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Free 2011 Tax Software

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Free 2011 Tax Software

Free 2011 tax software 8. Free 2011 tax software   Business Expenses Table of Contents Introduction Useful Items - You may want to see: Bad DebtsAccrual method. Free 2011 tax software Cash method. Free 2011 tax software Car and Truck ExpensesOffice in the home. Free 2011 tax software Methods for Deducting Car and Truck Expenses Reimbursing Your Employees for Expenses Depreciation Employees' PayFringe benefits. Free 2011 tax software InsuranceHow to figure the deduction. Free 2011 tax software Interest Legal and Professional FeesTax preparation fees. Free 2011 tax software Pension Plans Rent Expense Taxes Travel, Meals, and EntertainmentTransportation. Free 2011 tax software Taxi, commuter bus, and limousine. Free 2011 tax software Baggage and shipping. Free 2011 tax software Car or truck. Free 2011 tax software Meals and lodging. Free 2011 tax software Cleaning. Free 2011 tax software Telephone. Free 2011 tax software Tips. Free 2011 tax software More information. Free 2011 tax software Business Use of Your HomeExceptions to exclusive use. Free 2011 tax software Other Expenses You Can Deduct Expenses You Cannot Deduct Introduction You can deduct the costs of operating your business. Free 2011 tax software These costs are known as business expenses. Free 2011 tax software These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year. Free 2011 tax software To be deductible, a business expense must be both ordinary and necessary. Free 2011 tax software An ordinary expense is one that is common and accepted in your field of business. Free 2011 tax software A necessary expense is one that is helpful and appropriate for your business. Free 2011 tax software An expense does not have to be indispensable to be considered necessary. Free 2011 tax software For more information about the general rules for deducting business expenses, see chapter 1 in Publication 535, Business Expenses. Free 2011 tax software If you have an expense that is partly for business and partly personal, separate the personal part from the business part. Free 2011 tax software The personal part is not deductible. Free 2011 tax software Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 946 How To Depreciate Property See chapter 12 for information about getting publications and forms. Free 2011 tax software Bad Debts If someone owes you money you cannot collect, you have a bad debt. Free 2011 tax software There are two kinds of bad debts, business bad debts and nonbusiness bad debts. Free 2011 tax software A business bad debt is generally one that comes from operating your trade or business. Free 2011 tax software You may be able to deduct business bad debts as an expense on your business tax return. Free 2011 tax software Business bad debt. Free 2011 tax software   A business bad debt is a loss from the worthlessness of a debt that was either of the following. Free 2011 tax software Created or acquired in your business. Free 2011 tax software Closely related to your business when it became partly or totally worthless. Free 2011 tax software A debt is closely related to your business if your primary motive for incurring the debt is a business reason. Free 2011 tax software   Business bad debts are mainly the result of credit sales to customers. Free 2011 tax software They can also be the result of loans to suppliers, clients, employees, or distributors. Free 2011 tax software Goods and services customers have not paid for are shown in your books as either accounts receivable or notes receivable. Free 2011 tax software If you are unable to collect any part of these accounts or notes receivable, the uncollectible part is a business bad debt. Free 2011 tax software    You can take a bad debt deduction for these accounts and notes receivable only if the amount you were owed was included in your gross income either for the year the deduction is claimed or for a prior year. Free 2011 tax software Accrual method. Free 2011 tax software   If you use an accrual method of accounting, you normally report income as you earn it. Free 2011 tax software You can take a bad debt deduction for an uncollectible receivable if you have included the uncollectible amount in income. Free 2011 tax software Cash method. Free 2011 tax software   If you use the cash method of accounting, you normally report income when you receive payment. Free 2011 tax software You cannot take a bad debt deduction for amounts owed to you that you have not received and cannot collect if you never included those amounts in income. Free 2011 tax software More information. Free 2011 tax software   For more information about business bad debts, see chapter 10 in Publication 535. Free 2011 tax software Nonbusiness bad debts. Free 2011 tax software   All other bad debts are nonbusiness bad debts and are deductible as short-term capital losses on Form 8949 and Schedule D (Form 1040). Free 2011 tax software For more information on nonbusiness bad debts, see Publication 550, Investment Income and Expenses. Free 2011 tax software Car and Truck Expenses If you use your car or truck in your business, you may be able to deduct the costs of operating and maintaining your vehicle. Free 2011 tax software You also may be able to deduct other costs of local transportation and traveling away from home overnight on business. Free 2011 tax software You may qualify for a tax credit for qualified plug-in electric vehicles, qualified plug-in electric drive motor vehicles, and alternative motor vehicles you place in service during the year. Free 2011 tax software See Form 8936 and Form 8910 for more information. Free 2011 tax software Local transportation expenses. Free 2011 tax software   Local transportation expenses include the ordinary and necessary costs of all the following. Free 2011 tax software Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Free 2011 tax software Tax home is defined later. Free 2011 tax software Visiting clients or customers. Free 2011 tax software Going to a business meeting away from your regular workplace. Free 2011 tax software Getting from your home to a temporary workplace when you have one or more regular places of work. Free 2011 tax software These temporary workplaces can be either within the area of your tax home or outside that area. Free 2011 tax software Local business transportation does not include expenses you have while traveling away from home overnight. Free 2011 tax software Those expenses are deductible as travel expenses and are discussed later under Travel, Meals, and Entertainment. Free 2011 tax software However, if you use your car while traveling away from home overnight, use the rules in this section to figure your car expense deduction. Free 2011 tax software   Generally, your tax home is your regular place of business, regardless of where you maintain your family home. Free 2011 tax software It includes the entire city or general area in which your business or work is located. Free 2011 tax software Example. Free 2011 tax software You operate a printing business out of rented office space. Free 2011 tax software You use your van to deliver completed jobs to your customers. Free 2011 tax software You can deduct the cost of round-trip transportation between your customers and your print shop. Free 2011 tax software    You cannot deduct the costs of driving your car or truck between your home and your main or regular workplace. Free 2011 tax software These costs are personal commuting expenses. Free 2011 tax software Office in the home. Free 2011 tax software   Your workplace can be your home if you have an office in your home that qualifies as your principal place of business. Free 2011 tax software For more information, see Business Use of Your Home, later. Free 2011 tax software Example. Free 2011 tax software You are a graphics designer. Free 2011 tax software You operate your business out of your home. Free 2011 tax software Your home qualifies as your principal place of business. Free 2011 tax software You occasionally have to drive to your clients to deliver your completed work. Free 2011 tax software You can deduct the cost of the round-trip transportation between your home and your clients. Free 2011 tax software Methods for Deducting Car and Truck Expenses For local transportation or overnight travel by car or truck, you generally can use one of the following methods to figure your expenses. Free 2011 tax software Standard mileage rate. Free 2011 tax software Actual expenses. Free 2011 tax software Standard mileage rate. Free 2011 tax software   You may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. Free 2011 tax software For 2013, the standard mileage rate is 56. Free 2011 tax software 5 cents per mile. Free 2011 tax software    If you choose to use the standard mileage rate for a year, you cannot deduct your actual expenses for that year except for business-related parking fees and tolls. Free 2011 tax software Choosing the standard mileage rate. Free 2011 tax software   If you want to use the standard mileage rate for a car or truck you own, you must choose to use it in the first year the car is available for use in your business. Free 2011 tax software In later years, you can choose to use either the standard mileage rate or actual expenses. Free 2011 tax software   If you use the standard mileage rate for a car you lease, you must choose to use it for the entire lease period (including renewals). Free 2011 tax software Standard mileage rate not allowed. Free 2011 tax software   You cannot use the standard mileage rate if you: Operate five or more cars at the same time, Claimed a depreciation deduction using any method other than straight line, for example, ACRS or MACRS, Claimed a section 179 deduction on the car, Claimed the special depreciation allowance on the car, Claimed actual car expenses for a car you leased, or Are a rural mail carrier who received a qualified reimbursement. Free 2011 tax software Parking fees and tolls. Free 2011 tax software   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. Free 2011 tax software (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. Free 2011 tax software ) Actual expenses. Free 2011 tax software   If you do not choose to use the standard mileage rate, you may be able to deduct your actual car or truck expenses. Free 2011 tax software    If you qualify to use both methods, figure your deduction both ways to see which gives you a larger deduction. Free 2011 tax software   Actual car expenses include the costs of the following items. Free 2011 tax software Depreciation Lease payments Registration Garage rent Licenses Repairs Gas Oil Tires Insurance Parking fees Tolls   If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. Free 2011 tax software You can divide your expenses based on the miles driven for each purpose. Free 2011 tax software Example. Free 2011 tax software You are the sole proprietor of a flower shop. Free 2011 tax software You drove your van 20,000 miles during the year. Free 2011 tax software 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use (including commuting miles). Free 2011 tax software You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. Free 2011 tax software More information. Free 2011 tax software   For more information about the rules for claiming car and truck expenses, see Publication 463. Free 2011 tax software Reimbursing Your Employees for Expenses You generally can deduct the amount you reimburse your employees for car and truck expenses. Free 2011 tax software The reimbursement you deduct and the manner in which you deduct it depend in part on whether you reimburse the expenses under an accountable plan or a nonaccountable plan. Free 2011 tax software For details, see chapter 11 in Publication 535. Free 2011 tax software That chapter explains accountable and nonaccountable plans and tells you whether to report the reimbursement on your employee's Form W-2, Wage and Tax Statement. Free 2011 tax software Depreciation If property you acquire to use in your business is expected to last more than 1 year, you generally cannot deduct the entire cost as a business expense in the year you acquire it. Free 2011 tax software You must spread the cost over more than 1 tax year and deduct part of it each year on Schedule C. Free 2011 tax software This method of deducting the cost of business property is called depreciation. Free 2011 tax software The discussion here is brief. Free 2011 tax software You will find more information about depreciation in Publication 946. Free 2011 tax software What property can be depreciated?   You can depreciate property if it meets all the following requirements. Free 2011 tax software It must be property you own. Free 2011 tax software It must be used in business or held to produce income. Free 2011 tax software You never can depreciate inventory (explained in chapter 2) because it is not held for use in your business. Free 2011 tax software It must have a useful life that extends substantially beyond the year it is placed in service. Free 2011 tax software It must have a determinable useful life, which means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Free 2011 tax software You never can depreciate the cost of land because land does not wear out, become obsolete, or get used up. Free 2011 tax software It must not be excepted property. Free 2011 tax software This includes property placed in service and disposed of in the same year. Free 2011 tax software Repairs. Free 2011 tax software    You cannot depreciate repairs and replacements that do not increase the value of your property, make it more useful, or lengthen its useful life. Free 2011 tax software You can deduct these amounts on line 21 of Schedule C or line 2 of Schedule C-EZ. Free 2011 tax software Depreciation method. Free 2011 tax software   The method for depreciating most business and investment property placed in service after 1986 is called the Modified Accelerated Cost Recovery System (MACRS). Free 2011 tax software MACRS is discussed in detail in Publication 946. Free 2011 tax software Section 179 deduction. Free 2011 tax software   You can elect to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. Free 2011 tax software This deduction is known as the “section 179 deduction. Free 2011 tax software ” The maximum amount you can elect to deduct during 2013 is generally $500,000 (higher limits apply to certain property). Free 2011 tax software See IRC 179(e). Free 2011 tax software   This limit is generally reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. Free 2011 tax software The total amount of depreciation (including the section 179 deduction) you can take for a passenger automobile you use in your business and first place in service in 2013 is $3,160 ($11,160 if you take the special depreciation allowance for qualified passenger automobiles placed in service in 2013). Free 2011 tax software Special rules apply to trucks and vans. Free 2011 tax software For more information, see Publication 946. Free 2011 tax software It explains what property qualifies for the deduction, what limits apply to the deduction, and when and how to recapture the deduction. Free 2011 tax software    Your section 179 election for the cost of any sport utility vehicle (SUV) and certain other vehicles is limited to $25,000. Free 2011 tax software For more information, see the Instructions for Form 4562 or Publication 946. Free 2011 tax software Listed property. Free 2011 tax software   You must follow special rules and recordkeeping requirements when depreciating listed property. Free 2011 tax software Listed property is any of the following. Free 2011 tax software Most passenger automobiles. Free 2011 tax software Most other property used for transportation. Free 2011 tax software Any property of a type generally used for entertainment, recreation, or amusement. Free 2011 tax software Certain computers and related peripheral equipment. Free 2011 tax software   For more information about listed property, see Publication 946. Free 2011 tax software Form 4562. Free 2011 tax software   Use Form 4562, Depreciation and Amortization, if you are claiming any of the following. Free 2011 tax software Depreciation on property placed in service during the current tax year. Free 2011 tax software A section 179 deduction. Free 2011 tax software Depreciation on any listed property (regardless of when it was placed in service). Free 2011 tax software    If you have to use Form 4562, you must file Schedule C. Free 2011 tax software You cannot use Schedule C-EZ. Free 2011 tax software   Employees' Pay You can generally deduct on Schedule C the pay you give your employees for the services they perform for your business. Free 2011 tax software The pay may be in cash, property, or services. Free 2011 tax software To be deductible, your employees' pay must be an ordinary and necessary expense and you must pay or incur it in the tax year. Free 2011 tax software In addition, the pay must meet both the following tests. Free 2011 tax software The pay must be reasonable. Free 2011 tax software The pay must be for services performed. Free 2011 tax software Chapter 2 in Publication 535 explains and defines these requirements. Free 2011 tax software You cannot deduct your own salary or any personal withdrawals you make from your business. Free 2011 tax software As a sole proprietor, you are not an employee of the business. Free 2011 tax software If you had employees during the year, you must use Schedule C. Free 2011 tax software You cannot use Schedule C-EZ. Free 2011 tax software Kinds of pay. Free 2011 tax software   Some of the ways you may provide pay to your employees are listed below. Free 2011 tax software For an explanation of each of these items, see chapter 2 in Publication 535. Free 2011 tax software Awards. Free 2011 tax software Bonuses. Free 2011 tax software Education expenses. Free 2011 tax software Fringe benefits (discussed later). Free 2011 tax software Loans or advances you do not expect the employee to repay if they are for personal services actually performed. Free 2011 tax software Property you transfer to an employee as payment for services. Free 2011 tax software Reimbursements for employee business expenses. Free 2011 tax software Sick pay. Free 2011 tax software Vacation pay. Free 2011 tax software Fringe benefits. Free 2011 tax software   A fringe benefit is a form of pay for the performance of services. Free 2011 tax software The following are examples of fringe benefits. Free 2011 tax software Benefits under qualified employee benefit programs. Free 2011 tax software Meals and lodging. Free 2011 tax software The use of a car. Free 2011 tax software Flights on airplanes. Free 2011 tax software Discounts on property or services. Free 2011 tax software Memberships in country clubs or other social clubs. Free 2011 tax software Tickets to entertainment or sporting events. Free 2011 tax software   Employee benefit programs include the following. Free 2011 tax software Accident and health plans. Free 2011 tax software Adoption assistance. Free 2011 tax software Cafeteria plans. Free 2011 tax software Dependent care assistance. Free 2011 tax software Educational assistance. Free 2011 tax software Group-term life insurance coverage. Free 2011 tax software Welfare benefit funds. Free 2011 tax software   You can generally deduct the cost of fringe benefits you provide on your Schedule C in whatever category the cost falls. Free 2011 tax software For example, if you allow an employee to use a car or other property you lease, deduct the cost of the lease as a rent or lease expense. Free 2011 tax software If you own the property, include your deduction for its cost or other basis as a section 179 deduction or a depreciation deduction. Free 2011 tax software    You may be able to exclude all or part of the fringe benefits you provide from your employees' wages. Free 2011 tax software For more information about fringe benefits and the exclusion of benefits, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. Free 2011 tax software Insurance You can generally deduct premiums you pay for the following kinds of insurance related to your business. Free 2011 tax software Fire, theft, flood, or similar insurance. Free 2011 tax software Credit insurance that covers losses from business bad debts. Free 2011 tax software Group hospitalization and medical insurance for employees, including long-term care insurance. Free 2011 tax software Liability insurance. Free 2011 tax software Malpractice insurance that covers your personal liability for professional negligence resulting in injury or damage to patients or clients. Free 2011 tax software Workers' compensation insurance set by state law that covers any claims for bodily injuries or job-related diseases suffered by employees in your business, regardless of fault. Free 2011 tax software Contributions to a state unemployment insurance fund are deductible as taxes if they are considered taxes under state law. Free 2011 tax software Overhead insurance that pays for business overhead expenses you have during long periods of disability caused by your injury or sickness. Free 2011 tax software Car and other vehicle insurance that covers vehicles used in your business for liability, damages, and other losses. Free 2011 tax software If you operate a vehicle partly for personal use, deduct only the part of the insurance premium that applies to the business use of the vehicle. Free 2011 tax software If you use the standard mileage rate to figure your car expenses, you cannot deduct any car insurance premiums. Free 2011 tax software Life insurance covering your employees if you are not directly or indirectly the beneficiary under the contract. Free 2011 tax software Business interruption insurance that pays for lost profits if your business is shut down due to a fire or other cause. Free 2011 tax software Nondeductible premiums. Free 2011 tax software   You cannot deduct premiums on the following kinds of insurance. Free 2011 tax software Self-insurance reserve funds. Free 2011 tax software You cannot deduct amounts credited to a reserve set up for self-insurance. Free 2011 tax software This applies even if you cannot get business insurance coverage for certain business risks. Free 2011 tax software However, your actual losses may be deductible. Free 2011 tax software For more information, see Publication 547, Casualties, Disasters, and Thefts. Free 2011 tax software Loss of earnings. Free 2011 tax software You cannot deduct premiums for a policy that pays for your lost earnings due to sickness or disability. Free 2011 tax software However, see item (8) in the previous list. Free 2011 tax software Certain life insurance and annuities. Free 2011 tax software For contracts issued before June 9, 1997, you cannot deduct the premiums on a life insurance policy covering you, an employee, or any person with a financial interest in your business if you are directly or indirectly a beneficiary of the policy. Free 2011 tax software You are included among possible beneficiaries of the policy if the policy owner is obligated to repay a loan from you using the proceeds of the policy. Free 2011 tax software A person has a financial interest in your business if the person is an owner or part owner of the business or has lent money to the business. Free 2011 tax software For contracts issued after June 8, 1997, you generally cannot deduct the premiums on any life insurance policy, endowment contract, or annuity contract if you are directly or indirectly a beneficiary. Free 2011 tax software The disallowance applies without regard to whom the policy covers. Free 2011 tax software Insurance to secure a loan. Free 2011 tax software If you take out a policy on your life or on the life of another person with a financial interest in your business to get or protect a business loan, you cannot deduct the premiums as a business expense. Free 2011 tax software Nor can you deduct the premiums as interest on business loans or as an expense of financing loans. Free 2011 tax software In the event of death, the proceeds of the policy are not taxed as income even if they are used to liquidate the debt. Free 2011 tax software Self-employed health insurance deduction. Free 2011 tax software   You may be able to deduct the amount you paid for medical and dental insurance and qualified long-term care insurance for you and your family. Free 2011 tax software How to figure the deduction. Free 2011 tax software   Generally, you can use the worksheet in the Form 1040 instructions to figure your deduction. Free 2011 tax software However, if any of the following apply, you must use the worksheet in chapter 6 of Publication 535. Free 2011 tax software You have more than one source of income subject to self-employment tax. Free 2011 tax software You file Form 2555 or Form 2555-EZ (relating to foreign earned income). Free 2011 tax software You are using amounts paid for qualified long-term care insurance to figure the deduction. Free 2011 tax software Prepayment. Free 2011 tax software   You cannot deduct expenses in advance, even if you pay them in advance. Free 2011 tax software This rule applies to any expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. Free 2011 tax software Example. Free 2011 tax software In 2013, you signed a 3-year insurance contract. Free 2011 tax software Even though you paid the premiums for 2013, 2014, and 2015 when you signed the contract, you can only deduct the premium for 2013 on your 2013 tax return. Free 2011 tax software You can deduct in 2014 and 2015 the premium allocable to those years. Free 2011 tax software More information. Free 2011 tax software   For more information about deducting insurance, see chapter 6 in Publication 535. Free 2011 tax software Interest You can generally deduct as a business expense all interest you pay or accrue during the tax year on debts related to your business. Free 2011 tax software Interest relates to your business if you use the proceeds of the loan for a business expense. Free 2011 tax software It does not matter what type of property secures the loan. Free 2011 tax software You can deduct interest on a debt only if you meet all of the following requirements. Free 2011 tax software You are legally liable for that debt. Free 2011 tax software Both you and the lender intend that the debt be repaid. Free 2011 tax software You and the lender have a true debtor-creditor relationship. Free 2011 tax software You cannot deduct on Schedule C or C-EZ the interest you paid on personal loans. Free 2011 tax software If a loan is part business and part personal, you must divide the interest between the personal part and the business part. Free 2011 tax software Example. Free 2011 tax software In 2013, you paid $600 interest on a car loan. Free 2011 tax software During 2013, you used the car 60% for business and 40% for personal purposes. Free 2011 tax software You are claiming actual expenses on the car. Free 2011 tax software You can only deduct $360 (60% × $600) for 2013 on Schedule C or C-EZ. Free 2011 tax software The remaining interest of $240 is a nondeductible personal expense. Free 2011 tax software More information. Free 2011 tax software   For more information about deducting interest, see chapter 4 in Publication 535. Free 2011 tax software That chapter explains the following items. Free 2011 tax software Interest you can deduct. Free 2011 tax software Interest you cannot deduct. Free 2011 tax software How to allocate interest between personal and business use. Free 2011 tax software When to deduct interest. Free 2011 tax software The rules for a below-market interest rate loan. Free 2011 tax software (This is generally a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Free 2011 tax software ) Legal and Professional Fees Legal and professional fees, such as fees charged by accountants, that are ordinary and necessary expenses directly related to operating your business are deductible on Schedule C or C-EZ. Free 2011 tax software However, you usually cannot deduct legal fees you pay to acquire business assets. Free 2011 tax software Add them to the basis of the property. Free 2011 tax software If the fees include payments for work of a personal nature (such as making a will), you can take a business deduction only for the part of the fee related to your business. Free 2011 tax software The personal part of legal fees for producing or collecting taxable income, doing or keeping your job, or for tax advice may be deductible on Schedule A (Form 1040) if you itemize deductions. Free 2011 tax software For more information, see Publication 529, Miscellaneous Deductions. Free 2011 tax software Tax preparation fees. Free 2011 tax software   You can deduct on Schedule C or C-EZ the cost of preparing that part of your tax return relating to your business as a sole proprietor or statutory employee. Free 2011 tax software You can deduct the remaining cost on Schedule A (Form 1040) if you itemize your deductions. Free 2011 tax software   You can also deduct on Schedule C or C-EZ the amount you pay or incur in resolving asserted tax deficiencies for your business as a sole proprietor or statutory employee. Free 2011 tax software Pension Plans You can set up and maintain the following small business retirement plans for yourself and your employees. Free 2011 tax software SEP (Simplified Employee Pension) plans. Free 2011 tax software SIMPLE (Savings Incentive Match Plan for Employees) plans. Free 2011 tax software Qualified plans (including Keogh or H. Free 2011 tax software R. Free 2011 tax software 10 plans). Free 2011 tax software SEP, SIMPLE, and qualified plans offer you and your employees a tax favored way to save for retirement. Free 2011 tax software You can deduct contributions you make to the plan for your employees on line 19 of Schedule C. Free 2011 tax software If you are a sole proprietor, you can deduct contributions you make to the plan for yourself on line 28 of Form 1040. Free 2011 tax software You can also deduct trustees' fees if contributions to the plan do not cover them. Free 2011 tax software Earnings on the contributions are generally tax free until you or your employees receive distributions from the plan. Free 2011 tax software You may also be able to claim a tax credit of 50% of the first $1,000 of qualified startup costs if you begin a new qualified defined benefit or defined contribution plan (including a 401(k) plan), SIMPLE plan, or simplified employee pension. Free 2011 tax software Under certain plans, employees can have you contribute limited amounts of their before-tax pay to a plan. Free 2011 tax software These amounts (and earnings on them) are generally tax free until your employees receive distributions from the plan. Free 2011 tax software For more information on retirement plans for small business, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). Free 2011 tax software Publication 590, Individual Retirement Arrangements (IRAs), discusses other tax favored ways to save for retirement. Free 2011 tax software Rent Expense Rent is any amount you pay for the use of property you do not own. Free 2011 tax software In general, you can deduct rent as a business expense only if the rent is for property you use in your business. Free 2011 tax software If you have or will receive equity in or title to the property, you cannot deduct the rent. Free 2011 tax software Unreasonable rent. Free 2011 tax software   You cannot take a rental deduction for unreasonable rents. Free 2011 tax software Ordinarily, the issue of reasonableness arises only if you and the lessor are related. Free 2011 tax software Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. Free 2011 tax software Rent is not unreasonable just because it is figured as a percentage of gross receipts. Free 2011 tax software   Related persons include members of your immediate family, including only brothers and sisters (either whole or half), your spouse, ancestors, and lineal descendants. Free 2011 tax software For a list of the other related persons, see section 267 of the Internal Revenue Code. Free 2011 tax software Rent on your home. Free 2011 tax software   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. Free 2011 tax software You must meet the requirements for business use of your home. Free 2011 tax software For more information, see Business Use of Your Home , later. Free 2011 tax software Rent paid in advance. Free 2011 tax software   Generally, rent paid in your business is deductible in the year paid or accrued. Free 2011 tax software If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. Free 2011 tax software You can deduct the rest of your payment only over the period to which it applies. Free 2011 tax software More information. Free 2011 tax software   For more information about rent, see chapter 3 in Publication 535. Free 2011 tax software Taxes You can deduct on Schedule C or C-EZ various federal, state, local, and foreign taxes directly attributable to your business. Free 2011 tax software Income taxes. Free 2011 tax software   You can deduct on Schedule C or C-EZ a state tax on gross income (as distinguished from net income) directly attributable to your business. Free 2011 tax software You can deduct other state and local income taxes on Schedule A (Form 1040) if you itemize your deductions. Free 2011 tax software Do not deduct federal income tax. Free 2011 tax software Employment taxes. Free 2011 tax software   You can deduct the social security, Medicare, and federal unemployment (FUTA) taxes you paid out of your own funds as an employer. Free 2011 tax software Employment taxes are discussed briefly in chapter 1. Free 2011 tax software You can also deduct payments you made as an employer to a state unemployment compensation fund or to a state disability benefit fund. Free 2011 tax software Deduct these payments as taxes. Free 2011 tax software Self-employment tax. Free 2011 tax software   You can deduct one-half of your self-employment tax on line 27 of Form 1040. Free 2011 tax software Self-employment tax is discussed in chapters 1 and 10. Free 2011 tax software Personal property tax. Free 2011 tax software   You can deduct on Schedule C or C-EZ any tax imposed by a state or local government on personal property used in your business. Free 2011 tax software   You can also deduct registration fees for the right to use property within a state or local area. Free 2011 tax software Example. Free 2011 tax software May and Julius Winter drove their car 7,000 business miles out of a total of 10,000 miles. Free 2011 tax software They had to pay $25 for their annual state license tags and $20 for their city registration sticker. Free 2011 tax software They also paid $235 in city personal property tax on the car, for a total of $280. Free 2011 tax software They are claiming their actual car expenses. Free 2011 tax software Because they used the car 70% for business, they can deduct 70% of the $280, or $196, as a business expense. Free 2011 tax software Real estate taxes. Free 2011 tax software   You can deduct on Schedule C or C-EZ the real estate taxes you pay on your business property. Free 2011 tax software Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. Free 2011 tax software The taxing authority must base the taxes on the assessed value of the real estate and charge them uniformly against all property under its jurisdiction. Free 2011 tax software   For more information about real estate taxes, see chapter 5 in Publication 535. Free 2011 tax software That chapter explains special rules for deducting the following items. Free 2011 tax software Taxes for local benefits, such as those for sidewalks, streets, water mains, and sewer lines. Free 2011 tax software Real estate taxes when you buy or sell property during the year. Free 2011 tax software Real estate taxes if you use an accrual method of accounting and choose to accrue real estate tax related to a definite period ratably over that period. Free 2011 tax software Sales tax. Free 2011 tax software   Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. Free 2011 tax software If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost. Free 2011 tax software If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. Free 2011 tax software If the property is depreciable, add the sales tax to the basis for depreciation. Free 2011 tax software For information on the basis of property, see Publication 551, Basis of Assets. Free 2011 tax software    Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. Free 2011 tax software Do not include these taxes in gross receipts or sales. Free 2011 tax software Excise taxes. Free 2011 tax software   You can deduct on Schedule C or C-EZ all excise taxes that are ordinary and necessary expenses of carrying on your business. Free 2011 tax software Excise taxes are discussed briefly in chapter 1. Free 2011 tax software Fuel taxes. Free 2011 tax software   Taxes on gasoline, diesel fuel, and other motor fuels you use in your business are usually included as part of the cost of the fuel. Free 2011 tax software Do not deduct these taxes as a separate item. Free 2011 tax software   You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. Free 2011 tax software For more information, see Publication 510, Excise Taxes. Free 2011 tax software Travel, Meals, and Entertainment This section briefly explains the kinds of travel and entertainment expenses you can deduct on Schedule C or C-EZ. Free 2011 tax software Table 8-1. Free 2011 tax software When Are Entertainment Expenses Deductible? (Note. Free 2011 tax software The following is a summary of the rules for deducting entertainment expenses. Free 2011 tax software For more details about these rules, see Publication 463. Free 2011 tax software ) General rule You can deduct ordinary and necessary expenses to entertain a client, customer, or employee if the expenses meet the directly-related test or the associated test. Free 2011 tax software Definitions Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation, and includes meals provided to a customer or client. Free 2011 tax software An ordinary expense is one that is common and accepted in your field of business, trade, or profession. Free 2011 tax software A necessary expense is one that is helpful and appropriate, although not necessarily required, for your business. Free 2011 tax software Tests to be met Directly-related test Entertainment took place in a clear business setting, or Main purpose of entertainment was the active conduct of business, and You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit. Free 2011 tax software   Associated test Entertainment is associated with your trade or business, and Entertainment directly precedes or follows a substantial business discussion. Free 2011 tax software Other rules You cannot deduct the cost of your meal as an entertainment expense if you are claiming the meal as a travel expense. Free 2011 tax software You cannot deduct expenses that are lavish or extravagant under the circumstances. Free 2011 tax software You generally can deduct only 50% of your unreimbursed entertainment expenses. Free 2011 tax software Travel expenses. Free 2011 tax software   These are the ordinary and necessary expenses of traveling away from home for your business. Free 2011 tax software You are traveling away from home if both the following conditions are met. Free 2011 tax software 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. Free 2011 tax software You need to get sleep or rest to meet the demands of your work while away from home. Free 2011 tax software Generally, your tax home is your regular place of business, regardless of where you maintain your family home. Free 2011 tax software It includes the entire city or general area in which your business is located. Free 2011 tax software See Publication 463 for more information. Free 2011 tax software   The following is a brief discussion of the expenses you can deduct. Free 2011 tax software Transportation. Free 2011 tax software   You can deduct the cost of travel by airplane, train, bus, or car between your home and your business destination. Free 2011 tax software Taxi, commuter bus, and limousine. Free 2011 tax software   You can deduct fares for these and other types of transportation between the airport or station and your hotel, or between the hotel and your work location away from home. Free 2011 tax software Baggage and shipping. Free 2011 tax software   You can deduct the cost of sending baggage and sample or display material between your regular and temporary work locations. Free 2011 tax software Car or truck. Free 2011 tax software   You can deduct the costs of operating and maintaining your vehicle when traveling away from home on business. Free 2011 tax software You can deduct actual expenses or the standard mileage rate (discussed earlier under Car and Truck Expenses), as well as business-related tolls and parking. Free 2011 tax software If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses. Free 2011 tax software Meals and lodging. Free 2011 tax software   You can deduct the cost of meals and lodging if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. Free 2011 tax software In most cases, you can deduct only 50% of your meal expenses. Free 2011 tax software Cleaning. Free 2011 tax software   You can deduct the costs of dry cleaning and laundry while on your business trip. Free 2011 tax software Telephone. Free 2011 tax software   You can deduct the cost of business calls while on your business trip, including business communication by fax machine or other communication devices. Free 2011 tax software Tips. Free 2011 tax software   You can deduct the tips you pay for any expense in this list. Free 2011 tax software More information. Free 2011 tax software   For more information about travel expenses, see Publication 463. Free 2011 tax software Entertainment expenses. Free 2011 tax software   You may be able to deduct business-related entertainment expenses for entertaining a client, customer, or employee. Free 2011 tax software In most cases, you can deduct only 50% of these expenses. Free 2011 tax software   The following are examples of entertainment expenses. Free 2011 tax software Entertaining guests at nightclubs, athletic clubs, theaters, or sporting events. Free 2011 tax software Providing meals, a hotel suite, or a car to business customers or their families. Free 2011 tax software To be deductible, the expenses must meet the rules listed in Table 8-1. Free 2011 tax software For details about these rules, see Publication 463. Free 2011 tax software Reimbursing your employees for expenses. Free 2011 tax software   You generally can deduct the amount you reimburse your employees for travel and entertainment expenses. Free 2011 tax software The reimbursement you deduct and the manner in which you deduct it depend in part on whether you reimburse the expenses under an accountable plan or a nonaccountable plan. Free 2011 tax software For details, see chapter 11 in Publication 535. Free 2011 tax software That chapter explains accountable and nonaccountable plans and tells you whether to report the reimbursement on your employee's Form W-2, Wage and Tax Statement. Free 2011 tax software Business Use of Your Home To deduct expenses related to the part of your home used for business, you must meet specific requirements. Free 2011 tax software Even then, your deduction may be limited. Free 2011 tax software To qualify to claim expenses for business use of your home, you must meet the following tests. Free 2011 tax software Your use of the business part of your home must be: Exclusive (however, see Exceptions to exclusive use , later), Regular, For your business, and The business part of your home must be one of the following: Your principal place of business (defined later), A place where you meet or deal with patients, clients, or customers in the normal course of your business, or A separate structure (not attached to your home) you use in connection with your business. Free 2011 tax software Exclusive use. Free 2011 tax software   To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Free 2011 tax software The area used for business can be a room or other separately identifiable space. Free 2011 tax software The space does not need to be marked off by a permanent partition. Free 2011 tax software   You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. Free 2011 tax software Example. Free 2011 tax software You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. Free 2011 tax software Your family also uses the den for recreation. Free 2011 tax software The den is not used exclusively in your profession, so you cannot claim a business deduction for its use. Free 2011 tax software Exceptions to exclusive use. Free 2011 tax software   You do not have to meet the exclusive use test if you use part of your home in either of the following ways. Free 2011 tax software For the storage of inventory or product samples. Free 2011 tax software As a daycare facility. Free 2011 tax software For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). Free 2011 tax software Regular use. Free 2011 tax software   To qualify under the regular use test, you must use a specific area of your home for business on a continuing basis. Free 2011 tax software You do not meet the test if your business use of the area is only occasional or incidental, even if you do not use that area for any other purpose. Free 2011 tax software Principal place of business. Free 2011 tax software   You can have more than one business location, including your home, for a single trade or business. Free 2011 tax software To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that business. Free 2011 tax software To determine your principal place of business, you must consider all the facts and circumstances. Free 2011 tax software   Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. Free 2011 tax software You use it exclusively and regularly for administrative or management activities of your business. Free 2011 tax software You have no other fixed location where you conduct substantial administrative or management activities of your business. Free 2011 tax software   Alternatively, if you use your home exclusively and regularly for your business, but your home office does not qualify as your principal place of business based on the previous rules, you determine your principal place of business based on the following factors. Free 2011 tax software The relative importance of the activities performed at each location. Free 2011 tax software If the relative importance factor does not determine your principal place of business, you can also consider the time spent at each location. Free 2011 tax software   If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Free 2011 tax software However, for other ways to qualify to deduct home office expenses, see Publication 587. Free 2011 tax software Deduction limit. Free 2011 tax software   If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. Free 2011 tax software If your gross income from the business use is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. Free 2011 tax software   Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation (with depreciation taken last), allocable to the business is limited to the gross income from the business use of your home minus the sum of the following. Free 2011 tax software The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). Free 2011 tax software The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. Free 2011 tax software Do not include in (2) above your deduction for one-half of your self-employment tax. Free 2011 tax software   Use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. Free 2011 tax software New simplified method. Free 2011 tax software    The IRS now provides a simplified method to determine your expenses for business use of your home. Free 2011 tax software The simplified method is an alternative to calculating and substantiating actual expenses. Free 2011 tax software In most cases, you will figure your deduction by multiplying $5 by the area of your home used for a qualified business use. Free 2011 tax software The area you use to figure your deduction is limited to 300 square feet. Free 2011 tax software For more information, see the Instructions for Schedule C. Free 2011 tax software More information. Free 2011 tax software   For more information on deducting expenses for the business use of your home, see Publication 587. Free 2011 tax software Other Expenses You Can Deduct You may also be able to deduct the following expenses. Free 2011 tax software See Publication 535 to find out whether you can deduct them. Free 2011 tax software Advertising. Free 2011 tax software Bank fees. Free 2011 tax software Donations to business organizations. Free 2011 tax software Education expenses. Free 2011 tax software Energy efficient commercial buildings deduction expenses. Free 2011 tax software Impairment-related expenses. Free 2011 tax software Interview expense allowances. Free 2011 tax software Licenses and regulatory fees. Free 2011 tax software Moving machinery. Free 2011 tax software Outplacement services. Free 2011 tax software Penalties and fines you pay for late performance or nonperformance of a contract. Free 2011 tax software Repairs that keep your property in a normal efficient operating condition. Free 2011 tax software Repayments of income. Free 2011 tax software Subscriptions to trade or professional publications. Free 2011 tax software Supplies and materials. Free 2011 tax software Utilities. Free 2011 tax software Expenses You Cannot Deduct You usually cannot deduct the following as business expenses. Free 2011 tax software For more information, see Publication 535. Free 2011 tax software Bribes and kickbacks. Free 2011 tax software Charitable contributions. Free 2011 tax software Demolition expenses or losses. Free 2011 tax software Dues to business, social, athletic, luncheon, sporting, airline, and hotel clubs. Free 2011 tax software Lobbying expenses. Free 2011 tax software Penalties and fines you pay to a governmental agency or instrumentality because you broke the law. Free 2011 tax software Personal, living, and family expenses. Free 2011 tax software Political contributions. Free 2011 tax software Repairs that add to the value of your property or significantly increase its life. Free 2011 tax software Prev  Up  Next   Home   More Online Publications
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The Free 2011 Tax Software

Free 2011 tax software Index A Affected taxpayer, Affected taxpayer. Free 2011 tax software B Book inventories, charitable deduction for, Charitable Deduction for Contributions of Book Inventories to Public Schools C Cancellation of indebtedness, Exclusion of Certain Cancellations of Indebtedness by Reason of Hurricane Katrina Casualty and theft losses, Casualty and Theft Losses Charitable contributions, Temporary Suspension of Limits on Charitable Contributions Charitable deduction: Book inventory, Charitable Deduction for Contributions of Book Inventories to Public Schools Food inventory, Charitable Deduction for Contributions of Food Inventory Child tax credit, Earned Income Credit and Child Tax Credit Clean-up costs, Demolition and Clean-up Costs Copy of tax return, request for, Request for copy of tax return. Free 2011 tax software Core disaster area, Gulf Opportunity (GO) Zone (Core Disaster Area) Covered disaster area: Katrina, Katrina Covered Disaster Area Rita, Hurricane Rita Disaster Area (Rita Covered Disaster Area) Wilma, Wilma Covered Disaster Area Credits: Child tax, Earned Income Credit and Child Tax Credit Earned income, Earned Income Credit and Child Tax Credit Education, Education Credits Employee retention, Employee Retention Credit Hurricane Katrina housing, Hurricane Katrina Housing Credit Rehabilitation tax, Increase in Rehabilitation Tax Credit Work opportunity, Work Opportunity Credit D Deadlines, extended, Extended Tax Deadlines Demolition costs, Demolition and Clean-up Costs Depreciation: Qualified GO Zone property, Qualified GO Zone property. Free 2011 tax software Special allowance, Special Depreciation Allowance Disaster area: Hurricane Katrina, Hurricane Katrina Disaster Area Hurricane Rita, Hurricane Rita Disaster Area (Rita Covered Disaster Area) Hurricane Wilma, Hurricane Wilma Disaster Area Distributions: Home purchase or construction, Repayment of Qualified Distributions for the Purchase or Construction of a Main Home Qualified hurricane, Qualified hurricane distribution. Free 2011 tax software Repayment of, Repayment of Qualified Hurricane Distributions Taxation of, Taxation of Qualified Hurricane Distributions E Earned income credit, Earned Income Credit and Child Tax Credit Education credits, Education Credits Eligible retirement plan, Eligible retirement plan. Free 2011 tax software Employee retention credit, Employee Retention Credit Exemption, additional for housing, Additional Exemption for Housing Individuals Displaced by Hurricane Katrina F Federal mortgage subsidy, recapture of, Recapture of Federal Mortgage Subsidy Food inventory, charitable deduction for, Charitable Deduction for Contributions of Food Inventory G Gulf Opportunity (GO) Zone, Gulf Opportunity (GO) Zone (Core Disaster Area) H Help: How to get, How To Get Tax Help Phone number, How To Get Tax Help Special IRS assistance, How To Get Tax Help Website, How To Get Tax Help Hope credit (see Education credits) Hurricane Katrina disaster area, Hurricane Katrina Disaster Area Hurricane Katrina housing credit, Hurricane Katrina Housing Credit Hurricane Rita disaster area, Hurricane Rita Disaster Area (Rita Covered Disaster Area) Hurricane Wilma disaster area, Hurricane Wilma Disaster Area I Involuntary conversion (see Replacement period for nonrecognition of gain) IRAs and other retirement plans, IRAs and Other Retirement Plans L Lifetime learning credit (see Education credits) M Mileage reimbursements, charitable volunteers, Mileage Reimbursements to Charitable Volunteers N Net operating losses, Net Operating Losses Q Qualified GO Zone loss, Qualified GO Zone loss. Free 2011 tax software Qualified hurricane distribution, Qualified hurricane distribution. Free 2011 tax software R Reforestation costs, Reforestation Costs Rehabilitation tax credit, Increase in Rehabilitation Tax Credit Relocation, temporary, Tax Relief for Temporary Relocation Replacement period for nonrecognition of gain, Replacement Period for Nonrecognition of Gain Retirement plan, eligible, Eligible retirement plan. Free 2011 tax software Retirement plans, IRAs and Other Retirement Plans Rita GO Zone, Rita GO Zone S Section 179 deduction, Increased Section 179 Deduction Standard mileage rate, charitable use, Standard Mileage Rate for Charitable Use of Vehicles T Tax return: Request for copy, Request for copy of tax return. Free 2011 tax software Request for transcript, Request for transcript of tax return. Free 2011 tax software Taxpayer Advocate, Contacting your Taxpayer Advocate. Free 2011 tax software Temporary relocation, Tax Relief for Temporary Relocation Theft losses, Casualty and Theft Losses Timber: 5-year NOL carryback, 5-year NOL carryback of certain timber losses. Free 2011 tax software Reforestation costs, Reforestation Costs Transcript of tax return, request for, Request for transcript of tax return. Free 2011 tax software W Wilma GO Zone, Wilma GO Zone Work opportunity credit, Work Opportunity Credit Prev  Up     Home   More Online Publications