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Free fillable forms 4. Free fillable forms   Detailed Examples Table of Contents These examples use actual forms to help you prepare your income tax return. Free fillable forms However, the information shown on the filled-in forms is not from any actual person or scenario. Free fillable forms Example 1—Mortgage loan modification. Free fillable forms    In 2007, Nancy Oak bought a main home for $435,000. Free fillable forms Nancy took out a $420,000 mortgage loan to buy the home and made a down payment of $15,000. Free fillable forms The loan was secured by the home. Free fillable forms The mortgage loan was a recourse debt, meaning that Nancy was personally liable for the debt. Free fillable forms In 2008, Nancy took out a second mortgage loan (also a recourse debt) in the amount of $30,000 that was used to substantially improve her kitchen. Free fillable forms    In 2011, when the outstanding principal of the first and second mortgage loans was $440,000, Nancy refinanced the two recourse loans into one recourse loan in the amount of $475,000. Free fillable forms The FMV of Nancy's home at the time of the refinancing was $500,000. Free fillable forms Nancy used the additional $35,000 debt ($475,000 new mortgage loan minus $440,000 outstanding principal of Nancy's first and second mortgage loans immediately before the refinancing) to pay off personal credit cards and to pay college tuition for her son. Free fillable forms After the refinancing, Nancy has qualified principal residence indebtedness in the amount of $440,000 because the refinanced debt is qualified principal residence indebtedness only to the extent the amount of debt is not more than the old mortgage principal just before the refinancing. Free fillable forms   In 2013, Nancy was unable to make her mortgage loan payments. Free fillable forms On August 31, 2013, when the outstanding balance of her refinanced mortgage loan was still $475,000 and the FMV of the property was $425,000, Nancy's bank agreed to a loan modification (a “workout”) that resulted in a $40,000 reduction in the principal balance of her loan. Free fillable forms Nancy was neither insolvent nor in bankruptcy at the time of the loan modification. Free fillable forms   Nancy received a 2013 Form 1099-C from her bank in January 2014 showing canceled debt of $40,000 in box 2. Free fillable forms Identifiable event code "F" appears in box 6. Free fillable forms This box shows the reason the creditor has filed Form 1099-C. Free fillable forms To determine if she must include the canceled debt in her income, Nancy must determine whether she meets any of the exceptions or exclusions that apply to canceled debts. Free fillable forms Nancy determines that the only exception or exclusion that applies to her is the qualified principal residence indebtedness exclusion. Free fillable forms   Next, Nancy determines the amount, if any, of the $40,000 of canceled debt that was qualified principal residence indebtedness. Free fillable forms Although Nancy has $440,000 of qualified principal residence indebtedness, part of her loan ($35,000) was not qualified principal residence indebtedness because it was used to pay off personal credit cards and college tuition for her son. Free fillable forms Applying the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent the amount canceled is more than the amount of the debt (immediately before the cancellation) that is not qualified principal residence indebtedness. Free fillable forms Thus, Nancy can exclude only $5,000 of the canceled debt as qualified principal residence indebtedness ($40,000 amount canceled minus $35,000 nonqualified debt). Free fillable forms   Because Nancy does not meet any other exception or exclusion, she checks only the box on line 1e of Form 982 and enters $5,000 on line 2. Free fillable forms Nancy must also enter $5,000 on line 10b and reduce the basis of her main home by the $5,000 she excluded from income, bringing the adjusted basis in her home to $460,000 ($435,000 purchase price plus $30,000 substantial improvement minus $5,000). Free fillable forms Nancy must also include the $35,000 nonqualified debt portion in income on Form 1040, line 21. Free fillable forms You can see Nancy's Form 1099-C and a portion of her Form 1040 below. Free fillable forms Nancy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Free fillable forms Please click the link to view the image. Free fillable forms Form 1099-C, Cancellation of Debt Nancy's 2013 Form 1040 This image is too large to be displayed in the current screen. Free fillable forms Please click the link to view the image. Free fillable forms Form 1040, U. Free fillable forms S. Free fillable forms Individual Income Tax Nancy's Form 982 This image is too large to be displayed in the current screen. Free fillable forms Please click the link to view the image. Free fillable forms Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)              Example 2—Mortgage loan foreclosure. Free fillable forms    In 2005, John and Mary Elm bought a main home for $335,000. Free fillable forms John and Mary took out a $320,000 mortgage loan to buy the home and made a down payment of $15,000. Free fillable forms The loan was secured by the home and is a recourse debt, meaning John and Mary are personally liable for the debt. Free fillable forms   John and Mary became unable to make their mortgage loan payments and on March 1, 2013, when the outstanding balance of the mortgage loan was $315,000 and the FMV of the property was $290,000, the bank foreclosed on the property and simultaneously canceled the remaining mortgage debt. Free fillable forms Immediately before the foreclosure, John and Mary's only other assets and liabilities were a checking account with a balance of $6,000, retirement savings of $13,000, and credit card debt of $5,500. Free fillable forms   John and Mary received a 2013 Form 1099-C showing canceled debt of $25,000 in box 2 ($315,000 outstanding balance minus $290,000 FMV) and an FMV of $290,000 in box 7. Free fillable forms Identifiable event code "D" appears in box 6. Free fillable forms This box shows the reason the creditor has filed Form 1099-C. Free fillable forms In order to determine if John and Mary must include the canceled debt in income, they must first determine whether they meet any of the exceptions or exclusions that apply to canceled debts. Free fillable forms In this example, John and Mary meet both the insolvency and qualified principal residence indebtedness exclusions. Free fillable forms Their sample Form 1099-C is shown on this page. Free fillable forms   John and Mary complete the insolvency worksheet and determine that they were insolvent immediately before the cancellation because at that time their liabilities exceeded the FMV of their assets by $11,500 ($320,500 total liabilities minus $309,000 FMV of total assets). Free fillable forms However, because the entire debt canceled is qualified principal residence indebtedness, the insolvency exclusion only applies if John and Mary elect to apply the insolvency exclusion instead of the qualified principal residence exclusion. Free fillable forms   John and Mary do not elect to apply the insolvency exclusion instead of the qualified principal residence exclusion because under the insolvency exclusion their exclusion would be limited to the amount by which they were insolvent ($11,500). Free fillable forms Instead, John and Mary check box 1e of Form 982 to exclude the canceled debt under the qualified principal residence exclusion. Free fillable forms Under the qualified principal residence exclusion, the amount that John and Mary can exclude is not limited because their qualified principal residence indebtedness is not more than $2 million and no portion of the loan was nonqualified debt. Free fillable forms As a result, John and Mary enter the full $25,000 of canceled debt on line 2 of Form 982. Free fillable forms Because John and Mary no longer own the home due to the foreclosure, John and Mary have no remaining basis in the home at the time of the debt cancellation. Free fillable forms Thus, John and Mary leave line 10b of Form 982 blank. Free fillable forms   John and Mary must also determine whether they have a gain or loss from the foreclosure. Free fillable forms John and Mary complete Table 1-1 (shown below) and find that they have a $45,000 loss from the foreclosure. Free fillable forms Because this loss relates to their home, it is a nondeductible loss. Free fillable forms   John and Mary's Form 1099-C, Insolvency Worksheet, and Form 982 follow. Free fillable forms John and Mary's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Free fillable forms Please click the link to view the image. Free fillable forms Form 1099-C, Cancellation of Debt Table 1-1. Free fillable forms Worksheet for Foreclosures and Repossessions (for John and Mary Elm) Part 1. Free fillable forms Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Free fillable forms Otherwise, go to Part 2. Free fillable forms 1. Free fillable forms Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $315,000. Free fillable forms 00 2. Free fillable forms Enter the fair market value of the transferred property $290,000. Free fillable forms 00 3. Free fillable forms Ordinary income from the cancellation of debt upon foreclosure or repossession. Free fillable forms * Subtract line 2 from line 1. Free fillable forms If less than zero, enter zero. Free fillable forms Next, go to Part 2 $ 25,000. Free fillable forms 00 Part 2. Free fillable forms Gain or loss from foreclosure or repossession. Free fillable forms   4. Free fillable forms Enter the smaller of line 1 or line 2. Free fillable forms If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property $290,000. Free fillable forms 00 5. Free fillable forms Enter any proceeds you received from the foreclosure sale   6. Free fillable forms Add line 4 and line 5 $290,000. Free fillable forms 00 7. Free fillable forms Enter the adjusted basis of the transferred property $335,000. Free fillable forms 00 8. Free fillable forms Gain or loss from foreclosure or repossession. Free fillable forms Subtract line 7 from line 6 ($ 45,000. Free fillable forms 00) * The income may not be taxable. Free fillable forms See chapter 1 for more details. Free fillable forms Insolvency Worksheet—John and Mary Elm Date debt was canceled (mm/dd/yy) 03/01/13 Part I. Free fillable forms Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. Free fillable forms Credit card debt $ 5,500 2. Free fillable forms Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 315,000 3. Free fillable forms Car and other vehicle loans $ 4. Free fillable forms Medical bills owed $ 5. Free fillable forms Student loans $ 6. Free fillable forms Accrued or past-due mortgage interest $ 7. Free fillable forms Accrued or past-due real estate taxes $ 8. Free fillable forms Accrued or past-due utilities (water, gas, electric) $ 9. Free fillable forms Accrued or past-due child care costs $ 10. Free fillable forms Federal or state income taxes remaining due (for prior tax years) $ 11. Free fillable forms Judgments $ 12. Free fillable forms Business debts (including those owed as a sole proprietor or partner) $ 13. Free fillable forms Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. Free fillable forms Other liabilities (debts) not included above $ 15. Free fillable forms Total liabilities immediately before the cancellation. Free fillable forms Add lines 1 through 14. Free fillable forms $ 320,500 Part II. Free fillable forms Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. Free fillable forms Cash and bank account balances $ 6,000 17. Free fillable forms Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 290,000 18. Free fillable forms Cars and other vehicles $ 19. Free fillable forms Computers $ 20. Free fillable forms Household goods and furnishings (for example, appliances, electronics, furniture, etc. Free fillable forms ) $ 21. Free fillable forms Tools $ 22. Free fillable forms Jewelry $ 23. Free fillable forms Clothing $ 24. Free fillable forms Books $ 25. Free fillable forms Stocks and bonds $ 26. Free fillable forms Investments in coins, stamps, paintings, or other collectibles $ 27. Free fillable forms Firearms, sports, photographic, and other hobby equipment $ 28. Free fillable forms Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 13,000 29. Free fillable forms Interest in a pension plan $ 30. Free fillable forms Interest in education accounts $ 31. Free fillable forms Cash value of life insurance $ 32. Free fillable forms Security deposits with landlords, utilities, and others $ 33. Free fillable forms Interests in partnerships $ 34. Free fillable forms Value of investment in a business $ 35. Free fillable forms Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. Free fillable forms Other assets not included above $ 37. Free fillable forms FMV of total assets immediately before the cancellation. Free fillable forms Add lines 16 through 36. Free fillable forms $ 309,000 Part III. Free fillable forms Insolvency 38. Free fillable forms Amount of Insolvency. Free fillable forms Subtract line 37 from line 15. Free fillable forms If zero or less, you are not insolvent. Free fillable forms $ 11,500 John and Mary's Form 982 This image is too large to be displayed in the current screen. Free fillable forms Please click the link to view the image. Free fillable forms Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)          Example 3—Mortgage loan foreclosure with debt exceeding $2 million limit. Free fillable forms    In 2011, Kathy and Frank Willow got married and entered into a contract with Hive Construction Corporation to build a house for $3,000,000 to be used as their main home. Free fillable forms Kathy and Frank made a $400,000 down payment and took out a $2,600,000 mortgage to finance the remaining cost of the house. Free fillable forms Kathy and Frank are personally liable for the mortgage loan, which is secured by the home. Free fillable forms   In November 2013, when the outstanding principal balance on the mortgage loan was $2,500,000, the FMV of the property fell to $1,750,000 and Kathy and Frank abandoned the property by permanently moving out. Free fillable forms The lender foreclosed on the property and, on December 5, 2013, sold the property to another buyer for $1,750,000. Free fillable forms On December 26, 2013, the lender canceled the remaining debt. Free fillable forms Kathy and Frank have no tax attributes other than basis of personal-use property. Free fillable forms   The lender issued a 2013 Form 1099-C to Kathy and Frank showing canceled debt of $750,000 in box 2 (the remaining balance on the $2,500,000 mortgage debt after application of the foreclosure sale proceeds) and $1,750,000 in box 7 (FMV of the property). Free fillable forms Identifiable event code "D" appears in box 6. Free fillable forms This box shows the reason the creditor has filed Form 1099-C. Free fillable forms Although Kathy and Frank abandoned the property, the lender did not need to also file a Form 1099-A because the lender canceled the debt in connection with the foreclosure in the same calendar year. Free fillable forms Kathy and Frank are filing a joint return for 2013. Free fillable forms   Because the foreclosure occurred prior to the debt cancellation, Kathy and Frank first calculate their gain or loss from the foreclosure using Table 1-1. Free fillable forms Because Kathy and Frank remained personally liable for the $750,000 debt remaining after the foreclosure ($2,500,000 outstanding debt immediately before the foreclosure minus $1,750,000 satisfied through the sale of the home), Kathy and Frank enter $1,750,000 on line 1 of Table 1-1 ($2,500,000 outstanding debt immediately before the foreclosure minus the $750,000 for which they remained liable). Free fillable forms Completing Table 1-1, Kathy and Frank find that they have no ordinary income from the cancellation of debt upon foreclosure and that they have a $1,250,000 loss. Free fillable forms Because this loss relates to their home, it is a nondeductible loss. Free fillable forms   Because the lender later canceled the remaining amount of the debt, Kathy and Frank must also determine whether that canceled debt is taxable. Free fillable forms Immediately before the cancellation, Kathy and Frank had $15,000 in a savings account, household furnishings with an FMV of $17,000, a car with an FMV of $10,000, and $18,000 in credit card debt. Free fillable forms Kathy and Frank also had the $750,000 remaining balance on the mortgage loan at that time. Free fillable forms The household furnishings originally cost $30,000. Free fillable forms The car had been fully paid off (so there was no related outstanding debt) and was originally purchased for $16,000. Free fillable forms Kathy and Frank had no adjustments to the cost basis of the car. Free fillable forms Kathy and Frank had no other assets or liabilities at the time of the cancellation. Free fillable forms Kathy and Frank complete the insolvency worksheet to calculate that they were insolvent to the extent of $726,000 immediately before the cancellation ($768,000 of total liabilities minus $42,000 FMV of total assets). Free fillable forms   At the beginning of 2014, Kathy and Frank had $9,000 in their savings account and $15,000 in credit card debt. Free fillable forms Kathy and Frank also owned the same car at that time (still with an FMV of $10,000 and basis of $16,000) and the same household furnishings (still with an FMV of $17,000 and a basis of $30,000). Free fillable forms Kathy and Frank had no other assets or liabilities at that time. Free fillable forms Kathy and Frank no longer own the home because the lender foreclosed on it in 2013. Free fillable forms   Because the canceled debt is qualified principal residence indebtedness, the insolvency exclusion does not apply unless Kathy and Frank elect to apply the insolvency exclusion instead of the qualified principal residence indebtedness exclusion. Free fillable forms The maximum amount that Kathy and Frank can treat as qualified principal residence indebtedness is $2,000,000. Free fillable forms The remaining $500,000 ($2,500,000 outstanding mortgage loan minus $2,000,000 limit on qualified principal residence indebtedness) is not qualified principal residence indebtedness. Free fillable forms Because only a part of the loan is qualified principal residence indebtedness, Kathy and Frank must apply the ordering rule to the canceled debt. Free fillable forms Under the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent that the amount canceled ($750,000) exceeds the amount of the loan (immediately before the cancellation) that is not qualified principal residence indebtedness ($500,000). Free fillable forms This means that Kathy and Frank can only exclude $250,000 ($750,000 amount canceled minus $500,000 nonqualified debt) under the qualified principal residence indebtedness exclusion. Free fillable forms   Kathy and Frank do not elect to have the insolvency exclusion apply instead of the qualified principal residence exclusion. Free fillable forms Nonetheless, they can still apply the insolvency exclusion to the $500,000 nonqualified debt because it is not qualified principal residence indebtedness. Free fillable forms Kathy and Frank can exclude the remaining $500,000 canceled debt under the insolvency exclusion because they were insolvent immediately before the cancellation to the extent of $726,000. Free fillable forms Thus, Kathy and Frank check the boxes on lines 1b and 1e of Form 982 and enter $750,000 on line 2 ($250,000 excluded under the qualified principal residence indebtedness exclusion plus $500,000 excluded under the insolvency exclusion). Free fillable forms   Next, Kathy and Frank reduce their tax attributes using Part II of Form 982. Free fillable forms Because Kathy and Frank no longer own the home due to the foreclosure, Kathy and Frank have no remaining basis in the home at the time of the debt cancellation. Free fillable forms Thus, Kathy and Frank leave line 10b of Form 982 blank. Free fillable forms However, Kathy and Frank are also excluding nonqualified debt under the insolvency exclusion. Free fillable forms As a result, Kathy and Frank must reduce the basis of property they own based on the amount of canceled debt they are excluding from income under the insolvency rules. Free fillable forms Because Kathy and Frank have no tax attributes other than basis of personal-use property to reduce, Kathy and Frank figure the amount they must include on line 10a of Form 982 by taking the smallest of: The $46,000 bases of their personal-use property held at the beginning of 2014 ($16,000 basis in the car plus $30,000 basis in household furnishings), The $500,000 of the nonbusiness debt (other than qualified principal residence indebtedness) that they are excluding from income on line 2 of Form 982, or The $43,000 excess of the total bases of the property and the amount of money they held immediately after the cancellation over their total liabilities immediately after the cancellation ($15,000 in savings account plus $30,000 basis in household furnishings plus $16,000 adjusted basis in car minus $18,000 credit card debt). Free fillable forms Kathy and Frank enter $43,000 on Form 982, line 10a and reduce their bases in the car and the household furnishings in proportion to the total adjusted bases in all their property. Free fillable forms Kathy and Frank reduce the basis in the car by $14,956. Free fillable forms 52 ($43,000 x $16,000/$46,000). Free fillable forms And they reduce the basis in the household furnishings by $28,043. Free fillable forms 48 ($43,000 x $30,000/$46,000). Free fillable forms   Following are Kathy and Frank's sample forms and worksheets. Free fillable forms Frank and Kathy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Free fillable forms Please click the link to view the image. Free fillable forms Form 1099-C, Cancellation of Debt Table 1-1. Free fillable forms Worksheet for Foreclosures and Repossessions (for Frank and Kathy Willow) Part 1. Free fillable forms Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Free fillable forms Otherwise, go to Part 2. Free fillable forms 1. Free fillable forms Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $1,750,000. Free fillable forms 00 2. Free fillable forms Enter the fair market value of the transferred property $1,750,000. Free fillable forms 00 3. Free fillable forms Ordinary income from the cancellation of debt upon foreclosure or repossession. Free fillable forms * Subtract line 2 from line 1. Free fillable forms If less than zero, enter zero. Free fillable forms Next, go to Part 2 $0. Free fillable forms 00 Part 2. Free fillable forms Gain or loss from foreclosure or repossession. Free fillable forms   4. Free fillable forms Enter the smaller of line 1 or line 2. Free fillable forms If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property. Free fillable forms $1,750,000. Free fillable forms 00 5. Free fillable forms Enter any proceeds you received from the foreclosure sale   6. Free fillable forms Add line 4 and line 5 $1,750,000. Free fillable forms 00 7. Free fillable forms Enter the adjusted basis of the transferred property $3,000,000. Free fillable forms 00 8. Free fillable forms Gain or loss from foreclosure or repossession. Free fillable forms Subtract line 7 from line 6 ($1,250,000. Free fillable forms 00) * The income may not be taxable. Free fillable forms See chapter 1 for more details. Free fillable forms    Insolvency Worksheet—Frank and Kathy Willow Date debt was canceled (mm/dd/yy) 12/26/13 Part I. Free fillable forms Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. Free fillable forms Credit card debt $ 18,000 2. Free fillable forms Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 750,000 3. Free fillable forms Car and other vehicle loans $ 4. Free fillable forms Medical bills owed $ 5. Free fillable forms Student loans $ 6. Free fillable forms Accrued or past-due mortgage interest $ 7. Free fillable forms Accrued or past-due real estate taxes $ 8. Free fillable forms Accrued or past-due utilities (water, gas, electric) $ 9. Free fillable forms Accrued or past-due child care costs $ 10. Free fillable forms Federal or state income taxes remaining due (for prior tax years) $ 11. Free fillable forms Judgments $ 12. Free fillable forms Business debts (including those owed as a sole proprietor or partner) $ 13. Free fillable forms Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. Free fillable forms Other liabilities (debts) not included above $ 15. Free fillable forms Total liabilities immediately before the cancellation. Free fillable forms Add lines 1 through 14. Free fillable forms $ 768,000 Part II. Free fillable forms Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. Free fillable forms Cash and bank account balances $ 15,000 17. Free fillable forms Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 18. Free fillable forms Cars and other vehicles $ 10,000 19. Free fillable forms Computers $ 20. Free fillable forms Household goods and furnishings (for example, appliances, electronics, furniture, etc. Free fillable forms ) $ 17,000 21. Free fillable forms Tools $ 22. Free fillable forms Jewelry $ 23. Free fillable forms Clothing $ 24. Free fillable forms Books $ 25. Free fillable forms Stocks and bonds $ 26. Free fillable forms Investments in coins, stamps, paintings, or other collectibles $ 27. Free fillable forms Firearms, sports, photographic, and other hobby equipment $ 28. Free fillable forms Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 29. Free fillable forms Interest in a pension plan $ 30. Free fillable forms Interest in education accounts $ 31. Free fillable forms Cash value of life insurance $ 32. Free fillable forms Security deposits with landlords, utilities, and others $ 33. Free fillable forms Interests in partnerships $ 34. Free fillable forms Value of investment in a business $ 35. Free fillable forms Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. Free fillable forms Other assets not included above $ 37. Free fillable forms FMV of total assets immediately before the cancellation. Free fillable forms Add lines 16 through 36. Free fillable forms $ 42,000 Part III. Free fillable forms Insolvency 38. Free fillable forms Amount of Insolvency. Free fillable forms Subtract line 37 from line 15. Free fillable forms If zero or less, you are not insolvent. Free fillable forms $ 726,000    Frank and Kathy's Form 982 This image is too large to be displayed in the current screen. Free fillable forms Please click the link to view the image. Free fillable forms Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Prev  Up  Next   Home   More Online Publications
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Inter-American Foundation

The Inter-American Foundation provides grant support to Latin American and Carribean grass-roots groups and non-governmental organizations with creative self-help ideas.

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The Free Fillable Forms

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