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Free tax act Publication 503 - Additional Material Prev  Up  Next   Home   More Online Publications
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2014 Standard Mileage Rates

IR-2013-95, Dec. 6, 2013

WASHINGTON — The Internal Revenue Service today issued the 2014 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 56 cents per mile for business miles driven
  • 23.5 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

The business, medical, and moving expense rates decrease one-half cent from the 2013 rates.  The charitable rate is based on statute.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.  In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51.  Notice 2013-80 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

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Page Last Reviewed or Updated: 06-Dec-2013

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Free tax act 2. Free tax act   Entertainment Table of Contents Directly-Related Test Associated TestMeetings at conventions. Free tax act 50% LimitExceptions to the 50% Limit What Entertainment Expenses Are Deductible?A meal as a form of entertainment. Free tax act Deduction may depend on your type of business. Free tax act Exception for events that benefit charitable organizations. Free tax act Food and beverages in skybox seats. Free tax act What Entertainment Expenses Are Not Deductible?Out-of-pocket expenses. Free tax act You may be able to deduct business-related entertainment expenses you have for entertaining a client, customer, or employee. Free tax act The rules and definitions are summarized in Table 2-1 . Free tax act You can deduct entertainment expenses only if they are both ordinary and necessary and meet one of the following tests. Free tax act Directly-related test. Free tax act Associated test. Free tax act Both of these tests are explained later. Free tax act An ordinary expense is one that is common and accepted in your trade or business. Free tax act A necessary expense is one that is helpful and appropriate for your business. Free tax act An expense does not have to be required to be considered necessary. Free tax act The amount you can deduct for entertainment expenses may be limited. Free tax act Generally, you can deduct only 50% of your unreimbursed entertainment expenses. Free tax act This limit is discussed later under 50% Limit. Free tax act Directly-Related Test To meet the directly-related test for entertainment expenses (including entertainment-related meals), you must show that: The main purpose of the combined business and entertainment was the active conduct of business, You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit at some future time. Free tax act Business is generally not considered to be the main purpose when business and entertainment are combined on hunting or fishing trips, or on yachts or other pleasure boats. Free tax act Even if you show that business was the main purpose, you generally cannot deduct the expenses for the use of an entertainment facility. Free tax act See Entertainment facilities under What Entertainment Expenses Are Not Deductible? later in this chapter. Free tax act You must consider all the facts, including the nature of the business transacted and the reasons for conducting business during the entertainment. Free tax act It is not necessary to devote more time to business than to entertainment. Free tax act However, if the business discussion is only incidental to the entertainment, the entertainment expenses do not meet the directly-related test. Free tax act Table 2-1. Free tax act When Are Entertainment Expenses Deductible? General rule You can deduct ordinary and necessary expenses to entertain a client, customer, or employee if the expenses meet the directly-related test or the associated test. Free tax act Definitions Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation, and includes meals provided to a customer or client. Free tax act An ordinary expense is one that is common and accepted in your trade or business. Free tax act A necessary expense is one that is helpful and appropriate. Free tax act Tests to be met Directly-related test Entertainment took place in a clear business setting, or Main purpose of entertainment was the active conduct of business, and You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit. Free tax act   Associated test Entertainment is associated with your trade or business, and Entertainment is directly before or after a substantial business discussion. Free tax act Other rules You cannot deduct the cost of your meal as an entertainment expense if you are claiming the meal as a travel expense. Free tax act You cannot deduct expenses that are lavish or extravagant under the circumstances. Free tax act You generally can deduct only 50% of your unreimbursed entertainment expenses (see 50% Limit ). Free tax act You do not have to show that business income or other business benefit actually resulted from each entertainment expense. Free tax act Clear business setting. Free tax act   If the entertainment takes place in a clear business setting and is for your business or work, the expenses are considered directly related to your business or work. Free tax act The following situations are examples of entertainment in a clear business setting. Free tax act Entertainment in a hospitality room at a convention where business goodwill is created through the display or discussion of business products. Free tax act Entertainment that is mainly a price rebate on the sale of your products (such as a restaurant owner providing an occasional free meal to a loyal customer). Free tax act Entertainment of a clear business nature occurring under circumstances where there is no meaningful personal or social relationship between you and the persons entertained. Free tax act An example is entertainment of business and civic leaders at the opening of a new hotel or play when the purpose is to get business publicity rather than to create or maintain the goodwill of the persons entertained. Free tax act Expenses not considered directly related. Free tax act   Entertainment expenses generally are not considered directly related if you are not there or in situations where there are substantial distractions that generally prevent you from actively conducting business. Free tax act The following are examples of situations where there are substantial distractions. Free tax act A meeting or discussion at a nightclub, theater, or sporting event. Free tax act A meeting or discussion during what is essentially a social gathering, such as a cocktail party. Free tax act A meeting with a group that includes persons who are not business associates at places such as cocktail lounges, country clubs, golf clubs, athletic clubs, or vacation resorts. Free tax act Associated Test Even if your expenses do not meet the directly-related test, they may meet the associated test. Free tax act To meet the associated test for entertainment expenses (including entertainment-related meals), you must show that the entertainment is: Associated with the active conduct of your trade or business, and Directly before or after a substantial business discussion (defined later). Free tax act Associated with trade or business. Free tax act   Generally, an expense is associated with the active conduct of your trade or business if you can show that you had a clear business purpose for having the expense. Free tax act The purpose may be to get new business or to encourage the continuation of an existing business relationship. Free tax act Substantial business discussion. Free tax act   Whether a business discussion is substantial depends on the facts of each case. Free tax act A business discussion will not be considered substantial unless you can show that you actively engaged in the discussion, meeting, negotiation, or other business transaction to get income or some other specific business benefit. Free tax act   The meeting does not have to be for any specified length of time, but you must show that the business discussion was substantial in relation to the meal or entertainment. Free tax act It is not necessary that you devote more time to business than to entertainment. Free tax act You do not have to discuss business during the meal or entertainment. Free tax act Meetings at conventions. Free tax act   You are considered to have a substantial business discussion if you attend meetings at a convention or similar event, or at a trade or business meeting sponsored and conducted by a business or professional organization. Free tax act However, your reason for attending the convention or meeting must be to further your trade or business. Free tax act The organization that sponsors the convention or meeting must schedule a program of business activities that is the main activity of the convention or meeting. Free tax act Directly before or after business discussion. Free tax act   If the entertainment is held on the same day as the business discussion, it is considered to be held directly before or after the business discussion. Free tax act   If the entertainment and the business discussion are not held on the same day, you must consider the facts of each case to see if the associated test is met. Free tax act Among the facts to consider are the place, date, and duration of the business discussion. Free tax act If you or your business associates are from out of town, you must also consider the dates of arrival and departure, and the reasons the entertainment and the discussion did not take place on the same day. Free tax act Example. Free tax act A group of business associates comes from out of town to your place of business to hold a substantial business discussion. Free tax act If you entertain those business guests on the evening before the business discussion, or on the evening of the day following the business discussion, the entertainment generally is considered to be held directly before or after the discussion. Free tax act The expense meets the associated test. Free tax act 50% Limit In general, you can deduct only 50% of your business-related meal and entertainment expenses. Free tax act (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 tax act See Individuals subject to “hours of service” limits , later. Free tax act ) 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 tax act Figure A summarizes the general rules explained in this section. Free tax act 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 tax act Included expenses. Free tax act   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 tax act 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 tax act Figure A. Free tax act Does the 50% Limit Apply to Your Expenses? There are exceptions to these rules. Free tax act See Exceptions to the 50% Limit . Free tax act Please click here for the text description of the image. Free tax act Figure A. Free tax act Does the 50% limit apply to Your Expenses?TAs for Figure A are: Notice 87-23; Form 2106 instructions Application of 50% limit. Free tax act   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. Free tax act   The 50% limit also applies to certain meal and entertainment expenses that are not business related. Free tax act It applies to meal and entertainment expenses you have for the production of income, including rental or royalty income. Free tax act It also applies to the cost of meals included in deductible educational expenses. Free tax act When to apply the 50% limit. Free tax act   You apply the 50% limit after determining the amount that would otherwise qualify for a deduction. Free tax act You first have to determine the amount of meal and entertainment expenses that would be deductible under the other rules discussed in this publication. Free tax act Example 1. Free tax act You spend $200 for a business-related meal. Free tax act If $110 of that amount is not allowable because it is lavish and extravagant, the remaining $90 is subject to the 50% limit. Free tax act Your deduction cannot be more than $45 (50% × $90). Free tax act Example 2. Free tax act You purchase two tickets to a concert and give them to a client. Free tax act You purchased the tickets through a ticket agent. Free tax act You paid $200 for the two tickets, which had a face value of $80 each ($160 total). Free tax act Your deduction cannot be more than $80 (50% × $160). Free tax act Exceptions to the 50% Limit Generally, business-related meal and entertainment expenses are subject to the 50% limit. Free tax act Figure A can help you determine if the 50% limit applies to you. Free tax act Expenses not subject to 50% limit. Free tax act   Your meal or entertainment expense is not subject to the 50% limit if the expense meets one of the following exceptions. Free tax act 1 - Employee's reimbursed expenses. Free tax act   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 tax act Accountable plans are discussed in chapter 6. Free tax act 2 - Self-employed. Free tax act   If you are self-employed, your deductible meal and entertainment expenses are not subject to the 50% limit if all of the following requirements are met. Free tax act You have these expenses as an independent contractor. Free tax act Your customer or client reimburses you or gives you an allowance for these expenses in connection with services you perform. Free tax act You provide adequate records of these expenses to your customer or client. Free tax act (See chapter 5 . Free tax act )   In this case, your client or customer is subject to the 50% limit on the expenses. Free tax act Example. Free tax act You are a self-employed attorney who adequately accounts for meal and entertainment expenses to a client who reimburses you for these expenses. Free tax act You are not subject to the directly-related or associated test, nor are you subject to the 50% limit. Free tax act If the client can deduct the expenses, the client is subject to the 50% limit. Free tax act If you (as an independent contractor) have expenses for meals and entertainment related to providing services for a client but do not adequately account for and seek reimbursement from the client for those expenses, you are subject to the directly-related or associated test and to the 50% limit. Free tax act 3 - Advertising expenses. Free tax act   You are not subject to the 50% limit if you provide meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. Free tax act For example, neither the expense of sponsoring a television or radio show nor the expense of distributing free food and beverages to the general public is subject to the 50% limit. Free tax act 4 - Sale of meals or entertainment. Free tax act   You are not subject to the 50% limit if you actually sell meals, entertainment, goods and services, or use of facilities to the public. Free tax act For example, if you run a nightclub, your expense for the entertainment you furnish to your customers, such as a floor show, is not subject to the 50% limit. Free tax act 5 - Charitable sports event. Free tax act   You are not subject to the 50% limit if you pay for a package deal that includes a ticket to a qualified charitable sports event. Free tax act For the conditions the sports event must meet, see Exception for events that benefit charitable organizations under What Entertainment Expenses Are Deductible?, later. Free tax act Individuals subject to “hours of service” limits. Free tax act   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 tax act The percentage is 80%. Free tax act   Individuals subject to the Department of Transportation's “hours of service” limits include the following persons. Free tax act Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations. Free tax act Interstate truck operators and bus drivers who are under Department of Transportation regulations. Free tax act Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations. Free tax act Certain merchant mariners who are under Coast Guard regulations. Free tax act What Entertainment Expenses Are Deductible? This section explains different types of entertainment expenses you may be able to deduct. Free tax act Entertainment. Free tax act   Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. Free tax act Examples include entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; on yachts; or on hunting, fishing, vacation, and similar trips. Free tax act   Entertainment also may include meeting personal, living, or family needs of individuals, such as providing meals, a hotel suite, or a car to customers or their families. Free tax act A meal as a form of entertainment. Free tax act   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 tax act A meal expense includes the cost of food, beverages, taxes, and tips for the meal. Free tax act To deduct an entertainment-related meal, you or your employee must be present when the food or beverages are provided. Free tax act    You cannot claim the cost of your meal both as an entertainment expense and as a travel expense. Free tax act    Meals sold in the normal course of your business are not considered entertainment. Free tax act Deduction may depend on your type of business. Free tax act   Your kind of business may determine if a particular activity is considered entertainment. Free tax act For example, if you are a dress designer and have a fashion show to introduce your new designs to store buyers, the show generally is not considered entertainment. Free tax act This is because fashion shows are typical in your business. Free tax act But, if you are an appliance distributor and hold a fashion show for the spouses of your retailers, the show generally is considered entertainment. Free tax act Separating costs. Free tax act   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 tax act You must have a reasonable basis for making this allocation. Free tax act For example, you must allocate your expenses if a hotel includes entertainment in its lounge on the same bill with your room charge. Free tax act Taking turns paying for meals or entertainment. Free tax act   If a group of business acquaintances takes turns picking up each others' meal or entertainment checks primarily for personal reasons, without regard to whether any business purposes are served, no member of the group can deduct any part of the expense. Free tax act Lavish or extravagant expenses. Free tax act   You cannot deduct expenses for entertainment that are lavish or extravagant. Free tax act An expense is not considered lavish or extravagant if it is reasonable considering the facts and circumstances. Free tax act 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 tax act Allocating between business and nonbusiness. Free tax act   If you entertain business and nonbusiness individuals at the same event, you must divide your entertainment expenses between business and nonbusiness. Free tax act You can deduct only the business part. Free tax act If you cannot establish the part of the expense for each person participating, allocate the expense to each participant on a pro rata basis. Free tax act Example. Free tax act You entertain a group of individuals that includes yourself, three business prospects, and seven social guests. Free tax act Only 4/11 of the expense qualifies as a business entertainment expense. Free tax act You cannot deduct the expenses for the seven social guests because those costs are nonbusiness expenses. Free tax act Trade association meetings. Free tax act   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 tax act These organizations include business leagues, chambers of commerce, real estate boards, trade associations, and professional associations. Free tax act Entertainment tickets. Free tax act   Generally, you cannot deduct more than the face value of an entertainment ticket, even if you paid a higher price. Free tax act 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 tax act Exception for events that benefit charitable organizations. Free tax act   Different rules apply when the cost of a ticket to a sports event benefits a charitable organization. Free tax act You can take into account the full cost you pay for the ticket, even if it is more than the face value, if all of the following conditions apply. Free tax act The event's main purpose is to benefit a qualified charitable organization. Free tax act The entire net proceeds go to the charity. Free tax act The event uses volunteers to perform substantially all the event's work. Free tax act    The 50% limit on entertainment does not apply to any expense for a package deal that includes a ticket to such a charitable sports event. Free tax act Example 1. Free tax act You purchase tickets to a golf tournament organized by the local volunteer fire company. Free tax act All net proceeds will be used to buy new fire equipment. Free tax act The volunteers will run the tournament. Free tax act You can deduct the entire cost of the tickets as a business expense if they otherwise qualify as an entertainment expense. Free tax act Example 2. Free tax act You purchase tickets to a college football game through a ticket broker. Free tax act After having a business discussion, you take a client to the game. Free tax act Net proceeds from the game go to colleges that qualify as charitable organizations. Free tax act However, since the colleges also pay individuals to perform services, such as coaching and recruiting, you can only use the face value of the tickets in determining your business deduction. Free tax act Skyboxes and other private luxury boxes. Free tax act   If you rent a skybox or other private luxury box for more than one event at the same sports arena, you generally cannot deduct more than the price of a nonluxury box seat ticket. Free tax act   To determine whether a skybox has been rented for more than one event, count each game or other performance as one event. Free tax act For example, renting a skybox for a series of playoff games is considered renting it for more than one event. Free tax act All skyboxes you rent in the same arena, along with any rentals by related parties, are considered in making this determination. Free tax act   Related parties include: Family members (spouses, ancestors, and lineal descendants), Parties who have made a reciprocal arrangement involving the sharing of skyboxes, Related corporations, A partnership and its principal partners, and A corporation and a partnership with common ownership. Free tax act Example. Free tax act You pay $3,000 to rent a 10-seat skybox at Team Stadium for three baseball games. Free tax act The cost of regular nonluxury box seats at each event is $30 a seat. Free tax act You can deduct (subject to the 50% limit) $900 ((10 seats × $30 each) × 3 events). Free tax act Food and beverages in skybox seats. Free tax act   If expenses for food and beverages are separately stated, you can deduct these expenses in addition to the amounts allowable for the skybox, subject to the requirements and limits that apply. Free tax act The amounts separately stated for food and beverages must be reasonable. Free tax act You cannot inflate the charges for food and beverages to avoid the limited deduction for skybox rentals. Free tax act What Entertainment Expenses Are Not Deductible? This section explains different types of entertainment expenses you generally may not be able to deduct. Free tax act Club dues and membership fees. Free tax act   You cannot deduct dues (including initiation fees) for membership in any club organized for: Business, Pleasure, Recreation, or Other social purpose. Free tax act 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, discussed later. Free tax act   The purposes and activities of a club, not its name, will determine whether or not you can deduct the dues. Free tax act 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 tax act Entertainment facilities. Free tax act   Generally, you cannot deduct any expense for the use of an entertainment facility. Free tax act This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection. Free tax act   An entertainment facility is any property you own, rent, or use for entertainment. Free tax act 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 tax act Out-of-pocket expenses. Free tax act   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 tax act These are not expenses for the use of an entertainment facility. Free tax act However, these expenses are subject to the directly-related and associated tests and to the 50% limit , all discussed earlier. Free tax act Expenses for spouses. Free tax act   You generally cannot deduct the cost of entertainment for your spouse or for the spouse of a customer. Free tax act However, you can deduct these costs if you can show you had a clear business purpose, rather than a personal or social purpose, for providing the entertainment. Free tax act Example. Free tax act You entertain a customer. Free tax act The cost is an ordinary and necessary business expense and is allowed under the entertainment rules. Free tax act The customer's spouse joins you because it is impractical to entertain the customer without the spouse. Free tax act You can deduct the cost of entertaining the customer's spouse. Free tax act If your spouse joins the party because the customer's spouse is present, the cost of the entertainment for your spouse is also deductible. Free tax act Gift or entertainment. Free tax act   Any item that might be considered either a gift or entertainment generally will be considered entertainment. Free tax act However, if you give a customer packaged food or beverages that you intend the customer to use at a later date, treat it as a gift. Free tax act   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 tax act You can treat the tickets as either a gift or entertainment, whichever is to your advantage. Free tax act   You can change your treatment of the tickets at a later date by filing an amended return. Free tax act Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. Free tax act   If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. Free tax act You cannot choose, in this case, to treat the tickets as a gift. Free tax act Prev  Up  Next   Home   More Online Publications