Deductible? Gift Expenses Transportation ExpensesArmed Forces reservists. Taxes help Parking fees. Taxes help Advertising display on car. Taxes help Car pools. Taxes help Hauling tools or instruments. Taxes help Union members' trips from a union hall. Taxes help Car Expenses RecordkeepingHow To Prove Expenses How Long To Keep Records and Receipts How To ReportGifts. Taxes help Statutory employees. Taxes help Reimbursements Completing Forms 2106 and 2106-EZ Special Rules What's New Standard mileage rate. Taxes help  For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. Taxes help Car expenses and use of the standard mileage rate are explained under Transportation Expenses , later. Taxes help Depreciation limits on cars, trucks, and vans. Taxes help  For 2013, the first-year limit on the total section 179 deduction, special depreciation allowance, and depreciation deduction for cars remains at $11,160 ($3,160 if you elect not to claim the special depreciation allowance). Taxes help For trucks and vans the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). Taxes help For more information, see Depreciation limits in Publication 463. Taxes help Introduction You may be able to deduct the ordinary and necessary business-related expenses you have for: Travel, Entertainment, Gifts, or Transportation. Taxes help An ordinary expense is one that is common and accepted in your trade or business. Taxes help A necessary expense is one that is helpful and appropriate for your business. Taxes help An expense does not have to be required to be considered necessary. Taxes help This chapter explains the following. Taxes help What expenses are deductible. Taxes help How to report your expenses on your return. Taxes help What records you need to prove your expenses. Taxes help How to treat any expense reimbursements you may receive. Taxes help Who does not need to use this chapter. Taxes help   If you are an employee, you will not need to read this chapter if all of the following are true. Taxes help You fully accounted to your employer for your work-related expenses. Taxes help You received full reimbursement for your expenses. Taxes help Your employer required you to return any excess reimbursement and you did so. Taxes help There is no amount shown with a code “L” in box 12 of your Form W-2, Wage and Tax Statement. Taxes help If you meet all of these conditions, there is no need to show the expenses or the reimbursements on your return. Taxes help See Reimbursements , later, if you would like more information on reimbursements and accounting to your employer. Taxes help    If you meet these conditions and your employer included reimbursements on your Form W-2 in error, ask your employer for a corrected Form W-2. Taxes help Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule C (Form 1040) Profit or Loss From Business Schedule C-EZ (Form 1040) Net Profit From Business Schedule F (Form 1040) Profit or Loss From Farming Form 2106 Employee Business Expenses Form 2106-EZ Unreimbursed Employee Business Expenses Travel Expenses If you temporarily travel away from your tax home, you can use this section to determine if you have deductible travel expenses. Taxes help This section discusses: Traveling away from home, Tax home, Temporary assignment or job, and What travel expenses are deductible. Taxes help It also discusses the standard meal allowance, rules for travel inside and outside the United States, and deductible convention expenses. Taxes help Travel expenses defined. Taxes help   For tax purposes, travel expenses are the ordinary and necessary expenses (defined earlier) of traveling away from home for your business, profession, or job. Taxes help   You will find examples of deductible travel expenses in Table 26-1 . Taxes help Traveling Away From Home You are traveling away from home if: Your duties require you to be away from the general area of your tax home (defined later) substantially longer than an ordinary day's work, and You need to sleep or rest to meet the demands of your work while away from home. Taxes help This rest requirement is not satisfied by merely napping in your car. Taxes help You do not have to be away from your tax home for a whole day or from dusk to dawn as long as your relief from duty is long enough to get necessary sleep or rest. Taxes help Example 1. Taxes help You are a railroad conductor. Taxes help You leave your home terminal on a regularly scheduled round-trip run between two cities and return home 16 hours later. Taxes help During the run, you have 6 hours off at your turnaround point where you eat two meals and rent a hotel room to get necessary sleep before starting the return trip. Taxes help You are considered to be away from home. Taxes help Example 2. Taxes help You are a truck driver. Taxes help You leave your terminal and return to it later the same day. Taxes help You get an hour off at your turnaround point to eat. Taxes help Because you are not off to get necessary sleep and the brief time off is not an adequate rest period, you are not traveling away from home. Taxes help Members of the Armed Forces. Taxes help   If you are a member of the U. Taxes help S. Taxes help Armed Forces on a permanent duty assignment overseas, you are not traveling away from home. Taxes help You cannot deduct your expenses for meals and lodging. Taxes help You cannot deduct these expenses even if you have to maintain a home in the United States for your family members who are not allowed to accompany you overseas. Taxes help If you are transferred from one permanent duty station to another, you may have deductible moving expenses, which are explained in Publication 521, Moving Expenses. Taxes help    A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a tax home aboard ship for travel expense purposes. Taxes help Tax Home To determine whether you are traveling away from home, you must first determine the location of your tax home. Taxes help Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. Taxes help It includes the entire city or general area in which your business or work is located. Taxes help If you have more than one regular place of business, your tax home is your main place of business. Taxes help See Main place of business or work , later. Taxes help If you do not have a regular or a main place of business because of the nature of your work, then your tax home may be the place where you regularly live. Taxes help See No main place of business or work , later. Taxes help If you do not have a regular or a main place of business or post of duty and there is no place where you regularly live, you are considered an itinerant (a transient) and your tax home is wherever you work. Taxes help As an itinerant, you cannot claim a travel expense deduction because you are never considered to be traveling away from home. Taxes help Main place of business or work. Taxes help   If you have more than one place of business or work, consider the following when determining which one is your main place of business or work. Taxes help The total time you ordinarily spend in each place. Taxes help The level of your business activity in each place. Taxes help Whether your income from each place is significant or insignificant. Taxes help Example. Taxes help You live in Cincinnati where you have a seasonal job for 8 months each year and earn $40,000. Taxes help You work the other 4 months in Miami, also at a seasonal job, and earn $15,000. Taxes help Cincinnati is your main place of work because you spend most of your time there and earn most of your income there. Taxes help No main place of business or work. Taxes help   You may have a tax home even if you do not have a regular or main place of business or work. Taxes help Your tax home may be the home where you regularly live. Taxes help Factors used to determine tax home. Taxes help   If you do not have a regular or main place of business or work, use the following three factors to determine where your tax home is. Taxes help You perform part of your business in the area of your main home and use that home for lodging while doing business in the area. Taxes help You have living expenses at your main home that you duplicate because your business requires you to be away from that home. Taxes help You have not abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging. Taxes help   If you satisfy all three factors, your tax home is the home where you regularly live. Taxes help If you satisfy only two factors, you may have a tax home depending on all the facts and circumstances. Taxes help If you satisfy only one factor, you are an itinerant; your tax home is wherever you work and you cannot deduct travel expenses. Taxes help Example. Taxes help You are single and live in Boston in an apartment you rent. Taxes help You have worked for your employer in Boston for a number of years. Taxes help Your employer enrolls you in a 12-month executive training program. Taxes help You do not expect to return to work in Boston after you complete your training. Taxes help During your training, you do not do any work in Boston. Taxes help Instead, you receive classroom and on-the-job training throughout the United States. Taxes help You keep your apartment in Boston and return to it frequently. Taxes help You use your apartment to conduct your personal business. Taxes help You also keep up your community contacts in Boston. Taxes help When you complete your training, you are transferred to Los Angeles. Taxes help You do not satisfy factor (1) because you did not work in Boston. Taxes help You satisfy factor (2) because you had duplicate living expenses. Taxes help You also satisfy factor (3) because you did not abandon your apartment in Boston as your main home, you kept your community contacts, and you frequently returned to live in your apartment. Taxes help Therefore, you have a tax home in Boston. Taxes help Tax home different from family home. Taxes help   If you (and your family) do not live at your tax home (defined earlier), you cannot deduct the cost of traveling between your tax home and your family home. Taxes help You also cannot deduct the cost of meals and lodging while at your tax home. Taxes help See Example 1 . Taxes help   If you are working temporarily in the same city where you and your family live, you may be considered as traveling away from home. Taxes help See Example 2 . Taxes help Example 1. Taxes help You are a truck driver and you and your family live in Tucson. Taxes help You are employed by a trucking firm that has its terminal in Phoenix. Taxes help At the end of your long runs, you return to your home terminal in Phoenix and spend one night there before returning home. Taxes help You cannot deduct any expenses you have for meals and lodging in Phoenix or the cost of traveling from Phoenix to Tucson. Taxes help This is because Phoenix is your tax home. Taxes help Example 2. Taxes help Your family home is in Pittsburgh, where you work 12 weeks a year. Taxes help The rest of the year you work for the same employer in Baltimore. Taxes help In Baltimore, you eat in restaurants and sleep in a rooming house. Taxes help Your salary is the same whether you are in Pittsburgh or Baltimore. Taxes help Because you spend most of your working time and earn most of your salary in Baltimore, that city is your tax home. Taxes help You cannot deduct any expenses you have for meals and lodging there. Taxes help However, when you return to work in Pittsburgh, you are away from your tax home even though you stay at your family home. Taxes help You can deduct the cost of your round trip between Baltimore and Pittsburgh. Taxes help You can also deduct your part of your family's living expenses for meals and lodging while you are living and working in Pittsburgh. Taxes help Temporary Assignment or Job You may regularly work at your tax home and also work at another location. Taxes help It may not be practical to return to your tax home from this other location at the end of each work day. Taxes help Temporary assignment vs. Taxes help indefinite assignment. Taxes help   If your assignment or job away from your main place of work is temporary, your tax home does not change. Taxes help You are considered to be away from home for the whole period you are away from your main place of work. Taxes help You can deduct your travel expenses if they otherwise qualify for deduction. Taxes help Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less. Taxes help   However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax home and you cannot deduct your travel expenses while there. Taxes help An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than 1 year, whether or not it actually lasts for more than 1 year. Taxes help   If your assignment is indefinite, you must include in your income any amounts you receive from your employer for living expenses, even if they are called travel allowances and you account to your employer for them. Taxes help You may be able to deduct the cost of relocating to your new tax home as a moving expense. Taxes help See Publication 521 for more information. Taxes help Exception for federal crime investigations or prosecutions. Taxes help   If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the 1-year rule. Taxes help This means you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year, provided you meet the other requirements for deductibility. Taxes help   For you to qualify, the Attorney General (or his or her designee) must certify that you are traveling: For the federal government, In a temporary duty status, and To investigate or prosecute, or provide support services for the investigation or prosecution of a federal crime. Taxes help Determining temporary or indefinite. Taxes help   You must determine whether your assignment is temporary or indefinite when you start work. Taxes help If you expect an assignment or job to last for 1 year or less, it is temporary unless there are facts and circumstances that indicate otherwise. Taxes help An assignment or job that is initially temporary may become indefinite due to changed circumstances. Taxes help A series of assignments to the same location, all for short periods but that together cover a long period, may be considered an indefinite assignment. Taxes help Going home on days off. Taxes help   If you go back to your tax home from a temporary assignment on your days off, you are not considered away from home while you are in your hometown. Taxes help You cannot deduct the cost of your meals and lodging there. Taxes help However, you can deduct your travel expenses, including meals and lodging, while traveling between your temporary place of work and your tax home. Taxes help You can claim these expenses up to the amount it would have cost you to stay at your temporary place of work. Taxes help   If you keep your hotel room during your visit home, you can deduct the cost of your hotel room. Taxes help In addition, you can deduct your expenses of returning home up to the amount you would have spent for meals had you stayed at your temporary place of work. Taxes help Probationary work period. Taxes help   If you take a job that requires you to move, with the understanding that you will keep the job if your work is satisfactory during a probationary period, the job is indefinite. Taxes help You cannot deduct any of your expenses for meals and lodging during the probationary period. Taxes help What Travel Expenses Are Deductible? Once you have determined that you are traveling away from your tax home, you can determine what travel expenses are deductible. Taxes help You can deduct ordinary and necessary expenses you have when you travel away from home on business. Taxes help The type of expense you can deduct depends on the facts and your circumstances. Taxes help Table 26-1 summarizes travel expenses you may be able to deduct. Taxes help You may have other deductible travel expenses that are not covered there, depending on the facts and your circumstances. Taxes help When you travel away from home on business, you should keep records of all the expenses you have and any advances you receive from your employer. Taxes help You can use a log, diary, notebook, or any other written record to keep track of your expenses. Taxes help The types of expenses you need to record, along with supporting documentation, are described in Table 26-2 , later. Taxes help Separating costs. Taxes help   If you have one expense that includes the costs of meals, entertainment, and other services (such as lodging or transportation), you must allocate that expense between the cost of meals and entertainment and the cost of other services. Taxes help You must have a reasonable basis for making this allocation. Taxes help For example, you must allocate your expenses if a hotel includes one or more meals in its room charge. Taxes help Travel expenses for another individual. Taxes help   If a spouse, dependent, or other individual goes with you (or your employee) on a business trip or to a business convention, you generally cannot deduct his or her travel expenses. Taxes help Employee. Taxes help   You can deduct the travel expenses of someone who goes with you if that person: Is your employee, Has a bona fide business purpose for the travel, and Would otherwise be allowed to deduct the travel expenses. Taxes help Business associate. Taxes help   If a business associate travels with you and meets the conditions in (2) and (3) above, you can deduct the travel expenses you have for that person. Taxes help A business associate is someone with whom you could reasonably expect to engage or deal in the active conduct of your business. Taxes help A business associate can be a current or prospective (likely to become) customer, client, supplier, employee, agent, partner, or professional advisor. Taxes help Bona fide business purpose. Taxes help   A bona fide business purpose exists if you can prove a real business purpose for the individual's presence. Taxes help Incidental services, such as typing notes or assisting in entertaining customers, are not enough to make the expenses deductible. Taxes help Example. Taxes help Jerry drives to Chicago on business and takes his wife, Linda, with him. Taxes help Linda is not Jerry's employee. Taxes help Linda occasionally types notes, performs similar services, and accompanies Jerry to luncheons and dinners. Taxes help The performance of these services does not establish that her presence on the trip is necessary to the conduct of Jerry's business. Taxes help Her expenses are not deductible. Taxes help Jerry pays $199 a day for a double room. Taxes help A single room costs $149 a day. Taxes help He can deduct the total cost of driving his car to and from Chicago, but only $149 a day for his hotel room. Taxes help If he uses public transportation, he can deduct only his fare. Taxes help Table 26-1. Taxes help Travel Expenses You Can Deduct This chart summarizes expenses you can deduct when you travel away from home for business purposes. Taxes help IF you have expenses for. Taxes help . Taxes help . Taxes help THEN you can deduct the cost of. Taxes help . Taxes help . Taxes help transportation travel by airplane, train, bus, or car between your home and your business destination. Taxes help If you were provided with a ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero. Taxes help If you travel by ship, see Luxury Water Travel and Cruise ships (under Conventions) in Publication 463 for additional rules and limits. Taxes help taxi, commuter bus, and airport limousine fares for these and other types of transportation that take you between: The airport or station and your hotel, and The hotel and the work location of your customers or clients, your business meeting place, or your temporary work location. Taxes help baggage and shipping sending baggage and sample or display material between your regular and temporary work locations. Taxes help car operating and maintaining your car when traveling away from home on business. Taxes help You can deduct actual expenses or the standard mileage rate as well as business-related tolls and parking. Taxes help If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses. Taxes help lodging and meals your lodging and meals if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. Taxes help Meals include amounts spent for food, beverages, taxes, and related tips. Taxes help See Meals and Incidental Expenses for additional rules and limits. Taxes help cleaning dry cleaning and laundry. Taxes help telephone business calls while on your business trip. Taxes help This includes business communication by fax machine or other communication devices. Taxes help tips tips you pay for any expenses in this chart. Taxes help other other similar ordinary and necessary expenses related to your business travel. Taxes help These expenses might include transportation to or from a business meal, public stenographer's fees, computer rental fees, and operating and maintaining a house trailer. Taxes help Meals and Incidental Expenses You can deduct the cost of meals in either of the following situations. Taxes help It is necessary for you to stop for substantial sleep or rest to properly perform your duties while traveling away from home on business. Taxes help The meal is business-related entertainment. Taxes help Business-related entertainment is discussed under Entertainment Expenses , later. Taxes help The following discussion deals only with meals (and incidental expenses) that are not business-related entertainment. Taxes help Lavish or extravagant. Taxes help   You cannot deduct expenses for meals that are lavish or extravagant. Taxes help An expense is not considered lavish or extravagant if it is reasonable based on the facts and circumstances. Taxes help Expenses will not be disallowed merely because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. Taxes help 50% limit on meals. Taxes help   You can figure your meal expenses using either of the following methods. Taxes help Actual cost. Taxes help The standard meal allowance. Taxes help Both of these methods are explained below. Taxes help But, regardless of the method you use, you generally can deduct only 50% of the unreimbursed cost of your meals. Taxes help   If you are reimbursed for the cost of your meals, how you apply the 50% limit depends on whether your employer's reimbursement plan was accountable or nonaccountable. Taxes help If you are not reimbursed, the 50% limit applies whether the unreimbursed meal expense is for business travel or business entertainment. Taxes help The 50% limit is explained later under Entertainment Expenses . Taxes help Accountable and nonaccountable plans are discussed later under Reimbursements . Taxes help Actual cost. Taxes help   You can use the actual cost of your meals to figure the amount of your expense before reimbursement and application of the 50% deduction limit. Taxes help If you use this method, you must keep records of your actual cost. Taxes help Standard meal allowance. Taxes help   Generally, you can use the “standard meal allowance” method as an alternative to the actual cost method. Taxes help It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of your actual costs. Taxes help The set amount varies depending on where and when you travel. Taxes help In this chapter, “standard meal allowance” refers to the federal rate for M&IE, discussed later under Amount of standard meal allowance . Taxes help If you use the standard meal allowance, you still must keep records to prove the time, place, and business purpose of your travel. Taxes help See Recordkeeping , later. Taxes help Incidental expenses. Taxes help   The term “incidental expenses” means fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. Taxes help Incidental expenses do not include expenses for laundry, cleaning and pressing of clothing, lodging taxes, costs of telegrams or telephone calls, transportation between places of lodging or business and places where meals are taken, or the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings. Taxes help Incidental expenses only method. Taxes help   You can use an optional method (instead of actual cost) for deducting incidental expenses only. Taxes help The amount of the deduction is $5 a day. Taxes help You can use this method only if you did not pay or incur any meal expenses. Taxes help You cannot use this method on any day that you use the standard meal allowance. Taxes help    Federal employees should refer to the Federal Travel Regulations at  www. Taxes help gsa. Taxes help gov. Taxes help Find “What GSA Offers” and click on “Regulations: FMR, FTR, & FAR” for Federal Travel Regulation (FTR) for changes affecting claims for reimbursement. Taxes help 50% limit may apply. Taxes help   If you use the standard meal allowance method for meal expenses and you are not reimbursed or you are reimbursed under a nonaccountable plan, you can generally deduct only 50% of the standard meal allowance. Taxes help If you are reimbursed under an accountable plan and you are deducting amounts that are more than your reimbursements, you can deduct only 50% of the excess amount. Taxes help The 50% limit is explained later under Entertainment Expenses . Taxes help Accountable and nonaccountable plans are discussed later under Reimbursements . Taxes help There is no optional standard lodging amount similar to the standard meal allowance. Taxes help Your allowable lodging expense deduction is your actual cost. Taxes help Who can use the standard meal allowance. Taxes help   You can use the standard meal allowance whether you are an employee or self-employed, and whether or not you are reimbursed for your traveling expenses. Taxes help   Use of the standard meal allowance for other travel. Taxes help    You can use the standard meal allowance to figure your meal expenses when you travel in connection with investment and other income-producing property. Taxes help You can also use it to figure your meal expenses when you travel for qualifying educational purposes. Taxes help You cannot use the standard meal allowance to figure the cost of your meals when you travel for medical or charitable purposes. Taxes help Amount of standard meal allowance. Taxes help   The standard meal allowance is the federal M&IE rate. Taxes help For travel in 2013, the daily rate for most small localities in the United States is $46. Taxes help   Most major cities and many other localities in the United States are designated as high-cost areas, qualifying for higher standard meal allowances. Taxes help You can find this information (organized by state) on the Internet at www. Taxes help gsa. Taxes help gov. Taxes help Click on “Per Diem Rates,” then select “2013” for the period January 1, 2013 – September 30, 2013, and select “2014” for the period October 1, 2013 – December 31, 2013. Taxes help However, you can apply the rates in effect before October 1, 2013, for expenses of all travel within the United States for 2013 instead of the updated rates. Taxes help You must consistently use either the rates for the first 9 months for all of 2013 or the updated rates for the period of October 1, 2013, through December 31, 2013. Taxes help   If you travel to more than one location in one day, use the rate in effect for the area where you stop for sleep or rest. Taxes help If you work in the transportation industry, however, see Special rate for transportation workers , later. Taxes help Standard meal allowance for areas outside the continental United States. Taxes help    The standard meal allowance rates above do not apply to travel in Alaska, Hawaii, or any other location outside the continental United States. Taxes help The Department of Defense establishes per diem rates for Alaska, Hawaii, Puerto Rico, American Samoa, Guam, Midway, the Northern Mariana Islands, the U. Taxes help S. Taxes help Virgin Islands, Wake Island, and other non-foreign areas outside the continental United States. Taxes help The Department of State establishes per diem rates for all other foreign areas. Taxes help    You can access per diem rates for non-foreign areas outside the continental United States at: www. Taxes help defensetravel. Taxes help dod. Taxes help mil/site/perdiemCalc. Taxes help cfm. Taxes help You can access all other foreign per diem rates at www. Taxes help state. Taxes help gov/travel/. Taxes help Click on “Travel Per Diem Allowances for Foreign Areas” under “Foreign Per Diem Rates,” to obtain the latest foreign per diem rates. Taxes help Special rate for transportation workers. Taxes help   You can use a special standard meal allowance if you work in the transportation industry. Taxes help You are in the transportation industry if your work: Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and Regularly requires you to travel away from home and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates. Taxes help If this applies to you, you can claim a standard daily meal allowance of $59 ($65 for travel outside the continental United States). Taxes help   Using the special rate for transportation workers eliminates the need for you to determine the standard meal allowance for every area where you stop for sleep or rest. Taxes help If you choose to use the special rate for any trip, you must use the special rate (and not use the regular standard meal allowance rates) for all trips you take that year. Taxes help Travel for days you depart and return. Taxes help   For both the day you depart for and the day you return from a business trip, you must prorate the standard meal allowance (figure a reduced amount for each day). Taxes help You can do so by one of two methods. Taxes help Method 1: You can claim 3/4 of the standard meal allowance. Taxes help Method 2: You can prorate using any method that you consistently apply and that is in accordance with reasonable business practice. Taxes help Example. Taxes help Jen is employed in New Orleans as a convention planner. Taxes help In March, her employer sent her on a 3-day trip to Washington, DC, to attend a planning seminar. Taxes help She left her home in New Orleans at 10 a. Taxes help m. Taxes help on Wednesday and arrived in Washington, DC, at 5:30 p. Taxes help m. Taxes help After spending two nights there, she flew back to New Orleans on Friday and arrived back home at 8:00 p. Taxes help m. Taxes help Jen's employer gave her a flat amount to cover her expenses and included it with her wages. Taxes help Under Method 1, Jen can claim 2½ days of the standard meal allowance for Washington, DC: 3/4 of the daily rate for Wednesday and Friday (the days she departed and returned), and the full daily rate for Thursday. Taxes help Under Method 2, Jen could also use any method that she applies consistently and that is in accordance with reasonable business practice. Taxes help For example, she could claim 3 days of the standard meal allowance even though a federal employee would have to use Method 1 and be limited to only 2½ days. Taxes help Travel in the United States The following discussion applies to travel in the United States. Taxes help For this purpose, the United States includes only the 50 states and the District of Columbia. Taxes help The treatment of your travel expenses depends on how much of your trip was business related and on how much of your trip occurred within the United States. Taxes help See Part of Trip Outside the United States , later. Taxes help Trip Primarily for Business You can deduct all your travel expenses if your trip was entirely business related. Taxes help If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct your business-related travel expenses. Taxes help These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination. Taxes help Example. Taxes help You work in Atlanta and take a business trip to New Orleans in May. Taxes help On your way home, you stop in Mobile to visit your parents. Taxes help You spend $1,996 for the 9 days you are away from home for travel, meals, lodging, and other travel expenses. Taxes help If you had not stopped in Mobile, you would have been gone only 6 days, and your total cost would have been $1,696. Taxes help You can deduct $1,696 for your trip, including the cost of round-trip transportation to and from New Orleans. Taxes help The deduction for your meals is subject to the 50% limit on meals mentioned earlier. Taxes help Trip Primarily for Personal Reasons If your trip was primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. Taxes help However, you can deduct any expenses you have while at your destination that are directly related to your business. Taxes help A trip to a resort or on a cruise ship may be a vacation even if the promoter advertises that it is primarily for business. Taxes help The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip. Taxes help Part of Trip Outside the United States If part of your trip is outside the United States, use the rules described later under Travel Outside the United States for that part of the trip. Taxes help For the part of your trip that is inside the United States, use the rules for travel in the United States. Taxes help Travel outside the United States does not include travel from one point in the United States to another point in the United States. Taxes help The following discussion can help you determine whether your trip was entirely within the United States. Taxes help Public transportation. Taxes help   If you travel by public transportation, any place in the United States where that vehicle makes a scheduled stop is a point in the United States. Taxes help Once the vehicle leaves the last scheduled stop in the United States on its way to a point outside the United States, you apply the rules under Travel Outside the United States . Taxes help Example. Taxes help You fly from New York to Puerto Rico with a scheduled stop in Miami. Taxes help You return to New York nonstop. Taxes help The flight from New York to Miami is in the United States, so only the flight from Miami to Puerto Rico is outside the United States. Taxes help Because there are no scheduled stops between Puerto Rico and New York, all of the return trip is outside the United States. Taxes help Private car. Taxes help   Travel by private car in the United States is travel between points in the United States, even when you are on your way to a destination outside the United States. Taxes help Example. Taxes help You travel by car from Denver to Mexico City and return. Taxes help Your travel from Denver to the border and from the border back to Denver is travel in the United States, and the rules in this section apply. Taxes help The rules under Travel Outside the United States apply to your trip from the border to Mexico City and back to the border. Taxes help Travel Outside the United States If any part of your business travel is outside the United States, some of your deductions for the cost of getting to and from your destination may be limited. Taxes help For this purpose, the United States includes only the 50 states and the District of Columbia. Taxes help How much of your travel expenses you can deduct depends in part upon how much of your trip outside the United States was business related. Taxes help See chapter 1 of Publication 463 for information on luxury water travel. Taxes help Travel Entirely for Business or Considered Entirely for Business You can deduct all your travel expenses of getting to and from your business destination if your trip is entirely for business or considered entirely for business. Taxes help Travel entirely for business. Taxes help   If you travel outside the United States and you spend the entire time on business activities, you can deduct all of your travel expenses. Taxes help Travel considered entirely for business. Taxes help   Even if you did not spend your entire time on business activities, your trip is considered entirely for business if you meet at least one of the following four exceptions. Taxes help Exception 1 - No substantial control. Taxes help   Your trip is considered entirely for business if you did not have substantial control over arranging the trip. Taxes help The fact that you control the timing of your trip does not, by itself, mean that you have substantial control over arranging your trip. Taxes help   You do not have substantial control over your trip if you: Are an employee who was reimbursed or paid a travel expense allowance, Are not related to your employer, and Are not a managing executive. Taxes help    “Related to your employer” is defined later in this chapter under Per Diem and Car Allowances . Taxes help   A “managing executive” is an employee who has the authority and responsibility, without being subject to the veto of another, to decide on the need for the business travel. Taxes help    A self-employed person generally has substantial control over arranging business trips. Taxes help Exception 2 - Outside United States no more than a week. Taxes help   Your trip is considered entirely for business if you were outside the United States for a week or less, combining business and nonbusiness activities. Taxes help One week means 7 consecutive days. Taxes help In counting the days, do not count the day you leave the United States, but do count the day you return to the United States. Taxes help Exception 3 - Less than 25% of time on personal activities. Taxes help   Your trip is considered entirely for business if: You were outside the United States for more than a week, and You spent less than 25% of the total time you were outside the United States on nonbusiness activities. Taxes help For this purpose, count both the day your trip began and the day it ended. Taxes help Exception 4 - Vacation not a major consideration. Taxes help   Your trip is considered entirely for business if you can establish that a personal vacation was not a major consideration, even if you have substantial control over arranging the trip. Taxes help Travel Primarily for Business If you travel outside the United States primarily for business but spend some of your time on nonbusiness activities, you generally cannot deduct all of your travel expenses. Taxes help You can only deduct the business portion of your cost of getting to and from your destination. Taxes help You must allocate the costs between your business and nonbusiness activities to determine your deductible amount. Taxes help These travel allocation rules are discussed in chapter 1 of Publication 463. Taxes help You do not have to allocate your travel expense deduction if you meet one of the four exceptions listed earlier under Travel considered entirely for business. Taxes help In those cases, you can deduct the total cost of getting to and from your destination. Taxes help Travel Primarily for Personal Reasons If you travel outside the United States primarily for vacation or for investment purposes, the entire cost of the trip is a nondeductible personal expense. Taxes help If you spend some time attending brief professional seminars or a continuing education program, you can deduct your registration fees and other expenses you have that are directly related to your business. Taxes help Conventions You can deduct your travel expenses when you attend a convention if you can show that your attendance benefits your trade or business. Taxes help You cannot deduct the travel expenses for your family. Taxes help If the convention is for investment, political, social, or other purposes unrelated to your trade or business, you cannot deduct the expenses. Taxes help Your appointment or election as a delegate does not, in itself, determine whether you can deduct travel expenses. Taxes help You can deduct your travel expenses only if your attendance is connected to your own trade or business. Taxes help Convention agenda. Taxes help   The convention agenda or program generally shows the purpose of the convention. Taxes help You can show your attendance at the convention benefits your trade or business by comparing the agenda with the official duties and responsibilities of your position. Taxes help The agenda does not have to deal specifically with your official duties and responsibilities; it will be enough if the agenda is so related to your position that it shows your attendance was for business purposes. Taxes help Conventions held outside the North American area. Taxes help    See chapter 1 of Publication 463 for information on conventions held outside the North American area. Taxes help Entertainment Expenses You may be able to deduct business-related entertainment expenses you have for entertaining a client, customer, or employee. Taxes help You can deduct entertainment expenses only if they are both ordinary and necessary (defined earlier in the Introduction ) and meet one of the following tests. Taxes help Directly-related test. Taxes help Associated test. Taxes help Both of these tests are explained in chapter 2 of Publication 463. Taxes help The amount you can deduct for entertainment expenses may be limited. Taxes help Generally, you can deduct only 50% of your unreimbursed entertainment expenses. Taxes help This limit is discussed next. Taxes help 50% Limit In general, you can deduct only 50% of your business-related meal and entertainment expenses. Taxes help (If you are subject to the Department of Transportation's “hours of service” limits, you can deduct 80% of your business-related meal and entertainment expenses. Taxes help See Individuals subject to “hours of service” limits , later. Taxes help ) The 50% limit applies to employees or their employers, and to self-employed persons (including independent contractors) or their clients, depending on whether the expenses are reimbursed. Taxes help Figure 26-A summarizes the general rules explained in this section. Taxes help The 50% limit applies to business meals or entertainment expenses you have while: Traveling away from home (whether eating alone or with others) on business, Entertaining customers at your place of business, a restaurant, or other location, or Attending a business convention or reception, business meeting, or business luncheon at a club. Taxes help Included expenses. Taxes help   Expenses subject to the 50% limit include: Taxes and tips relating to a business meal or entertainment activity, Cover charges for admission to a nightclub, Rent paid for a room in which you hold a dinner or cocktail party, and Amounts paid for parking at a sports arena. Taxes help However, the cost of transportation to and from a business meal or a business-related entertainment activity is not subject to the 50% limit. Taxes help Application of 50% limit. Taxes help   The 50% limit on meal and entertainment expenses applies if the expense is otherwise deductible and is not covered by one of the exceptions discussed later in this section. Taxes help   The 50% limit also applies to certain meal and entertainment expenses that are not business related. Taxes help It applies to meal and entertainment expenses incurred for the production of income, including rental or royalty income. Taxes help It also applies to the cost of meals included in deductible educational expenses. Taxes help When to apply the 50% limit. Taxes help   You apply the 50% limit after determining the amount that would otherwise qualify for a deduction. Taxes help You first have to determine the amount of meal and entertainment expenses that would be deductible under the other rules discussed in this chapter. Taxes help Example 1. Taxes help You spend $200 for a business-related meal. Taxes help If $110 of that amount is not allowable because it is lavish and extravagant, the remaining $90 is subject to the 50% limit. Taxes help Your deduction cannot be more than $45 (. Taxes help 50 × $90). Taxes help Example 2. Taxes help You purchase two tickets to a concert and give them to a client. Taxes help You purchased the tickets through a ticket agent. Taxes help You paid $200 for the two tickets, which had a face value of $80 each ($160 total). Taxes help Your deduction cannot be more than $80 (. Taxes help 50 × $160). Taxes help Exceptions to the 50% Limit Generally, business-related meal and entertainment expenses are subject to the 50% limit. Taxes help Figure 26-A can help you determine if the 50% limit applies to you. Taxes help Your meal or entertainment expense is not subject to the 50% limit if the expense meets one of the following exceptions. Taxes help Employee's reimbursed expenses. Taxes help   If you are an employee, you are not subject to the 50% limit on expenses for which your employer reimburses you under an accountable plan. Taxes help Accountable plans are discussed later under Reimbursements . Taxes help Individuals subject to “hours of service” limits. Taxes help   You can deduct a higher percentage of your meal expenses while traveling away from your tax home if the meals take place during or incident to any period subject to the Department of Transportation's “hours of service” limits. Taxes help The percentage is 80%. Taxes help   Individuals subject to the Department of Transportation's “hours of service” limits include the following persons. Taxes help Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations. Taxes help Interstate truck operators and bus drivers who are under Department of Transportation regulations. Taxes help Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations. Taxes help Certain merchant mariners who are under Coast Guard regulations. Taxes help Other exceptions. Taxes help   There are also exceptions for the self-employed, advertising expenses, selling meals or entertainment, and charitable sports events. Taxes help These are discussed in Publication 463. Taxes help Figure 26-A. Taxes help Does the 50% Limit Apply to Your Expenses? There are exceptions to these rules. Taxes help See Exceptions to the 50% Limit . Taxes help Please click here for the text description of the image. Taxes help Entertainment expenses: 50% limit What Entertainment Expenses Are Deductible? This section explains different types of entertainment expenses you may be able to deduct. Taxes help Entertainment. Taxes help    Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. Taxes help Examples include entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; or on hunting, fishing, vacation, and similar trips. Taxes help A meal as a form of entertainment. Taxes help   Entertainment includes the cost of a meal you provide to a customer or client, whether the meal is a part of other entertainment or by itself. Taxes help A meal expense includes the cost of food, beverages, taxes, and tips for the meal. Taxes help To deduct an entertainment-related meal, you or your employee must be present when the food or beverages are provided. Taxes help You cannot claim the cost of your meal both as an entertainment expense and as a travel expense. Taxes help Separating costs. Taxes help   If you have one expense that includes the costs of entertainment and other services (such as lodging or transportation), you must allocate that expense between the cost of entertainment and the cost of other services. Taxes help You must have a reasonable basis for making this allocation. Taxes help For example, you must allocate your expenses if a hotel includes entertainment in its lounge on the same bill with your room charge. Taxes help Taking turns paying for meals or entertainment. Taxes help   If a group of business acquaintances take turns picking up each others' meal or entertainment checks without regard to whether any business purposes are served, no member of the group can deduct any part of the expense. Taxes help Lavish or extravagant expenses. Taxes help   You cannot deduct expenses for entertainment that are lavish or extravagant. Taxes help An expense is not considered lavish or extravagant if it is reasonable considering the facts and circumstances. Taxes help Expenses will not be disallowed just because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. Taxes help Trade association meetings. Taxes help    You can deduct entertainment expenses that are directly related to, and necessary for, attending business meetings or conventions of certain exempt organizations if the expenses of your attendance are related to your active trade or business. Taxes help These organizations include business leagues, chambers of commerce, real estate boards, trade associations, and professional associations. Taxes help Entertainment tickets. Taxes help   Generally, you cannot deduct more than the face value of an entertainment ticket, even if you paid a higher price. Taxes help For example, you cannot deduct service fees you pay to ticket agencies or brokers or any amount over the face value of the tickets you pay to scalpers. Taxes help What Entertainment Expenses Are Not Deductible? This section explains different types of entertainment expenses you generally may not be able to deduct. Taxes help Club dues and membership fees. Taxes help   You cannot deduct dues (including initiation fees) for membership in any club organized for: Business, Pleasure, Recreation, or Other social purpose. Taxes help This rule applies to any membership organization if one of its principal purposes is either: To conduct entertainment activities for members or their guests, or To provide members or their guests with access to entertainment facilities. Taxes help   The purposes and activities of a club, not its name, will determine whether or not you can deduct the dues. Taxes help You cannot deduct dues paid to: Country clubs, Golf and athletic clubs, Airline clubs, Hotel clubs, and Clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. Taxes help Entertainment facilities. Taxes help   Generally, you cannot deduct any expense for the use of an entertainment facility. Taxes help This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection. Taxes help   An entertainment facility is any property you own, rent, or use for entertainment. Taxes help Examples include a yacht, hunting lodge, fishing camp, swimming pool, tennis court, bowling alley, car, airplane, apartment, hotel suite, or home in a vacation resort. Taxes help Out-of-pocket expenses. Taxes help   You can deduct out-of-pocket expenses, such as for food and beverages, catering, gas, and fishing bait, that you provided during entertainment at a facility. Taxes help These are not expenses for the use of an entertainment facility. Taxes help However, these expenses are subject to the directly-related and associated tests and to the 50% Limit discussed earlier. Taxes help Additional information. Taxes help   For more information on entertainment expenses, including discussions of the directly-related and associated tests, see chapter 2 of Publication 463. Taxes help Gift Expenses If you give gifts in the course of your trade or business, you can deduct all or part of the cost. Taxes help This section explains the limits and rules for deducting the costs of gifts. Taxes help $25 limit. Taxes help   You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. Taxes help A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift. Taxes help   If you give a gift to a member of a customer's family, the gift is generally considered to be an indirect gift to the customer. Taxes help This rule does not apply if you have a bona fide, independent business connection with that family member and the gift is not intended for the customer's eventual use or benefit. Taxes help   If you and your spouse both give gifts, both of you are treated as one taxpayer. Taxes help It does not matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient. Taxes help If a partnership gives gifts, the partnership and the partners are treated as one taxpayer. Taxes help Incidental costs. Taxes help   Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit. Taxes help   A cost is incidental only if it does not add substantial value to the gift. Taxes help For example, the cost of customary gift wrapping is an incidental cost. Taxes help However, the purchase of an ornamental basket for packaging fruit is not an incidental cost if the value of the basket is substantial compared to the value of the fruit. Taxes help Exceptions. Taxes help   The following items are not considered gifts for purposes of the $25 limit. Taxes help An item that costs $4 or less and: Has your name clearly and permanently imprinted on the gift, and Is one of a number of identical items you widely distribute. Taxes help Examples include pens, desk sets, and plastic bags and cases. Taxes help Signs, display racks, or other promotional material to be used on the business premises of the recipient. Taxes help Gift or entertainment. Taxes help   Any item that might be considered either a gift or entertainment generally will be considered entertainment. Taxes help However, if you give a customer packaged food or beverages you intend the customer to use at a later date, treat it as a gift. Taxes help    If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. Taxes help You can treat the cost of the tickets as either a gift expense or an entertainment expense, whichever is to your advantage. Taxes help    If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. Taxes help You cannot choose, in this case, to treat the cost of the tickets as a gift expense. Taxes help Transportation Expenses This section discusses expenses you can deduct for business transportation when you are not traveling away from home as defined earlier under Travel Expenses . Taxes help These expenses include the cost of transportation by air, rail, bus, taxi, etc. Taxes help , and the cost of driving and maintaining your car. Taxes help Transportation expenses include the ordinary and necessary costs of all of the following. Taxes help Getting from one workplace to another in the course of your business or profession when you are traveling within the area of your tax home. Taxes help (Tax home is defined earlier under Travel Expenses . Taxes help ) Visiting clients or customers. Taxes help Going to a business meeting away from your regular workplace. Taxes help Getting from your home to a temporary workplace when you have one or more regular places of work. Taxes help These temporary workplaces can be either within the area of your tax home or outside that area. Taxes help Transportation expenses do not include expenses you have while traveling away from home overnight. Taxes help Those expenses are travel expenses, discussed earlier. Taxes help However, if you use your car while traveling away from home overnight, use the rules in this section to figure your car expense deduction. Taxes help See Car Expenses , later. Taxes help Illustration of transportation expenses. Taxes help    Figure 26-B illustrates the rules for when you can deduct transportation expenses when you have a regular or main job away from your home. Taxes help You may want to refer to it when deciding whether you can deduct your transportation expenses. Taxes help Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. Taxes help However, there are many exceptions for deducting transportation expenses, like whether your work location is temporary (inside or outside the metropolitan area), traveling for same trade or business, or if you have a home office. Taxes help Temporary work location. Taxes help   If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance. Taxes help   If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise. Taxes help   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. Taxes help   If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. Taxes help It will not be treated as temporary after the date you determine it will last more than 1 year. Taxes help   If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. Taxes help You may have deductible travel expenses as discussed earlier in this chapter. Taxes help No regular place of work. Taxes help   If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area. Taxes help   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. Taxes help   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. Taxes help These are nondeductible commuting expenses. Taxes help Two places of work. Taxes help   If you work at two places in one day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. Taxes help However, if for some personal reason you do not go directly from one location to the other, you cannot deduct more than the amount it would have cost you to go directly from the first location to the second. Taxes help   Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. Taxes help You cannot deduct them. Taxes help Armed Forces reservists. Taxes help   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. Taxes help You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work , earlier. Taxes help   You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. Taxes help In this case, your transportation generally is a nondeductible commuting expense. Taxes help However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. Taxes help   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. Taxes help   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. Taxes help These expenses are discussed earlier under Travel Expenses . Taxes help   If you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you may be able to deduct some of your reserve-related travel costs as an adjustment to income rather than as an itemized deduction. Taxes help See Armed Forces reservists traveling more than 100 miles from home under Special Rules, later. Taxes help Commuting expenses. Taxes help   You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. Taxes help These costs are personal commuting expenses. Taxes help You cannot deduct commuting expenses no matter how far your home is from your regular place of work. Taxes help You cannot deduct commuting expenses even if you work during the commuting trip. Taxes help Example. Taxes help You sometimes use your cell phone to make business calls while commuting to and from work. Taxes help Sometimes business associates ride with you to and from work, and you have a business discussion in the car. Taxes help These activities do not change the trip from personal to business. Taxes help You cannot deduct your commuting expenses. Taxes help Parking fees. Taxes help   Fees you pay to park your car at your place of business are nondeductible commuting expenses. Taxes help You can, however, deduct business-related parking fees when visiting a customer or client. Taxes help Advertising display on car. Taxes help   Putting display material that advertises your business on your car does not change the use of your car from personal use to business use. Taxes help If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. Taxes help Car pools. Taxes help   You cannot deduct the cost of using your car in a nonprofit car pool. Taxes help Do not include payments you receive from the passengers in your income. Taxes help These payments are considered reimbursements of your expenses. Taxes help However, if you operate a car pool for a profit, you must include payments from passengers in your income. Taxes help You can then deduct your car expenses (using the rules in this chapter). Taxes help Hauling tools or instruments. Taxes help   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. Taxes help However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car). Taxes help Union members' trips from a union hall. Taxes help   If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work are nondeductible commuting expenses. Taxes help Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. Taxes help Office in the home. Taxes help   If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. Taxes help (See chapter 28 for information on determining if your home office qualifies as a principal place of business. Taxes help ) Figure 26-B. Taxes help When Are Transportation Expenses Deductible? Most employees and self-employed persons can use this chart. Taxes help (Do not use this chart if your home is your principal place of business. Taxes help See Office in the home . Taxes help ) Please click here for the text description of the image. Taxes help Figure 26-B. Taxes help Local Transportation Examples of deductible transportation. Taxes help   The following examples show when you can deduct transportation expenses based on the location of your work and your home. Taxes help Example 1. Taxes help You regularly work in an office in the city where you live. Taxes help Your employer sends you to a 1-week training session at a different office in the same city. Taxes help You travel directly from your home to the training location and return each day. Taxes help You can deduct the cost of your daily round-trip transportation between your home and the training location. Taxes help Example 2. Taxes help Your principal place of business is in your home. Taxes help You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business. Taxes help Example 3. Taxes help You have no regular office, and you do not have an office in your home. Taxes help In this case, the location of your first business contact inside the metropolitan area is considered your office. Taxes help Transportation expenses between your home and this first contact are nondeductible commuting expenses. Taxes help Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. Taxes help While you cannot deduct the costs of these first and last trips, you can deduct the costs of going from one client or customer to another. Taxes help With no regular or home office, the costs of travel between two or more business contacts in a metropolitan area are deductible while the costs of travel between the home to (and from) business contacts are not deductible. Taxes help Car Expenses If you use your car for business purposes, you may be able to deduct car expenses. Taxes help You generally can use one of the two following methods to figure your deductible expenses. Taxes help Standard mileage rate. Taxes help Actual car expenses. Taxes help If you use actual car expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. Taxes help See Leasing a car under Actual Car Expenses, later. Taxes help In this chapter, “car” includes a van, pickup, or panel truck. Taxes help Rural mail carriers. Taxes help   If you are a rural mail carrier, you may be able to treat the amount of qualified reimbursement you received as the amount of your allowable expense. Taxes help Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the amount of reimbursement in your income. Taxes help   If your vehicle expenses are more than the amount of your reimbursement, you can deduct the unreimbursed expenses as an itemized deduction on Schedule A (Form 1040). Taxes help You must complete Form 2106 and attach it to your Form 1040. Taxes help   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. Taxes help It is given as an equipment maintenance allowance (EMA) to employees of the U. Taxes help S. Taxes help Postal Service. Taxes help It is at the rate contained in the 1991 collective bargaining agreement. Taxes help Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. Taxes help See your employer for information on your reimbursement. Taxes help If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. Taxes help Standard Mileage Rate You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. Taxes help For 2013, the standard mileage rate for business use is 56½ cents per mile. Taxes help If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year, but see Parking fees and tolls, later. Taxes help You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. Taxes help See Reimbursements under How To Report, later. Taxes help Choosing the standard mileage rate. Taxes help   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Taxes help Then in later years, you can choose to use either the standard mileage rate or actual expenses. Taxes help   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. Taxes help   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. Taxes help You cannot revoke the choice. Taxes help However, in a later year, you can switch from the standard mileage rate to the actual expenses method. Taxes help If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation. Taxes help Example. Taxes help Larry is an employee who occasionally uses his own car for business purposes. Taxes help He purchased the car in 2011, but he did not claim any unreimburse
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Understanding Your CP187 Notice

You received this notice to remind you of the amount you owe in tax, penalty and interest.


What you need to do

  • Read your notice carefully ― it will explain how much money you owe on your taxes.

You may want to...


Answers to Common Questions

  • Am I charged interest on the money I owe?
    Yes, interest accrues on your unpaid balance until you pay it in full.

  • Do I receive a penalty if I cannot pay the full amount?
    Yes, you receive a late payment penalty.

  • What happens if I cannot pay the full amount I owe?
    You can arrange to make a payment plan with us if you cannot pay the full amount you owe.

  • How can I set up a payment plan?
    Call the toll-free number listed on the top right corner of your notice to discuss payment options or learn more about payment arrangements here.

  • What’s a Federal Tax Deposit Coupon Book? Do I need one?
    The coupon book allows you to make deposits at your bank of various business taxes such as income tax withholding, Social Security tax and Medicare tax collected from your employees’ pay. You can also make your tax liability deposits electronically through the Electronic Federal Tax Deposit System. If your employment taxes are less than $2500 each quarter, you can submit your employment tax payment with your Form 941, Employer’s QUARTERLY Federal Tax Return.

  •  


  • Tips for next year

    Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions for which you may qualify. In many cases, you can file free. Learn more about how to file electronically here.


    Understanding your notice

    Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

    Notice CP187, Page 1

    Notice CP187, Page 2

    Notice CP187, Page 3

Page Last Reviewed or Updated: 09-Dec-2013

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Taxes Help

Taxes help Publication 534 - Introductory Material Table of Contents Important Change for 1995 Introduction How To Use This Publication Important Change for 1995 Major changes to Publications 534 and 946. Taxes help  This publication, as well as Publication 946,How To Depreciate Property, has been changed. Taxes help Publication 534 has been shortened. Taxes help It no longer contains general information on MACRS and the section 179 deduction. Taxes help It contains a discussion of the accelerated cost recovery system (ACRS), the ACRS Percentage Tables, a discussion of other methods of depreciation, and a limited discussion of listed property. Taxes help We expanded Publication 946 by adding material taken from Publication 534. Taxes help We added more detail to the discussions of the section 179 deduction, the modified accelerated cost recovery system (MACRS), and listed property. Taxes help We replaced the partialMACRS Percentage Tables with the complete ones from Publication 534. Taxes help We also added the Table of Class Lives and Recovery Periods from Publication 534. Taxes help We made these changes to eliminate most of the duplication that existed in the two publications. Taxes help This will save money and make it easier for you to decide which publication you need. Taxes help Use this publication to figure depreciation on property you placed in service before 1987; use Publication 946 to figure depreciation on property you placed in service after 1986. Taxes help Introduction The law allows you to recover your cost in business or income-producing property through yearly tax deductions. Taxes help You do this by depreciating your property, that is, by deducting some of your cost on your tax return each year. Taxes help You can depreciate both tangible property, such as a car, building, or machinery, and certain intangible property, such as a copyright or a patent. Taxes help The amount you can deduct depends on: How much the property cost, When you began using it, How long it will take to recover your cost, and Which of several depreciation methods you use. Taxes help Depreciation defined. Taxes help   Depreciation is a loss in the value of property over the time the property is being used. Taxes help Events that can cause property to depreciate include wear and tear, age, deterioration, and obsolescence. Taxes help You can get back your cost of certain property, such as equipment you use in your business or property used for the production of income by taking deductions for depreciation. Taxes help Black's Law Dictionary Amortization. Taxes help   Amortization is similar to depreciation. Taxes help Using amortization, you can recover your cost or basis in certain property proportionately over a specific number of years or months. Taxes help Examples of costs you can amortize are the costs of starting a business, reforestation, and pollution control facilities. Taxes help You can find information on amortization inchapter 12 of Publication 535, Business Expenses. Taxes help Alternative minimum tax. Taxes help   If you use accelerated depreciation for real property, or personal property that is leased to others, you may be liable for the alternative minimum tax. Taxes help Accelerated depreciation is any method, that allows recovery at a faster rate in the earlier years than the straight line method. Taxes help For more information, you may wish to see the following: Form 6251, Alternative Minimum Tax-Individuals, and Publication 542, Tax Information on Corporations. Taxes help Ordering publications and forms. Taxes help   To order free publications and forms, 1-800-TAX-FORM (1-800-829-3676). Taxes help You can also write to the IRS Forms Distribution Center nearest you. Taxes help Check your income tax package for the address. Taxes help   If you have access to a personal computer and a modem, you can also get many forms and publications electronically. Taxes help See How To Get Forms and Publications in your income tax package for details. Taxes help Telephone help. Taxes help   You can call the IRS with your tax question Monday through Friday during regular business hours. Taxes help Check your telephone book for the local number or you can call1-800-829-1040. Taxes help Telephone help for hearing-impaired persons. Taxes help   If you have access to TDD equipment, you can call 1-800-829-4059 with your tax question or to order forms and publications. Taxes help See your tax package for the hours of operation. Taxes help How To Use This Publication This publication describes the kinds of property that can be depreciated and the methods used to figure depreciation on property placed in service before 1987. Taxes help It is divided into three chapters and contains an appendix. Taxes help Chapter 1 explains the rules for depreciating property under the Accelerated Cost Recovery System (ACRS). Taxes help Chapter 2 explains the rules for depreciating property first used before 1981. Taxes help Chapter 3 explains the rules for listed property. Taxes help Also this chapter defines listed property. Taxes help The appendix contains the ACRS Percentage Tables. Taxes help Prev  Up  Next   Home   More Online Publications