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1040ez Fillable Form 2012

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1040ez Fillable Form 2012

1040ez fillable form 2012 26. 1040ez fillable form 2012   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. 1040ez fillable form 2012 Parking fees. 1040ez fillable form 2012 Advertising display on car. 1040ez fillable form 2012 Car pools. 1040ez fillable form 2012 Hauling tools or instruments. 1040ez fillable form 2012 Union members' trips from a union hall. 1040ez fillable form 2012 Car Expenses RecordkeepingHow To Prove Expenses How Long To Keep Records and Receipts How To ReportGifts. 1040ez fillable form 2012 Statutory employees. 1040ez fillable form 2012 Reimbursements Completing Forms 2106 and 2106-EZ Special Rules What's New Standard mileage rate. 1040ez fillable form 2012  For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. 1040ez fillable form 2012 Car expenses and use of the standard mileage rate are explained under Transportation Expenses , later. 1040ez fillable form 2012 Depreciation limits on cars, trucks, and vans. 1040ez fillable form 2012  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). 1040ez fillable form 2012 For trucks and vans the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). 1040ez fillable form 2012 For more information, see Depreciation limits in Publication 463. 1040ez fillable form 2012 Introduction You may be able to deduct the ordinary and necessary business-related expenses you have for: Travel, Entertainment, Gifts, or Transportation. 1040ez fillable form 2012 An ordinary expense is one that is common and accepted in your trade or business. 1040ez fillable form 2012 A necessary expense is one that is helpful and appropriate for your business. 1040ez fillable form 2012 An expense does not have to be required to be considered necessary. 1040ez fillable form 2012 This chapter explains the following. 1040ez fillable form 2012 What expenses are deductible. 1040ez fillable form 2012 How to report your expenses on your return. 1040ez fillable form 2012 What records you need to prove your expenses. 1040ez fillable form 2012 How to treat any expense reimbursements you may receive. 1040ez fillable form 2012 Who does not need to use this chapter. 1040ez fillable form 2012   If you are an employee, you will not need to read this chapter if all of the following are true. 1040ez fillable form 2012 You fully accounted to your employer for your work-related expenses. 1040ez fillable form 2012 You received full reimbursement for your expenses. 1040ez fillable form 2012 Your employer required you to return any excess reimbursement and you did so. 1040ez fillable form 2012 There is no amount shown with a code “L” in box 12 of your Form W-2, Wage and Tax Statement. 1040ez fillable form 2012 If you meet all of these conditions, there is no need to show the expenses or the reimbursements on your return. 1040ez fillable form 2012 See Reimbursements , later, if you would like more information on reimbursements and accounting to your employer. 1040ez fillable form 2012    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. 1040ez fillable form 2012 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. 1040ez fillable form 2012 This section discusses: Traveling away from home, Tax home, Temporary assignment or job, and What travel expenses are deductible. 1040ez fillable form 2012 It also discusses the standard meal allowance, rules for travel inside and outside the United States, and deductible convention expenses. 1040ez fillable form 2012 Travel expenses defined. 1040ez fillable form 2012   For tax purposes, travel expenses are the ordinary and necessary expenses (defined earlier) of traveling away from home for your business, profession, or job. 1040ez fillable form 2012   You will find examples of deductible travel expenses in Table 26-1 . 1040ez fillable form 2012 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. 1040ez fillable form 2012 This rest requirement is not satisfied by merely napping in your car. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Example 1. 1040ez fillable form 2012 You are a railroad conductor. 1040ez fillable form 2012 You leave your home terminal on a regularly scheduled round-trip run between two cities and return home 16 hours later. 1040ez fillable form 2012 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. 1040ez fillable form 2012 You are considered to be away from home. 1040ez fillable form 2012 Example 2. 1040ez fillable form 2012 You are a truck driver. 1040ez fillable form 2012 You leave your terminal and return to it later the same day. 1040ez fillable form 2012 You get an hour off at your turnaround point to eat. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Members of the Armed Forces. 1040ez fillable form 2012   If you are a member of the U. 1040ez fillable form 2012 S. 1040ez fillable form 2012 Armed Forces on a permanent duty assignment overseas, you are not traveling away from home. 1040ez fillable form 2012 You cannot deduct your expenses for meals and lodging. 1040ez fillable form 2012 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. 1040ez fillable form 2012 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. 1040ez fillable form 2012    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. 1040ez fillable form 2012 Tax Home To determine whether you are traveling away from home, you must first determine the location of your tax home. 1040ez fillable form 2012 Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. 1040ez fillable form 2012 It includes the entire city or general area in which your business or work is located. 1040ez fillable form 2012 If you have more than one regular place of business, your tax home is your main place of business. 1040ez fillable form 2012 See Main place of business or work , later. 1040ez fillable form 2012 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. 1040ez fillable form 2012 See No main place of business or work , later. 1040ez fillable form 2012 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. 1040ez fillable form 2012 As an itinerant, you cannot claim a travel expense deduction because you are never considered to be traveling away from home. 1040ez fillable form 2012 Main place of business or work. 1040ez fillable form 2012   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. 1040ez fillable form 2012 The total time you ordinarily spend in each place. 1040ez fillable form 2012 The level of your business activity in each place. 1040ez fillable form 2012 Whether your income from each place is significant or insignificant. 1040ez fillable form 2012 Example. 1040ez fillable form 2012 You live in Cincinnati where you have a seasonal job for 8 months each year and earn $40,000. 1040ez fillable form 2012 You work the other 4 months in Miami, also at a seasonal job, and earn $15,000. 1040ez fillable form 2012 Cincinnati is your main place of work because you spend most of your time there and earn most of your income there. 1040ez fillable form 2012 No main place of business or work. 1040ez fillable form 2012   You may have a tax home even if you do not have a regular or main place of business or work. 1040ez fillable form 2012 Your tax home may be the home where you regularly live. 1040ez fillable form 2012 Factors used to determine tax home. 1040ez fillable form 2012   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. 1040ez fillable form 2012 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. 1040ez fillable form 2012 You have living expenses at your main home that you duplicate because your business requires you to be away from that home. 1040ez fillable form 2012 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. 1040ez fillable form 2012   If you satisfy all three factors, your tax home is the home where you regularly live. 1040ez fillable form 2012 If you satisfy only two factors, you may have a tax home depending on all the facts and circumstances. 1040ez fillable form 2012 If you satisfy only one factor, you are an itinerant; your tax home is wherever you work and you cannot deduct travel expenses. 1040ez fillable form 2012 Example. 1040ez fillable form 2012 You are single and live in Boston in an apartment you rent. 1040ez fillable form 2012 You have worked for your employer in Boston for a number of years. 1040ez fillable form 2012 Your employer enrolls you in a 12-month executive training program. 1040ez fillable form 2012 You do not expect to return to work in Boston after you complete your training. 1040ez fillable form 2012 During your training, you do not do any work in Boston. 1040ez fillable form 2012 Instead, you receive classroom and on-the-job training throughout the United States. 1040ez fillable form 2012 You keep your apartment in Boston and return to it frequently. 1040ez fillable form 2012 You use your apartment to conduct your personal business. 1040ez fillable form 2012 You also keep up your community contacts in Boston. 1040ez fillable form 2012 When you complete your training, you are transferred to Los Angeles. 1040ez fillable form 2012 You do not satisfy factor (1) because you did not work in Boston. 1040ez fillable form 2012 You satisfy factor (2) because you had duplicate living expenses. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Therefore, you have a tax home in Boston. 1040ez fillable form 2012 Tax home different from family home. 1040ez fillable form 2012   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. 1040ez fillable form 2012 You also cannot deduct the cost of meals and lodging while at your tax home. 1040ez fillable form 2012 See Example 1 . 1040ez fillable form 2012   If you are working temporarily in the same city where you and your family live, you may be considered as traveling away from home. 1040ez fillable form 2012 See Example 2 . 1040ez fillable form 2012 Example 1. 1040ez fillable form 2012 You are a truck driver and you and your family live in Tucson. 1040ez fillable form 2012 You are employed by a trucking firm that has its terminal in Phoenix. 1040ez fillable form 2012 At the end of your long runs, you return to your home terminal in Phoenix and spend one night there before returning home. 1040ez fillable form 2012 You cannot deduct any expenses you have for meals and lodging in Phoenix or the cost of traveling from Phoenix to Tucson. 1040ez fillable form 2012 This is because Phoenix is your tax home. 1040ez fillable form 2012 Example 2. 1040ez fillable form 2012 Your family home is in Pittsburgh, where you work 12 weeks a year. 1040ez fillable form 2012 The rest of the year you work for the same employer in Baltimore. 1040ez fillable form 2012 In Baltimore, you eat in restaurants and sleep in a rooming house. 1040ez fillable form 2012 Your salary is the same whether you are in Pittsburgh or Baltimore. 1040ez fillable form 2012 Because you spend most of your working time and earn most of your salary in Baltimore, that city is your tax home. 1040ez fillable form 2012 You cannot deduct any expenses you have for meals and lodging there. 1040ez fillable form 2012 However, when you return to work in Pittsburgh, you are away from your tax home even though you stay at your family home. 1040ez fillable form 2012 You can deduct the cost of your round trip between Baltimore and Pittsburgh. 1040ez fillable form 2012 You can also deduct your part of your family's living expenses for meals and lodging while you are living and working in Pittsburgh. 1040ez fillable form 2012 Temporary Assignment or Job You may regularly work at your tax home and also work at another location. 1040ez fillable form 2012 It may not be practical to return to your tax home from this other location at the end of each work day. 1040ez fillable form 2012 Temporary assignment vs. 1040ez fillable form 2012 indefinite assignment. 1040ez fillable form 2012   If your assignment or job away from your main place of work is temporary, your tax home does not change. 1040ez fillable form 2012 You are considered to be away from home for the whole period you are away from your main place of work. 1040ez fillable form 2012 You can deduct your travel expenses if they otherwise qualify for deduction. 1040ez fillable form 2012 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. 1040ez fillable form 2012   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. 1040ez fillable form 2012 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. 1040ez fillable form 2012   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. 1040ez fillable form 2012 You may be able to deduct the cost of relocating to your new tax home as a moving expense. 1040ez fillable form 2012 See Publication 521 for more information. 1040ez fillable form 2012 Exception for federal crime investigations or prosecutions. 1040ez fillable form 2012   If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the 1-year rule. 1040ez fillable form 2012 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. 1040ez fillable form 2012   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. 1040ez fillable form 2012 Determining temporary or indefinite. 1040ez fillable form 2012   You must determine whether your assignment is temporary or indefinite when you start work. 1040ez fillable form 2012 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. 1040ez fillable form 2012 An assignment or job that is initially temporary may become indefinite due to changed circumstances. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Going home on days off. 1040ez fillable form 2012   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. 1040ez fillable form 2012 You cannot deduct the cost of your meals and lodging there. 1040ez fillable form 2012 However, you can deduct your travel expenses, including meals and lodging, while traveling between your temporary place of work and your tax home. 1040ez fillable form 2012 You can claim these expenses up to the amount it would have cost you to stay at your temporary place of work. 1040ez fillable form 2012   If you keep your hotel room during your visit home, you can deduct the cost of your hotel room. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Probationary work period. 1040ez fillable form 2012   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. 1040ez fillable form 2012 You cannot deduct any of your expenses for meals and lodging during the probationary period. 1040ez fillable form 2012 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. 1040ez fillable form 2012 You can deduct ordinary and necessary expenses you have when you travel away from home on business. 1040ez fillable form 2012 The type of expense you can deduct depends on the facts and your circumstances. 1040ez fillable form 2012 Table 26-1 summarizes travel expenses you may be able to deduct. 1040ez fillable form 2012 You may have other deductible travel expenses that are not covered there, depending on the facts and your circumstances. 1040ez fillable form 2012 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. 1040ez fillable form 2012 You can use a log, diary, notebook, or any other written record to keep track of your expenses. 1040ez fillable form 2012 The types of expenses you need to record, along with supporting documentation, are described in Table 26-2 , later. 1040ez fillable form 2012 Separating costs. 1040ez fillable form 2012   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. 1040ez fillable form 2012 You must have a reasonable basis for making this allocation. 1040ez fillable form 2012 For example, you must allocate your expenses if a hotel includes one or more meals in its room charge. 1040ez fillable form 2012 Travel expenses for another individual. 1040ez fillable form 2012   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. 1040ez fillable form 2012 Employee. 1040ez fillable form 2012   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. 1040ez fillable form 2012 Business associate. 1040ez fillable form 2012   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. 1040ez fillable form 2012 A business associate is someone with whom you could reasonably expect to engage or deal in the active conduct of your business. 1040ez fillable form 2012 A business associate can be a current or prospective (likely to become) customer, client, supplier, employee, agent, partner, or professional advisor. 1040ez fillable form 2012 Bona fide business purpose. 1040ez fillable form 2012   A bona fide business purpose exists if you can prove a real business purpose for the individual's presence. 1040ez fillable form 2012 Incidental services, such as typing notes or assisting in entertaining customers, are not enough to make the expenses deductible. 1040ez fillable form 2012 Example. 1040ez fillable form 2012 Jerry drives to Chicago on business and takes his wife, Linda, with him. 1040ez fillable form 2012 Linda is not Jerry's employee. 1040ez fillable form 2012 Linda occasionally types notes, performs similar services, and accompanies Jerry to luncheons and dinners. 1040ez fillable form 2012 The performance of these services does not establish that her presence on the trip is necessary to the conduct of Jerry's business. 1040ez fillable form 2012 Her expenses are not deductible. 1040ez fillable form 2012 Jerry pays $199 a day for a double room. 1040ez fillable form 2012 A single room costs $149 a day. 1040ez fillable form 2012 He can deduct the total cost of driving his car to and from Chicago, but only $149 a day for his hotel room. 1040ez fillable form 2012 If he uses public transportation, he can deduct only his fare. 1040ez fillable form 2012 Table 26-1. 1040ez fillable form 2012 Travel Expenses You Can Deduct This chart summarizes expenses you can deduct when you travel away from home for business purposes. 1040ez fillable form 2012 IF you have expenses for. 1040ez fillable form 2012 . 1040ez fillable form 2012 . 1040ez fillable form 2012 THEN you can deduct the cost of. 1040ez fillable form 2012 . 1040ez fillable form 2012 . 1040ez fillable form 2012 transportation travel by airplane, train, bus, or car between your home and your business destination. 1040ez fillable form 2012 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. 1040ez fillable form 2012 If you travel by ship, see Luxury Water Travel and Cruise ships (under Conventions) in Publication 463 for additional rules and limits. 1040ez fillable form 2012 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. 1040ez fillable form 2012 baggage and shipping sending baggage and sample or display material between your regular and temporary work locations. 1040ez fillable form 2012 car operating and maintaining your car when traveling away from home on business. 1040ez fillable form 2012 You can deduct actual expenses or the standard mileage rate as well as business-related tolls and parking. 1040ez fillable form 2012 If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Meals include amounts spent for food, beverages, taxes, and related tips. 1040ez fillable form 2012 See Meals and Incidental Expenses for additional rules and limits. 1040ez fillable form 2012 cleaning dry cleaning and laundry. 1040ez fillable form 2012 telephone business calls while on your business trip. 1040ez fillable form 2012 This includes business communication by fax machine or other communication devices. 1040ez fillable form 2012 tips tips you pay for any expenses in this chart. 1040ez fillable form 2012 other other similar ordinary and necessary expenses related to your business travel. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Meals and Incidental Expenses You can deduct the cost of meals in either of the following situations. 1040ez fillable form 2012 It is necessary for you to stop for substantial sleep or rest to properly perform your duties while traveling away from home on business. 1040ez fillable form 2012 The meal is business-related entertainment. 1040ez fillable form 2012 Business-related entertainment is discussed under Entertainment Expenses , later. 1040ez fillable form 2012 The following discussion deals only with meals (and incidental expenses) that are not business-related entertainment. 1040ez fillable form 2012 Lavish or extravagant. 1040ez fillable form 2012   You cannot deduct expenses for meals that are lavish or extravagant. 1040ez fillable form 2012 An expense is not considered lavish or extravagant if it is reasonable based on the facts and circumstances. 1040ez fillable form 2012 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. 1040ez fillable form 2012 50% limit on meals. 1040ez fillable form 2012   You can figure your meal expenses using either of the following methods. 1040ez fillable form 2012 Actual cost. 1040ez fillable form 2012 The standard meal allowance. 1040ez fillable form 2012 Both of these methods are explained below. 1040ez fillable form 2012 But, regardless of the method you use, you generally can deduct only 50% of the unreimbursed cost of your meals. 1040ez fillable form 2012   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. 1040ez fillable form 2012 If you are not reimbursed, the 50% limit applies whether the unreimbursed meal expense is for business travel or business entertainment. 1040ez fillable form 2012 The 50% limit is explained later under Entertainment Expenses . 1040ez fillable form 2012 Accountable and nonaccountable plans are discussed later under Reimbursements . 1040ez fillable form 2012 Actual cost. 1040ez fillable form 2012   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. 1040ez fillable form 2012 If you use this method, you must keep records of your actual cost. 1040ez fillable form 2012 Standard meal allowance. 1040ez fillable form 2012   Generally, you can use the “standard meal allowance” method as an alternative to the actual cost method. 1040ez fillable form 2012 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. 1040ez fillable form 2012 The set amount varies depending on where and when you travel. 1040ez fillable form 2012 In this chapter, “standard meal allowance” refers to the federal rate for M&IE, discussed later under Amount of standard meal allowance . 1040ez fillable form 2012 If you use the standard meal allowance, you still must keep records to prove the time, place, and business purpose of your travel. 1040ez fillable form 2012 See Recordkeeping , later. 1040ez fillable form 2012 Incidental expenses. 1040ez fillable form 2012   The term “incidental expenses” means fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Incidental expenses only method. 1040ez fillable form 2012   You can use an optional method (instead of actual cost) for deducting incidental expenses only. 1040ez fillable form 2012 The amount of the deduction is $5 a day. 1040ez fillable form 2012 You can use this method only if you did not pay or incur any meal expenses. 1040ez fillable form 2012 You cannot use this method on any day that you use the standard meal allowance. 1040ez fillable form 2012    Federal employees should refer to the Federal Travel Regulations at  www. 1040ez fillable form 2012 gsa. 1040ez fillable form 2012 gov. 1040ez fillable form 2012 Find “What GSA Offers” and click on “Regulations: FMR, FTR, & FAR” for Federal Travel Regulation (FTR) for changes affecting claims for reimbursement. 1040ez fillable form 2012 50% limit may apply. 1040ez fillable form 2012   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. 1040ez fillable form 2012 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. 1040ez fillable form 2012 The 50% limit is explained later under Entertainment Expenses . 1040ez fillable form 2012 Accountable and nonaccountable plans are discussed later under Reimbursements . 1040ez fillable form 2012 There is no optional standard lodging amount similar to the standard meal allowance. 1040ez fillable form 2012 Your allowable lodging expense deduction is your actual cost. 1040ez fillable form 2012 Who can use the standard meal allowance. 1040ez fillable form 2012   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. 1040ez fillable form 2012   Use of the standard meal allowance for other travel. 1040ez fillable form 2012    You can use the standard meal allowance to figure your meal expenses when you travel in connection with investment and other income-producing property. 1040ez fillable form 2012 You can also use it to figure your meal expenses when you travel for qualifying educational purposes. 1040ez fillable form 2012 You cannot use the standard meal allowance to figure the cost of your meals when you travel for medical or charitable purposes. 1040ez fillable form 2012 Amount of standard meal allowance. 1040ez fillable form 2012   The standard meal allowance is the federal M&IE rate. 1040ez fillable form 2012 For travel in 2013, the daily rate for most small localities in the United States is $46. 1040ez fillable form 2012   Most major cities and many other localities in the United States are designated as high-cost areas, qualifying for higher standard meal allowances. 1040ez fillable form 2012 You can find this information (organized by state) on the Internet at www. 1040ez fillable form 2012 gsa. 1040ez fillable form 2012 gov. 1040ez fillable form 2012 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. 1040ez fillable form 2012 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. 1040ez fillable form 2012 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. 1040ez fillable form 2012   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. 1040ez fillable form 2012 If you work in the transportation industry, however, see Special rate for transportation workers , later. 1040ez fillable form 2012 Standard meal allowance for areas outside the continental United States. 1040ez fillable form 2012    The standard meal allowance rates above do not apply to travel in Alaska, Hawaii, or any other location outside the continental United States. 1040ez fillable form 2012 The Department of Defense establishes per diem rates for Alaska, Hawaii, Puerto Rico, American Samoa, Guam, Midway, the Northern Mariana Islands, the U. 1040ez fillable form 2012 S. 1040ez fillable form 2012 Virgin Islands, Wake Island, and other non-foreign areas outside the continental United States. 1040ez fillable form 2012 The Department of State establishes per diem rates for all other foreign areas. 1040ez fillable form 2012    You can access per diem rates for non-foreign areas outside the continental United States at: www. 1040ez fillable form 2012 defensetravel. 1040ez fillable form 2012 dod. 1040ez fillable form 2012 mil/site/perdiemCalc. 1040ez fillable form 2012 cfm. 1040ez fillable form 2012 You can access all other foreign per diem rates at www. 1040ez fillable form 2012 state. 1040ez fillable form 2012 gov/travel/. 1040ez fillable form 2012 Click on “Travel Per Diem Allowances for Foreign Areas” under “Foreign Per Diem Rates,” to obtain the latest foreign per diem rates. 1040ez fillable form 2012 Special rate for transportation workers. 1040ez fillable form 2012   You can use a special standard meal allowance if you work in the transportation industry. 1040ez fillable form 2012 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. 1040ez fillable form 2012 If this applies to you, you can claim a standard daily meal allowance of $59 ($65 for travel outside the continental United States). 1040ez fillable form 2012   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. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Travel for days you depart and return. 1040ez fillable form 2012   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). 1040ez fillable form 2012 You can do so by one of two methods. 1040ez fillable form 2012 Method 1: You can claim 3/4 of the standard meal allowance. 1040ez fillable form 2012 Method 2: You can prorate using any method that you consistently apply and that is in accordance with reasonable business practice. 1040ez fillable form 2012 Example. 1040ez fillable form 2012 Jen is employed in New Orleans as a convention planner. 1040ez fillable form 2012 In March, her employer sent her on a 3-day trip to Washington, DC, to attend a planning seminar. 1040ez fillable form 2012 She left her home in New Orleans at 10 a. 1040ez fillable form 2012 m. 1040ez fillable form 2012 on Wednesday and arrived in Washington, DC, at 5:30 p. 1040ez fillable form 2012 m. 1040ez fillable form 2012 After spending two nights there, she flew back to New Orleans on Friday and arrived back home at 8:00 p. 1040ez fillable form 2012 m. 1040ez fillable form 2012 Jen's employer gave her a flat amount to cover her expenses and included it with her wages. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Under Method 2, Jen could also use any method that she applies consistently and that is in accordance with reasonable business practice. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Travel in the United States The following discussion applies to travel in the United States. 1040ez fillable form 2012 For this purpose, the United States includes only the 50 states and the District of Columbia. 1040ez fillable form 2012 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. 1040ez fillable form 2012 See Part of Trip Outside the United States , later. 1040ez fillable form 2012 Trip Primarily for Business You can deduct all your travel expenses if your trip was entirely business related. 1040ez fillable form 2012 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. 1040ez fillable form 2012 These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination. 1040ez fillable form 2012 Example. 1040ez fillable form 2012 You work in Atlanta and take a business trip to New Orleans in May. 1040ez fillable form 2012 On your way home, you stop in Mobile to visit your parents. 1040ez fillable form 2012 You spend $1,996 for the 9 days you are away from home for travel, meals, lodging, and other travel expenses. 1040ez fillable form 2012 If you had not stopped in Mobile, you would have been gone only 6 days, and your total cost would have been $1,696. 1040ez fillable form 2012 You can deduct $1,696 for your trip, including the cost of round-trip transportation to and from New Orleans. 1040ez fillable form 2012 The deduction for your meals is subject to the 50% limit on meals mentioned earlier. 1040ez fillable form 2012 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. 1040ez fillable form 2012 However, you can deduct any expenses you have while at your destination that are directly related to your business. 1040ez fillable form 2012 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. 1040ez fillable form 2012 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. 1040ez fillable form 2012 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. 1040ez fillable form 2012 For the part of your trip that is inside the United States, use the rules for travel in the United States. 1040ez fillable form 2012 Travel outside the United States does not include travel from one point in the United States to another point in the United States. 1040ez fillable form 2012 The following discussion can help you determine whether your trip was entirely within the United States. 1040ez fillable form 2012 Public transportation. 1040ez fillable form 2012   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. 1040ez fillable form 2012 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 . 1040ez fillable form 2012 Example. 1040ez fillable form 2012 You fly from New York to Puerto Rico with a scheduled stop in Miami. 1040ez fillable form 2012 You return to New York nonstop. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Because there are no scheduled stops between Puerto Rico and New York, all of the return trip is outside the United States. 1040ez fillable form 2012 Private car. 1040ez fillable form 2012   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. 1040ez fillable form 2012 Example. 1040ez fillable form 2012 You travel by car from Denver to Mexico City and return. 1040ez fillable form 2012 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. 1040ez fillable form 2012 The rules under Travel Outside the United States apply to your trip from the border to Mexico City and back to the border. 1040ez fillable form 2012 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. 1040ez fillable form 2012 For this purpose, the United States includes only the 50 states and the District of Columbia. 1040ez fillable form 2012 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. 1040ez fillable form 2012 See chapter 1 of Publication 463 for information on luxury water travel. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Travel entirely for business. 1040ez fillable form 2012   If you travel outside the United States and you spend the entire time on business activities, you can deduct all of your travel expenses. 1040ez fillable form 2012 Travel considered entirely for business. 1040ez fillable form 2012   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. 1040ez fillable form 2012 Exception 1 - No substantial control. 1040ez fillable form 2012   Your trip is considered entirely for business if you did not have substantial control over arranging the trip. 1040ez fillable form 2012 The fact that you control the timing of your trip does not, by itself, mean that you have substantial control over arranging your trip. 1040ez fillable form 2012   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. 1040ez fillable form 2012    “Related to your employer” is defined later in this chapter under Per Diem and Car Allowances . 1040ez fillable form 2012   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. 1040ez fillable form 2012    A self-employed person generally has substantial control over arranging business trips. 1040ez fillable form 2012 Exception 2 - Outside United States no more than a week. 1040ez fillable form 2012   Your trip is considered entirely for business if you were outside the United States for a week or less, combining business and nonbusiness activities. 1040ez fillable form 2012 One week means 7 consecutive days. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Exception 3 - Less than 25% of time on personal activities. 1040ez fillable form 2012   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. 1040ez fillable form 2012 For this purpose, count both the day your trip began and the day it ended. 1040ez fillable form 2012 Exception 4 - Vacation not a major consideration. 1040ez fillable form 2012   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. 1040ez fillable form 2012 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. 1040ez fillable form 2012 You can only deduct the business portion of your cost of getting to and from your destination. 1040ez fillable form 2012 You must allocate the costs between your business and nonbusiness activities to determine your deductible amount. 1040ez fillable form 2012 These travel allocation rules are discussed in chapter 1 of Publication 463. 1040ez fillable form 2012 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. 1040ez fillable form 2012 In those cases, you can deduct the total cost of getting to and from your destination. 1040ez fillable form 2012 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. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Conventions You can deduct your travel expenses when you attend a convention if you can show that your attendance benefits your trade or business. 1040ez fillable form 2012 You cannot deduct the travel expenses for your family. 1040ez fillable form 2012 If the convention is for investment, political, social, or other purposes unrelated to your trade or business, you cannot deduct the expenses. 1040ez fillable form 2012 Your appointment or election as a delegate does not, in itself, determine whether you can deduct travel expenses. 1040ez fillable form 2012 You can deduct your travel expenses only if your attendance is connected to your own trade or business. 1040ez fillable form 2012 Convention agenda. 1040ez fillable form 2012   The convention agenda or program generally shows the purpose of the convention. 1040ez fillable form 2012 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. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Conventions held outside the North American area. 1040ez fillable form 2012    See chapter 1 of Publication 463 for information on conventions held outside the North American area. 1040ez fillable form 2012 Entertainment Expenses You may be able to deduct business-related entertainment expenses you have for entertaining a client, customer, or employee. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Directly-related test. 1040ez fillable form 2012 Associated test. 1040ez fillable form 2012 Both of these tests are explained in chapter 2 of Publication 463. 1040ez fillable form 2012 The amount you can deduct for entertainment expenses may be limited. 1040ez fillable form 2012 Generally, you can deduct only 50% of your unreimbursed entertainment expenses. 1040ez fillable form 2012 This limit is discussed next. 1040ez fillable form 2012 50% Limit In general, you can deduct only 50% of your business-related meal and entertainment expenses. 1040ez fillable form 2012 (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. 1040ez fillable form 2012 See Individuals subject to “hours of service” limits , later. 1040ez fillable form 2012 ) 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. 1040ez fillable form 2012 Figure 26-A summarizes the general rules explained in this section. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Included expenses. 1040ez fillable form 2012   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. 1040ez fillable form 2012 However, the cost of transportation to and from a business meal or a business-related entertainment activity is not subject to the 50% limit. 1040ez fillable form 2012 Application of 50% limit. 1040ez fillable form 2012   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. 1040ez fillable form 2012   The 50% limit also applies to certain meal and entertainment expenses that are not business related. 1040ez fillable form 2012 It applies to meal and entertainment expenses incurred for the production of income, including rental or royalty income. 1040ez fillable form 2012 It also applies to the cost of meals included in deductible educational expenses. 1040ez fillable form 2012 When to apply the 50% limit. 1040ez fillable form 2012   You apply the 50% limit after determining the amount that would otherwise qualify for a deduction. 1040ez fillable form 2012 You first have to determine the amount of meal and entertainment expenses that would be deductible under the other rules discussed in this chapter. 1040ez fillable form 2012 Example 1. 1040ez fillable form 2012 You spend $200 for a business-related meal. 1040ez fillable form 2012 If $110 of that amount is not allowable because it is lavish and extravagant, the remaining $90 is subject to the 50% limit. 1040ez fillable form 2012 Your deduction cannot be more than $45 (. 1040ez fillable form 2012 50 × $90). 1040ez fillable form 2012 Example 2. 1040ez fillable form 2012 You purchase two tickets to a concert and give them to a client. 1040ez fillable form 2012 You purchased the tickets through a ticket agent. 1040ez fillable form 2012 You paid $200 for the two tickets, which had a face value of $80 each ($160 total). 1040ez fillable form 2012 Your deduction cannot be more than $80 (. 1040ez fillable form 2012 50 × $160). 1040ez fillable form 2012 Exceptions to the 50% Limit Generally, business-related meal and entertainment expenses are subject to the 50% limit. 1040ez fillable form 2012 Figure 26-A can help you determine if the 50% limit applies to you. 1040ez fillable form 2012 Your meal or entertainment expense is not subject to the 50% limit if the expense meets one of the following exceptions. 1040ez fillable form 2012 Employee's reimbursed expenses. 1040ez fillable form 2012   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. 1040ez fillable form 2012 Accountable plans are discussed later under Reimbursements . 1040ez fillable form 2012 Individuals subject to “hours of service” limits. 1040ez fillable form 2012   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. 1040ez fillable form 2012 The percentage is 80%. 1040ez fillable form 2012   Individuals subject to the Department of Transportation's “hours of service” limits include the following persons. 1040ez fillable form 2012 Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations. 1040ez fillable form 2012 Interstate truck operators and bus drivers who are under Department of Transportation regulations. 1040ez fillable form 2012 Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations. 1040ez fillable form 2012 Certain merchant mariners who are under Coast Guard regulations. 1040ez fillable form 2012 Other exceptions. 1040ez fillable form 2012   There are also exceptions for the self-employed, advertising expenses, selling meals or entertainment, and charitable sports events. 1040ez fillable form 2012 These are discussed in Publication 463. 1040ez fillable form 2012 Figure 26-A. 1040ez fillable form 2012 Does the 50% Limit Apply to Your Expenses? There are exceptions to these rules. 1040ez fillable form 2012 See Exceptions to the 50% Limit . 1040ez fillable form 2012 Please click here for the text description of the image. 1040ez fillable form 2012 Entertainment expenses: 50% limit What Entertainment Expenses Are Deductible? This section explains different types of entertainment expenses you may be able to deduct. 1040ez fillable form 2012 Entertainment. 1040ez fillable form 2012    Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. 1040ez fillable form 2012 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. 1040ez fillable form 2012 A meal as a form of entertainment. 1040ez fillable form 2012   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. 1040ez fillable form 2012 A meal expense includes the cost of food, beverages, taxes, and tips for the meal. 1040ez fillable form 2012 To deduct an entertainment-related meal, you or your employee must be present when the food or beverages are provided. 1040ez fillable form 2012 You cannot claim the cost of your meal both as an entertainment expense and as a travel expense. 1040ez fillable form 2012 Separating costs. 1040ez fillable form 2012   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. 1040ez fillable form 2012 You must have a reasonable basis for making this allocation. 1040ez fillable form 2012 For example, you must allocate your expenses if a hotel includes entertainment in its lounge on the same bill with your room charge. 1040ez fillable form 2012 Taking turns paying for meals or entertainment. 1040ez fillable form 2012   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. 1040ez fillable form 2012 Lavish or extravagant expenses. 1040ez fillable form 2012   You cannot deduct expenses for entertainment that are lavish or extravagant. 1040ez fillable form 2012 An expense is not considered lavish or extravagant if it is reasonable considering the facts and circumstances. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Trade association meetings. 1040ez fillable form 2012    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. 1040ez fillable form 2012 These organizations include business leagues, chambers of commerce, real estate boards, trade associations, and professional associations. 1040ez fillable form 2012 Entertainment tickets. 1040ez fillable form 2012   Generally, you cannot deduct more than the face value of an entertainment ticket, even if you paid a higher price. 1040ez fillable form 2012 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. 1040ez fillable form 2012 What Entertainment Expenses Are Not Deductible? This section explains different types of entertainment expenses you generally may not be able to deduct. 1040ez fillable form 2012 Club dues and membership fees. 1040ez fillable form 2012   You cannot deduct dues (including initiation fees) for membership in any club organized for: Business, Pleasure, Recreation, or Other social purpose. 1040ez fillable form 2012 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. 1040ez fillable form 2012   The purposes and activities of a club, not its name, will determine whether or not you can deduct the dues. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Entertainment facilities. 1040ez fillable form 2012   Generally, you cannot deduct any expense for the use of an entertainment facility. 1040ez fillable form 2012 This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection. 1040ez fillable form 2012   An entertainment facility is any property you own, rent, or use for entertainment. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Out-of-pocket expenses. 1040ez fillable form 2012   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. 1040ez fillable form 2012 These are not expenses for the use of an entertainment facility. 1040ez fillable form 2012 However, these expenses are subject to the directly-related and associated tests and to the 50% Limit discussed earlier. 1040ez fillable form 2012 Additional information. 1040ez fillable form 2012   For more information on entertainment expenses, including discussions of the directly-related and associated tests, see chapter 2 of Publication 463. 1040ez fillable form 2012 Gift Expenses If you give gifts in the course of your trade or business, you can deduct all or part of the cost. 1040ez fillable form 2012 This section explains the limits and rules for deducting the costs of gifts. 1040ez fillable form 2012 $25 limit. 1040ez fillable form 2012   You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. 1040ez fillable form 2012 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. 1040ez fillable form 2012   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. 1040ez fillable form 2012 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. 1040ez fillable form 2012   If you and your spouse both give gifts, both of you are treated as one taxpayer. 1040ez fillable form 2012 It does not matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient. 1040ez fillable form 2012 If a partnership gives gifts, the partnership and the partners are treated as one taxpayer. 1040ez fillable form 2012 Incidental costs. 1040ez fillable form 2012   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. 1040ez fillable form 2012   A cost is incidental only if it does not add substantial value to the gift. 1040ez fillable form 2012 For example, the cost of customary gift wrapping is an incidental cost. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Exceptions. 1040ez fillable form 2012   The following items are not considered gifts for purposes of the $25 limit. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Examples include pens, desk sets, and plastic bags and cases. 1040ez fillable form 2012 Signs, display racks, or other promotional material to be used on the business premises of the recipient. 1040ez fillable form 2012 Gift or entertainment. 1040ez fillable form 2012   Any item that might be considered either a gift or entertainment generally will be considered entertainment. 1040ez fillable form 2012 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. 1040ez fillable form 2012    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. 1040ez fillable form 2012 You can treat the cost of the tickets as either a gift expense or an entertainment expense, whichever is to your advantage. 1040ez fillable form 2012    If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. 1040ez fillable form 2012 You cannot choose, in this case, to treat the cost of the tickets as a gift expense. 1040ez fillable form 2012 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 . 1040ez fillable form 2012 These expenses include the cost of transportation by air, rail, bus, taxi, etc. 1040ez fillable form 2012 , and the cost of driving and maintaining your car. 1040ez fillable form 2012 Transportation expenses include the ordinary and necessary costs of all of the following. 1040ez fillable form 2012 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. 1040ez fillable form 2012 (Tax home is defined earlier under Travel Expenses . 1040ez fillable form 2012 ) Visiting clients or customers. 1040ez fillable form 2012 Going to a business meeting away from your regular workplace. 1040ez fillable form 2012 Getting from your home to a temporary workplace when you have one or more regular places of work. 1040ez fillable form 2012 These temporary workplaces can be either within the area of your tax home or outside that area. 1040ez fillable form 2012 Transportation expenses do not include expenses you have while traveling away from home overnight. 1040ez fillable form 2012 Those expenses are travel expenses, discussed earlier. 1040ez fillable form 2012 However, if you use your car while traveling away from home overnight, use the rules in this section to figure your car expense deduction. 1040ez fillable form 2012 See Car Expenses , later. 1040ez fillable form 2012 Illustration of transportation expenses. 1040ez fillable form 2012    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. 1040ez fillable form 2012 You may want to refer to it when deciding whether you can deduct your transportation expenses. 1040ez fillable form 2012 Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Temporary work location. 1040ez fillable form 2012   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. 1040ez fillable form 2012   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. 1040ez fillable form 2012   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. 1040ez fillable form 2012   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. 1040ez fillable form 2012 It will not be treated as temporary after the date you determine it will last more than 1 year. 1040ez fillable form 2012   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. 1040ez fillable form 2012 You may have deductible travel expenses as discussed earlier in this chapter. 1040ez fillable form 2012 No regular place of work. 1040ez fillable form 2012   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. 1040ez fillable form 2012   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. 1040ez fillable form 2012   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. 1040ez fillable form 2012 These are nondeductible commuting expenses. 1040ez fillable form 2012 Two places of work. 1040ez fillable form 2012   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. 1040ez fillable form 2012 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. 1040ez fillable form 2012   Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. 1040ez fillable form 2012 You cannot deduct them. 1040ez fillable form 2012 Armed Forces reservists. 1040ez fillable form 2012   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. 1040ez fillable form 2012 You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work , earlier. 1040ez fillable form 2012   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. 1040ez fillable form 2012 In this case, your transportation generally is a nondeductible commuting expense. 1040ez fillable form 2012 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. 1040ez fillable form 2012   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. 1040ez fillable form 2012   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. 1040ez fillable form 2012 These expenses are discussed earlier under Travel Expenses . 1040ez fillable form 2012   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. 1040ez fillable form 2012 See Armed Forces reservists traveling more than 100 miles from home under Special Rules, later. 1040ez fillable form 2012 Commuting expenses. 1040ez fillable form 2012   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. 1040ez fillable form 2012 These costs are personal commuting expenses. 1040ez fillable form 2012 You cannot deduct commuting expenses no matter how far your home is from your regular place of work. 1040ez fillable form 2012 You cannot deduct commuting expenses even if you work during the commuting trip. 1040ez fillable form 2012 Example. 1040ez fillable form 2012 You sometimes use your cell phone to make business calls while commuting to and from work. 1040ez fillable form 2012 Sometimes business associates ride with you to and from work, and you have a business discussion in the car. 1040ez fillable form 2012 These activities do not change the trip from personal to business. 1040ez fillable form 2012 You cannot deduct your commuting expenses. 1040ez fillable form 2012 Parking fees. 1040ez fillable form 2012   Fees you pay to park your car at your place of business are nondeductible commuting expenses. 1040ez fillable form 2012 You can, however, deduct business-related parking fees when visiting a customer or client. 1040ez fillable form 2012 Advertising display on car. 1040ez fillable form 2012   Putting display material that advertises your business on your car does not change the use of your car from personal use to business use. 1040ez fillable form 2012 If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. 1040ez fillable form 2012 Car pools. 1040ez fillable form 2012   You cannot deduct the cost of using your car in a nonprofit car pool. 1040ez fillable form 2012 Do not include payments you receive from the passengers in your income. 1040ez fillable form 2012 These payments are considered reimbursements of your expenses. 1040ez fillable form 2012 However, if you operate a car pool for a profit, you must include payments from passengers in your income. 1040ez fillable form 2012 You can then deduct your car expenses (using the rules in this chapter). 1040ez fillable form 2012 Hauling tools or instruments. 1040ez fillable form 2012   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. 1040ez fillable form 2012 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). 1040ez fillable form 2012 Union members' trips from a union hall. 1040ez fillable form 2012   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. 1040ez fillable form 2012 Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. 1040ez fillable form 2012 Office in the home. 1040ez fillable form 2012   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. 1040ez fillable form 2012 (See chapter 28 for information on determining if your home office qualifies as a principal place of business. 1040ez fillable form 2012 ) Figure 26-B. 1040ez fillable form 2012 When Are Transportation Expenses Deductible? Most employees and self-employed persons can use this chart. 1040ez fillable form 2012 (Do not use this chart if your home is your principal place of business. 1040ez fillable form 2012 See Office in the home . 1040ez fillable form 2012 ) Please click here for the text description of the image. 1040ez fillable form 2012 Figure 26-B. 1040ez fillable form 2012 Local Transportation Examples of deductible transportation. 1040ez fillable form 2012   The following examples show when you can deduct transportation expenses based on the location of your work and your home. 1040ez fillable form 2012 Example 1. 1040ez fillable form 2012 You regularly work in an office in the city where you live. 1040ez fillable form 2012 Your employer sends you to a 1-week training session at a different office in the same city. 1040ez fillable form 2012 You travel directly from your home to the training location and return each day. 1040ez fillable form 2012 You can deduct the cost of your daily round-trip transportation between your home and the training location. 1040ez fillable form 2012 Example 2. 1040ez fillable form 2012 Your principal place of business is in your home. 1040ez fillable form 2012 You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business. 1040ez fillable form 2012 Example 3. 1040ez fillable form 2012 You have no regular office, and you do not have an office in your home. 1040ez fillable form 2012 In this case, the location of your first business contact inside the metropolitan area is considered your office. 1040ez fillable form 2012 Transportation expenses between your home and this first contact are nondeductible commuting expenses. 1040ez fillable form 2012 Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. 1040ez fillable form 2012 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. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Car Expenses If you use your car for business purposes, you may be able to deduct car expenses. 1040ez fillable form 2012 You generally can use one of the two following methods to figure your deductible expenses. 1040ez fillable form 2012 Standard mileage rate. 1040ez fillable form 2012 Actual car expenses. 1040ez fillable form 2012 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. 1040ez fillable form 2012 See Leasing a car under Actual Car Expenses, later. 1040ez fillable form 2012 In this chapter, “car” includes a van, pickup, or panel truck. 1040ez fillable form 2012 Rural mail carriers. 1040ez fillable form 2012   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. 1040ez fillable form 2012 Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the amount of reimbursement in your income. 1040ez fillable form 2012   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). 1040ez fillable form 2012 You must complete Form 2106 and attach it to your Form 1040. 1040ez fillable form 2012   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. 1040ez fillable form 2012 It is given as an equipment maintenance allowance (EMA) to employees of the U. 1040ez fillable form 2012 S. 1040ez fillable form 2012 Postal Service. 1040ez fillable form 2012 It is at the rate contained in the 1991 collective bargaining agreement. 1040ez fillable form 2012 Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. 1040ez fillable form 2012 See your employer for information on your reimbursement. 1040ez fillable form 2012 If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. 1040ez fillable form 2012 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. 1040ez fillable form 2012 For 2013, the standard mileage rate for business use is 56½ cents per mile. 1040ez fillable form 2012 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. 1040ez fillable form 2012 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. 1040ez fillable form 2012 See Reimbursements under How To Report, later. 1040ez fillable form 2012 Choosing the standard mileage rate. 1040ez fillable form 2012   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. 1040ez fillable form 2012 Then in later years, you can choose to use either the standard mileage rate or actual expenses. 1040ez fillable form 2012   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. 1040ez fillable form 2012   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. 1040ez fillable form 2012 You cannot revoke the choice. 1040ez fillable form 2012 However, in a later year, you can switch from the standard mileage rate to the actual expenses method. 1040ez fillable form 2012 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. 1040ez fillable form 2012 Example. 1040ez fillable form 2012 Larry is an employee who occasionally uses his own car for business purposes. 1040ez fillable form 2012 He purchased the car in 2011, but he did not claim any unreimburse
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Treasury, IRS Will Issue Proposed Guidance for Tax-Exempt Social Welfare Organizations

Initial Proposed Guidance Clarifies Qualification Requirements and Seeks Public Input

IR-2013-92, Nov. 26, 2013

WASHINGTON — The U.S. Department of the Treasury and the Internal Revenue Service today will issue initial guidance regarding qualification requirements for tax-exemption as a social welfare organization under section 501(c)(4) of the Internal Revenue Code. This proposed guidance defines the term “candidate-related political activity,” and would amend current regulations by indicating that the promotion of social welfare does not include this type of activity. The proposed guidance also seeks initial comments on other aspects of the qualification requirements, including what proportion of a 501(c)(4) organization’s activities must promote social welfare.

The proposed guidance is expected to be posted on the Federal Register later today.

There are a number of steps in the regulatory process that must be taken before any final guidance can be issued. Given the significant public interest in these and related issues, Treasury and the IRS expect to receive a large number of comments. Treasury and the IRS are committed to carefully and comprehensively considering all of the comments received before issuing additional proposed guidance or final rules.

“This is part of ongoing efforts within the IRS that are improving our work in the tax-exempt area,” said IRS Acting Commissioner Danny Werfel. “Once final, this proposed guidance will continue moving us forward and provide clarity for this important segment of exempt organizations.”

“This proposed guidance is a first critical step toward creating clear-cut definitions of political activity by tax-exempt social welfare organizations,” said Treasury Assistant Secretary for Tax Policy Mark J. Mazur. “We are committed to getting this right before issuing final guidance that may affect a broad group of organizations. It will take time to work through the regulatory process and carefully consider all public feedback as we strive to ensure that the standards for tax-exemption are clear and can be applied consistently.”

Organizations may apply for tax-exempt status under section 501(c)(4) of the tax code if they operate to promote social welfare. The IRS currently applies a “facts and circumstances” test to determine whether an organization is engaged in political campaign activities that do not promote social welfare. Today’s proposed guidance would reduce the need to conduct fact-intensive inquiries by replacing this test with more definitive rules.

In defining the new term, “candidate-related political activity,” Treasury and the IRS drew upon existing definitions of political activity under federal and state campaign finance laws, other IRS provisions, as well as suggestions made in unsolicited public comments.

Under the proposed guidelines, candidate-related political activity includes:

1. Communications

  • Communications that expressly advocate for a clearly identified political candidate or candidates of a political party.
  • Communications that are made within 60 days of a general election (or within 30 days of a primary election) and clearly identify a candidate or political party.
  • Communications expenditures that must be reported to the Federal Election Commission.

2. Grants and Contributions

  • Any contribution that is recognized under campaign finance law as a reportable contribution.
  • Grants to section 527 political organizations and other tax-exempt organizations that conduct candidate-related political activities (note that a grantor can rely on a written certification from a grantee stating that it does not engage in, and will not use grant funds for, candidate-related political activity).

3.  Activities Closely Related to Elections or Candidates

  • Voter registration drives and “get-out-the-vote” drives.
  • Distribution of any material prepared by or on behalf of a candidate or by a section 527 political organization.
  • Preparation or distribution of voter guides that refer to candidates (or, in a general election, to political parties).
  • Holding an event within 60 days of a general election (or within 30 days of a primary election) at which a candidate appears as part of the program.

These proposed rules reduce the need to conduct fact-intensive inquiries, including inquiries into whether activities or communications are neutral and unbiased.

Treasury and the IRS are planning to issue additional guidance that will address other issues relating to the standards for tax exemption under section 501(c)(4). In particular, there has been considerable public focus regarding the proportion of a section 501(c)(4) organization’s activities that must promote social welfare. Due to the importance of this aspect of the regulation, the proposed guidance requests initial comments on this issue.

The proposed guidance also seeks comments regarding whether standards similar to those proposed today should be adopted to define the political activities that do not further the tax-exempt purposes of other tax-exempt organizations and to promote consistent definitions across the tax-exempt sector.

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Page Last Reviewed or Updated: 02-Dec-2013

The 1040ez Fillable Form 2012

1040ez fillable form 2012 1. 1040ez fillable form 2012   Rental Income and Expenses (If No Personal Use of Dwelling) Table of Contents Rental IncomeWhen To Report Types of Income Rental ExpensesWhen To Deduct Types of Expenses This chapter discusses the various types of rental income and expenses for a residential rental activity with no personal use of the dwelling. 1040ez fillable form 2012 Generally, each year you will report all income and deduct all out-of-pocket expenses in full. 1040ez fillable form 2012 The deduction to recover the cost of your rental property—depreciation—is taken over a prescribed number of years, and is discussed in chapter 2, Depreciation of Rental Property. 1040ez fillable form 2012 If your rental income is from property you also use personally or rent to someone at less than a fair rental price, first read the information in chapter 5 , Personal Use of Dwelling Unit (Including Vacation Home). 1040ez fillable form 2012 Rental Income In most cases, you must include in your gross income all amounts you receive as rent. 1040ez fillable form 2012 Rental income is any payment you receive for the use or occupation of property. 1040ez fillable form 2012 In addition to amounts you receive as normal rental payments, there are other amounts that may be rental income. 1040ez fillable form 2012 When To Report When you report rental income on your tax return generally depends on whether you are a cash basis taxpayer or use an accrual method. 1040ez fillable form 2012 Most individual taxpayers use the cash method. 1040ez fillable form 2012 Cash method. 1040ez fillable form 2012   You are a cash basis taxpayer if you report income on your return in the year you actually or constructively receive it, regardless of when it was earned. 1040ez fillable form 2012 You constructively receive income when it is made available to you, for example, by being credited to your bank account. 1040ez fillable form 2012 Accrual method. 1040ez fillable form 2012    If you are an accrual basis taxpayer, you generally report income when you earn it, rather than when you receive it. 1040ez fillable form 2012 You generally deduct your expenses when you incur them, rather than when you pay them. 1040ez fillable form 2012 More information. 1040ez fillable form 2012   See Publication 538, Accounting Periods and Methods, for more information about when you constructively receive income and accrual methods of accounting. 1040ez fillable form 2012 Types of Income The following are common types of rental income. 1040ez fillable form 2012 Advance rent. 1040ez fillable form 2012   Advance rent is any amount you receive before the period that it covers. 1040ez fillable form 2012 Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. 1040ez fillable form 2012 Example. 1040ez fillable form 2012 On March 18, 2013, you signed a 10-year lease to rent your property. 1040ez fillable form 2012 During 2013, you received $9,600 for the first year's rent and $9,600 as rent for the last year of the lease. 1040ez fillable form 2012 You must include $19,200 in your rental income in the first year. 1040ez fillable form 2012 Canceling a lease. 1040ez fillable form 2012   If your tenant pays you to cancel a lease, the amount you receive is rent. 1040ez fillable form 2012 Include the payment in your income in the year you receive it regardless of your method of accounting. 1040ez fillable form 2012 Expenses paid by tenant. 1040ez fillable form 2012   If your tenant pays any of your expenses, those payments are rental income. 1040ez fillable form 2012 Because you must include this amount in income, you can also deduct the expenses if they are deductible rental expenses. 1040ez fillable form 2012 For more information, see Rental Expenses , later. 1040ez fillable form 2012 Example 1. 1040ez fillable form 2012 Your tenant pays the water and sewage bill for your rental property and deducts the amount from the normal rent payment. 1040ez fillable form 2012 Under the terms of the lease, your tenant does not have to pay this bill. 1040ez fillable form 2012 Include the utility bill paid by the tenant and any amount received as a rent payment in your rental income. 1040ez fillable form 2012 You can deduct the utility payment made by your tenant as a rental expense. 1040ez fillable form 2012 Example 2. 1040ez fillable form 2012 While you are out of town, the furnace in your rental property stops working. 1040ez fillable form 2012 Your tenant pays for the necessary repairs and deducts the repair bill from the rent payment. 1040ez fillable form 2012 Include the repair bill paid by the tenant and any amount received as a rent payment in your rental income. 1040ez fillable form 2012 You can deduct the repair payment made by your tenant as a rental expense. 1040ez fillable form 2012 Property or services. 1040ez fillable form 2012   If you receive property or services as rent, instead of money, include the fair market value of the property or services in your rental income. 1040ez fillable form 2012   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. 1040ez fillable form 2012 Example. 1040ez fillable form 2012 Your tenant is a house painter. 1040ez fillable form 2012 He offers to paint your rental property instead of paying 2 months rent. 1040ez fillable form 2012 You accept his offer. 1040ez fillable form 2012 Include in your rental income the amount the tenant would have paid for 2 months rent. 1040ez fillable form 2012 You can deduct that same amount as a rental expense for painting your property. 1040ez fillable form 2012 Security deposits. 1040ez fillable form 2012   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. 1040ez fillable form 2012 But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. 1040ez fillable form 2012    If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. 1040ez fillable form 2012 Include it in your income when you receive it. 1040ez fillable form 2012 Other Sources of Rental Income Lease with option to buy. 1040ez fillable form 2012   If the rental agreement gives your tenant the right to buy your rental property, the payments you receive under the agreement are generally rental income. 1040ez fillable form 2012 If your tenant exercises the right to buy the property, the payments you receive for the period after the date of sale are considered part of the selling price. 1040ez fillable form 2012 Part interest. 1040ez fillable form 2012   If you own a part interest in rental property, you must report your part of the rental income from the property. 1040ez fillable form 2012 Rental of property also used as your home. 1040ez fillable form 2012   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. 1040ez fillable form 2012 However, you can deduct on Schedule A (Form 1040), Itemized Deductions, the interest, taxes, and casualty and theft losses that are allowed for nonrental property. 1040ez fillable form 2012 See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). 1040ez fillable form 2012 Rental Expenses In most cases, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. 1040ez fillable form 2012 Personal use of rental property. 1040ez fillable form 2012   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. 1040ez fillable form 2012 Also, your rental expense deductions may be limited. 1040ez fillable form 2012 See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). 1040ez fillable form 2012 Part interest. 1040ez fillable form 2012   If you own a part interest in rental property, you can deduct expenses you paid according to your percentage of ownership. 1040ez fillable form 2012 Example. 1040ez fillable form 2012 Roger owns a one-half undivided interest in a rental house. 1040ez fillable form 2012 Last year he paid $968 for necessary repairs on the property. 1040ez fillable form 2012 Roger can deduct $484 (50% × $968) as a rental expense. 1040ez fillable form 2012 He is entitled to reimbursement for the remaining half from the co-owner. 1040ez fillable form 2012 When To Deduct You generally deduct your rental expenses in the year you pay them. 1040ez fillable form 2012 If you use the accrual method, see Publication 538 for more information. 1040ez fillable form 2012 Types of Expenses Listed below are the most common rental expenses. 1040ez fillable form 2012 Advertising. 1040ez fillable form 2012 Auto and travel expenses. 1040ez fillable form 2012 Cleaning and maintenance. 1040ez fillable form 2012 Commissions. 1040ez fillable form 2012 Depreciation. 1040ez fillable form 2012 Insurance. 1040ez fillable form 2012 Interest (other). 1040ez fillable form 2012 Legal and other professional fees. 1040ez fillable form 2012 Local transportation expenses. 1040ez fillable form 2012 Management fees. 1040ez fillable form 2012 Mortgage interest paid to banks, etc. 1040ez fillable form 2012 Points. 1040ez fillable form 2012 Rental payments. 1040ez fillable form 2012 Repairs. 1040ez fillable form 2012 Taxes. 1040ez fillable form 2012 Utilities. 1040ez fillable form 2012 Some of these expenses, as well as other less common ones, are discussed below. 1040ez fillable form 2012 Depreciation. 1040ez fillable form 2012   Depreciation is a capital expense. 1040ez fillable form 2012 It is the mechanism for recovering your cost in an income producing property and must be taken over the expected life of the property. 1040ez fillable form 2012   You can begin to depreciate rental property when it is ready and available for rent. 1040ez fillable form 2012 See Placed in Service under When Does Depreciation Begin and End in chapter 2. 1040ez fillable form 2012 Insurance premiums paid in advance. 1040ez fillable form 2012   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. 1040ez fillable form 2012 You cannot deduct the total premium in the year you pay it. 1040ez fillable form 2012 See chapter 6 of Publication 535 for information on deductible premiums. 1040ez fillable form 2012 Interest expense. 1040ez fillable form 2012   You can deduct mortgage interest you pay on your rental property. 1040ez fillable form 2012 When you refinance a rental property for more than the previous outstanding balance, the portion of the interest allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. 1040ez fillable form 2012 Chapter 4 of Publication 535 explains mortgage interest in detail. 1040ez fillable form 2012 Expenses paid to obtain a mortgage. 1040ez fillable form 2012   Certain expenses you pay to obtain a mortgage on your rental property cannot be deducted as interest. 1040ez fillable form 2012 These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses that are part of your basis in the property. 1040ez fillable form 2012 Form 1098, Mortgage Interest Statement. 1040ez fillable form 2012   If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098 or similar statement showing the interest you paid for the year. 1040ez fillable form 2012 If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on, the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. 1040ez fillable form 2012 Attach a statement to your return showing the name and address of the other person. 1040ez fillable form 2012 On the dotted line next to line 13, enter “See attached. 1040ez fillable form 2012 ” Legal and other professional fees. 1040ez fillable form 2012   You can deduct, as a rental expense, legal and other professional expenses such as tax return preparation fees you paid to prepare Schedule E, Part I. 1040ez fillable form 2012 For example, on your 2013 Schedule E you can deduct fees paid in 2013 to prepare Part I of your 2012 Schedule E. 1040ez fillable form 2012 You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. 1040ez fillable form 2012 Local benefit taxes. 1040ez fillable form 2012   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. 1040ez fillable form 2012 These charges are nondepreciable capital expenditures and must be added to the basis of your property. 1040ez fillable form 2012 However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. 1040ez fillable form 2012 Local transportation expenses. 1040ez fillable form 2012   You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. 1040ez fillable form 2012 However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. 1040ez fillable form 2012 See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. 1040ez fillable form 2012   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. 1040ez fillable form 2012 For 2013, the standard mileage rate for business use is 56. 1040ez fillable form 2012 5 cents per mile. 1040ez fillable form 2012 For more information, see chapter 4 of Publication 463. 1040ez fillable form 2012    To deduct car expenses under either method, you must keep records that follow the rules in chapter 5 of Publication 463. 1040ez fillable form 2012 In addition, you must complete Form 4562, Part V, and attach it to your tax return. 1040ez fillable form 2012 Pre-rental expenses. 1040ez fillable form 2012   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. 1040ez fillable form 2012 Rental of equipment. 1040ez fillable form 2012   You can deduct the rent you pay for equipment that you use for rental purposes. 1040ez fillable form 2012 However, in some cases, lease contracts are actually purchase contracts. 1040ez fillable form 2012 If so, you cannot deduct these payments. 1040ez fillable form 2012 You can recover the cost of purchased equipment through depreciation. 1040ez fillable form 2012 Rental of property. 1040ez fillable form 2012   You can deduct the rent you pay for property that you use for rental purposes. 1040ez fillable form 2012 If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. 1040ez fillable form 2012 Travel expenses. 1040ez fillable form 2012   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. 1040ez fillable form 2012 You must properly allocate your expenses between rental and nonrental activities. 1040ez fillable form 2012 You cannot deduct the cost of traveling away from home if the primary purpose of the trip is to improve the property. 1040ez fillable form 2012 The cost of improvements is recovered by taking depreciation. 1040ez fillable form 2012 For information on travel expenses, see chapter 1 of Publication 463. 1040ez fillable form 2012    To deduct travel expenses, you must keep records that follow the rules in chapter 5 of Publication 463. 1040ez fillable form 2012 Uncollected rent. 1040ez fillable form 2012   If you are a cash basis taxpayer, do not deduct uncollected rent. 1040ez fillable form 2012 Because you have not included it in your income, it is not deductible. 1040ez fillable form 2012   If you use an accrual method, report income when you earn it. 1040ez fillable form 2012 If you are unable to collect the rent, you may be able to deduct it as a business bad debt. 1040ez fillable form 2012 See chapter 10 of Publication 535 for more information about business bad debts. 1040ez fillable form 2012 Vacant rental property. 1040ez fillable form 2012   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. 1040ez fillable form 2012 However, you cannot deduct any loss of rental income for the period the property is vacant. 1040ez fillable form 2012 Vacant while listed for sale. 1040ez fillable form 2012   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. 1040ez fillable form 2012 If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. 1040ez fillable form 2012 Points The term “points” is often used to describe some of the charges paid, or treated as paid, by a borrower to take out a loan or a mortgage. 1040ez fillable form 2012 These charges are also called loan origination fees, maximum loan charges, or premium charges. 1040ez fillable form 2012 Any of these charges (points) that are solely for the use of money are interest. 1040ez fillable form 2012 Because points are prepaid interest, you generally cannot deduct the full amount in the year paid, but must deduct the interest over the term of the loan. 1040ez fillable form 2012 The method used to figure the amount of points you can deduct each year follows the original issue discount (OID) rules. 1040ez fillable form 2012 In this case, points are equivalent to OID, which is the difference between: The amount borrowed (redemption price at maturity, or principal) and The proceeds (issue price). 1040ez fillable form 2012 The first step is to determine whether your total OID (which you may have on bonds or other investments in addition to the mortgage loan), including the OID resulting from the points, is insignificant or de minimis. 1040ez fillable form 2012 If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct. 1040ez fillable form 2012 De minimis OID. 1040ez fillable form 2012   The OID is de minimis if it is less than one-fourth of 1% (. 1040ez fillable form 2012 0025) of the stated redemption price at maturity (principal amount of the loan) multiplied by the number of full years from the date of original issue to maturity (term of the loan). 1040ez fillable form 2012   If the OID is de minimis, you can choose one of the following ways to figure the amount of points you can deduct each year. 1040ez fillable form 2012 On a constant-yield basis over the term of the loan. 1040ez fillable form 2012 On a straight line basis over the term of the loan. 1040ez fillable form 2012 In proportion to stated interest payments. 1040ez fillable form 2012 In its entirety at maturity of the loan. 1040ez fillable form 2012 You make this choice by deducting the OID (points) in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued. 1040ez fillable form 2012 Example. 1040ez fillable form 2012 Carol Madison took out a $100,000 mortgage loan on January 1, 2013, to buy a house she will use as a rental during 2013. 1040ez fillable form 2012 The loan is to be repaid over 30 years. 1040ez fillable form 2012 During 2013, Carol paid $10,000 of mortgage interest (stated interest) to the lender. 1040ez fillable form 2012 When the loan was made, she paid $1,500 in points to the lender. 1040ez fillable form 2012 The points reduced the principal amount of the loan from $100,000 to $98,500, resulting in $1,500 of OID. 1040ez fillable form 2012 Carol determines that the points (OID) she paid are de minimis based on the following computation. 1040ez fillable form 2012 Redemption price at maturity (principal amount of the loan) $100,000 Multiplied by: The term of the  loan in complete years ×30 Multiplied by ×. 1040ez fillable form 2012 0025 De minimis amount $7,500 The points (OID) she paid ($1,500) are less than the de minimis amount ($7,500). 1040ez fillable form 2012 Therefore, Carol has de minimis OID and she can choose one of the four ways discussed earlier to figure the amount she can deduct each year. 1040ez fillable form 2012 Under the straight line method, she can deduct $50 each year for 30 years. 1040ez fillable form 2012 Constant-yield method. 1040ez fillable form 2012   If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. 1040ez fillable form 2012   You figure your deduction for the first year in the following manner. 1040ez fillable form 2012 Determine the issue price of the loan. 1040ez fillable form 2012 If you paid points on the loan, the issue price generally is the difference between the principal and the points. 1040ez fillable form 2012 Multiply the result in (1) by the yield to maturity (defined later). 1040ez fillable form 2012 Subtract any qualified stated interest payments (defined later) from the result in (2). 1040ez fillable form 2012 This is the OID you can deduct in the first year. 1040ez fillable form 2012 Yield to maturity (YTM). 1040ez fillable form 2012   This rate is generally shown in the literature you receive from your lender. 1040ez fillable form 2012 If you do not have this information, consult your lender or tax advisor. 1040ez fillable form 2012 In general, the YTM is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan. 1040ez fillable form 2012 Qualified stated interest (QSI). 1040ez fillable form 2012   In general, this is the stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a fixed rate. 1040ez fillable form 2012 Example—Year 1. 1040ez fillable form 2012 The facts are the same as in the previous example. 1040ez fillable form 2012 The yield to maturity on Carol's loan is 10. 1040ez fillable form 2012 2467%, compounded annually. 1040ez fillable form 2012 She figured the amount of points (OID) she could deduct in 2013 as follows. 1040ez fillable form 2012 Principal amount of the loan $100,000 Minus: Points (OID) –1,500 Issue price of the loan $98,500 Multiplied by: YTM × . 1040ez fillable form 2012 102467 Total 10,093 Minus: QSI –10,000 Points (OID) deductible in 2013 $93 To figure your deduction in any subsequent year, you start with the adjusted issue price. 1040ez fillable form 2012 To get the adjusted issue price, add to the issue price figured in Year 1 any OID previously deducted. 1040ez fillable form 2012 Then follow steps (2) and (3), earlier. 1040ez fillable form 2012 Example—Year 2. 1040ez fillable form 2012 Carol figured the deduction for 2014 as follows. 1040ez fillable form 2012 Issue price $98,500 Plus: Points (OID) deducted  in 2013 +93 Adjusted issue price $98,593 Multiplied by: YTM × . 1040ez fillable form 2012 102467 Total 10,103 Minus: QSI –10,000 Points (OID) deductible in 2014 $103 Loan or mortgage ends. 1040ez fillable form 2012    If your loan or mortgage ends, you may be able to deduct any remaining points (OID) in the tax year in which the loan or mortgage ends. 1040ez fillable form 2012 A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event. 1040ez fillable form 2012 However, if the refinancing is with the same lender, the remaining points (OID) generally are not deductible in the year in which the refinancing occurs, but may be deductible over the term of the new mortgage or loan. 1040ez fillable form 2012 Points when loan refinance is more than the previous outstanding balance. 1040ez fillable form 2012   When you refinance a rental property for more than the previous outstanding balance, the portion of the points allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. 1040ez fillable form 2012 For example, if an individual refinanced a loan with a balance of $100,000, the amount of the new loan was $120,000, and the taxpayer used $20,000 to purchase a car, points allocable to the $20,000 would be treated as nondeductible personal interest. 1040ez fillable form 2012 Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. 1040ez fillable form 2012 Improvements. 1040ez fillable form 2012   You must capitalize any expense you pay to improve your rental property. 1040ez fillable form 2012 An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. 1040ez fillable form 2012 Betterments. 1040ez fillable form 2012   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. 1040ez fillable form 2012 Restoration. 1040ez fillable form 2012   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. 1040ez fillable form 2012 Adaptation. 1040ez fillable form 2012   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. 1040ez fillable form 2012 Separate the costs of repairs and improvements, and keep accurate records. 1040ez fillable form 2012 You will need to know the cost of improvements when you sell or depreciate your property. 1040ez fillable form 2012 The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. 1040ez fillable form 2012 Table 1-1. 1040ez fillable form 2012 Examples of Improvements Additions Bedroom Bathroom Deck Garage Porch Patio  Lawn & Grounds Landscaping Driveway Walkway Fence Retaining wall Sprinkler system Swimming pool Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system   Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances Kitchen modernization Flooring Wall-to-wall 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