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

Taxcut online Index A Accrual foreign taxes, adjustments, You may have to post a bond. Taxcut online Accrual method of accounting, Accrual method of accounting. Taxcut online Allocation Carryback/carryover between spouses, Allocations Between Spouses Foreign losses, Foreign Losses Foreign taxes, Allocation of Foreign Taxes U. Taxcut online S. Taxcut online losses, U. Taxcut online S. Taxcut online Losses Alternative minimum tax, Reminders Amended return, Claim for Refund American Samoa, resident of, Possession Exclusion Assistance (see Tax help) B Bankruptcy, effect of, Effect of bankruptcy or insolvency. Taxcut online Beneficiary, Partner or S corporation shareholder. Taxcut online Bond, income tax, You may have to post a bond. Taxcut online Boycotting countries, Taxes From International Boycott Operations C Capital gains and losses, Capital Gains and Losses Carryback and carryover, Carrybacks and carryovers. Taxcut online Allocations between spouses, Allocations Between Spouses Claim for refund, Time Limit on Tax Assessment Joint return, Married Couples Joint return–deduction year, Joint Return Filed in a Deduction Year Taxes all credited or deducted, Claim for Refund Time limit on tax assessment, Time Limit on Tax Assessment Choice to take credit or deduction Changing your choice, Making or Changing Your Choice Choice applied to all qualified foreign taxes, Choice Applies to All Qualified Foreign Taxes Claim for refund, Claim for Refund Classes of gross income, Classes of gross income. Taxcut online Compensation for labor or personal services, Determining the Source of Compensation for Labor or Personal Services Geographical basis, Geographical basis. Taxcut online Comprehensive example, Comprehensive Example — Filled-In Form 1116 Controlled foreign corporation shareholder, Controlled foreign corporation shareholder. Taxcut online , Income from controlled foreign corporations. Taxcut online Covered asset acquisition, Covered Asset Acquisition Credit How to claim, How To Claim the Credit How to figure, How To Figure the Credit Limit on, Limit on the Credit Credit for taxes paid or accrued, Credit for Taxes Paid or Accrued D Deduction for foreign taxes that are not income taxes, Foreign taxes that are not income taxes. Taxcut online Distributions Lump-sum, Lump-Sum Distribution Dividends Taxes on, Taxes Imposed on Certain Dividends Dual-capacity taxpayers, Dual-capacity taxpayers. Taxcut online E Economic benefits, Specific economic benefit. Taxcut online Examples Comprehensive, Comprehensive Example — Filled-In Form 1116 Simple, Simple Example — Filled-In Form 1116 Excess limit, Carryback and Carryover Exchange rates, Foreign Currency and Exchange Rates Excluded income Foreign earned, Foreign Earned Income and Housing Exclusions Taxes on, Taxes on Excluded Income Exemption from foreign tax credit limit, Exemption from foreign tax credit limit. Taxcut online Export financing interest, Export financing interest. Taxcut online Extraterritorial income, Extraterritorial Income Exclusion F Financial services income, Financial services income. Taxcut online Foreign corporation–U. Taxcut online S. Taxcut online shareholders, filing requirements, Taxes of U. Taxcut online S. Taxcut online Persons Controlling Foreign Corporations and Partnerships Foreign country, Foreign country. Taxcut online Foreign currency and exchange rates, Foreign Currency and Exchange Rates Foreign income, translating, Translating foreign currency into U. Taxcut online S. Taxcut online dollars. Taxcut online Foreign losses Allocation of, Foreign Losses Recapture of, Recapture of Prior Year Overall Foreign Loss Accounts Foreign mineral income, taxes on, Taxes on Foreign Mineral Income Foreign oil and gas extraction income, taxes on, Taxes on Combined Foreign Oil and Gas Income Foreign partnerships–U. Taxcut online S. Taxcut online partners, filing requirement, Taxes of U. Taxcut online S. Taxcut online Persons Controlling Foreign Corporations and Partnerships Foreign tax refund, Foreign tax refund. Taxcut online , Foreign tax refund. Taxcut online Foreign tax(es) Allocation to income categories, Allocation of Foreign Taxes For which you cannot take a credit, Foreign Taxes for Which You Cannot Take a Credit Imposed on foreign refund, Foreign tax imposed on foreign refund. Taxcut online Qualifying for credit, What Foreign Taxes Qualify for the Credit? Redetermination, Foreign Tax Redetermination Refund, Foreign tax imposed on foreign refund. Taxcut online Form 1040X, Claim for Refund 1116, Form 1116, Simple Example — Filled-In Form 1116, Comprehensive Example — Filled-In Form 1116 5471, Taxes of U. Taxcut online S. Taxcut online Persons Controlling Foreign Corporations and Partnerships 5713, Form 5713 required. Taxcut online 8833, Report required. Taxcut online 8865, Taxes of U. Taxcut online S. Taxcut online Persons Controlling Foreign Corporations and Partnerships 8873, Extraterritorial Income Exclusion Free tax services, Free help with your tax return. Taxcut online Functional currency, Translating foreign currency into U. Taxcut online S. Taxcut online dollars. Taxcut online G General category income, separate limit, General Category Income H Help (see Tax help) High-taxed income, High-taxed income. Taxcut online I Income from sources in U. Taxcut online S. Taxcut online possessions, Determining the source of income from U. Taxcut online S. Taxcut online possessions. Taxcut online Income re-sourced by treaty, separate limit, Certain Income Re-Sourced By Treaty Income tax, Income Tax Income tax bond, You may have to post a bond. Taxcut online Interest, Penalties and interest. Taxcut online Interest expense, apportioning, Interest expense. Taxcut online International boycott, Taxes From International Boycott Operations Itemized deduction, Taxes for Which You Can Only Take an Itemized Deduction J Joint return Carryback and carryover, Married Couples Credit based on foreign tax of both spouses, Joint return. Taxcut online Filed in a deduction year, Joint Return Filed in a Deduction Year L Levy, Income Tax Limit on credit, Limit on the Credit Losses, foreign, Foreign Losses Allocation of, Foreign Losses Recapture of, Recapture of Prior Year Overall Foreign Loss Accounts Losses, U. Taxcut online S. Taxcut online , U. Taxcut online S. Taxcut online Losses Allocation of, U. Taxcut online S. Taxcut online Losses Lump-sum distributions, Lump-Sum Distribution M Making or changing your choice, Making or Changing Your Choice Married couples Carryback and carryover, Married Couples Joint return, Joint return. Taxcut online Mineral income, foreign,, Taxes on Foreign Mineral Income Mutual fund distributions, Mutual fund shareholder. Taxcut online , Passive income. Taxcut online Mutual fund shareholder, Mutual fund shareholder. Taxcut online N Nonresident aliens, Nonresident Aliens Notice to the IRS of change in tax, Notice to the Internal Revenue Service (IRS) of Redetermination O Overall foreign loss, Overall foreign loss. Taxcut online P Partner, Partner or S corporation shareholder. Taxcut online , Partnership distributive share. Taxcut online , Foreign Taxes From a Partnership or an S Corporation Passive category income, Passive Category Income Penalties, Failure-to-notify penalty. Taxcut online , Penalties and interest. Taxcut online Failure to file Form 5471, 8865, Penalty for not filing Form 5471 or Form 8865. Taxcut online Failure to file Form 5713, Penalty for failure to file. Taxcut online Failure to notify, foreign tax change, Failure-to-notify penalty. Taxcut online Failure to report treaty information, Report required. Taxcut online Pension, employment, and disability fund payments, Pension, unemployment, and disability fund payments. Taxcut online Personal property, sales or exchanges of, Determining the Source of Income From the Sales or Exchanges of Certain Personal Property Possession exclusion, Possession Exclusion Publications (see Tax help) Purchase or sale of oil or gas, taxes in connection with, Taxes in Connection With the Purchase or Sale of Oil or Gas Q Qualified business unit, Translating foreign currency into U. Taxcut online S. Taxcut online dollars. Taxcut online Qualified dividends, Capital Gains and Losses R Rate of exchange, Rate of exchange for foreign taxes paid. Taxcut online Recapture of foreign losses, Recapture of Prior Year Overall Foreign Loss Accounts Records to keep, Records To Keep Redetermination of foreign tax, Foreign Tax Redetermination Refund claims, time limit, Time Limit on Refund Claims Refund, foreign tax, Foreign tax refund. Taxcut online Reporting requirements (international boycott), Reporting requirements. Taxcut online Resident aliens, Resident Aliens S S corporation shareholder, Partner or S corporation shareholder. Taxcut online , Foreign Taxes From a Partnership or an S Corporation Sanctioned countries, Taxes Imposed By Sanctioned Countries (Section 901(j) Income) Section 901(j) income, Section 901(j) Income Section 901(j) sanctioned income, Taxes Imposed By Sanctioned Countries (Section 901(j) Income) Separate limit income, Separate Limit Income General category income, General Category Income Income re-sourced by treaty, Certain Income Re-Sourced By Treaty Lump-sum distribution, Lump-Sum Distribution Passive category income, Passive Category Income Section 901(j) income, Section 901(j) Income Shareholder, Mutual fund shareholder. Taxcut online Simple example, Simple Example — Filled-In Form 1116 Soak-up taxes, Soak-up taxes. Taxcut online Social security taxes, Pension, unemployment, and disability fund payments. Taxcut online Source of compensation for labor or personal services Alternative basis, Alternative basis. Taxcut online Multi-year compensation, Multi-year compensation. Taxcut online Time basis, Time basis. Taxcut online Transportation income, Transportation Income State income taxes, State income taxes. Taxcut online Subsidy, Subsidy received. Taxcut online T Tax help, How To Get Tax Help Tax treaties, Tax Treaties Taxable income from sources outside the U. Taxcut online S. Taxcut online , determination of, Determining Taxable Income From Sources Outside the United States Taxes Excluded income, Foreign Earned Income and Housing Exclusions In lieu of income taxes, Taxes in Lieu of Income Taxes On dividends, Taxes Imposed on Certain Dividends Paid or accrued, Credit for Taxes Paid or Accrued Withheld on income or gain, Taxes Withheld on Income or Gain (Other Than Dividends) Taxes related to a foreign tax credit splitting event, Taxes Related to a Foreign Tax Credit Splitting Event Time limit Refund claims, Time Limit on Refund Claims Tax assessment, Time Limit on Tax Assessment Translating foreign currency, Translating foreign currency into U. Taxcut online S. Taxcut online dollars. Taxcut online U U. Taxcut online S. Taxcut online citizens, U. Taxcut online S. Taxcut online Citizens U. Taxcut online S. Taxcut online losses Allocation of, U. Taxcut online S. Taxcut online Losses U. Taxcut online S. Taxcut online possessions, U. Taxcut online S. Taxcut online possessions. Taxcut online Unused foreign tax credits, carryback or carryover, Carrybacks and carryovers. Taxcut online , Carryback and Carryover W Wages, Wages completely excluded. Taxcut online When refunds can be claimed, Time Limit on Refund Claims When tax can be assessed, Time Limit on Tax Assessment Who can take the credit, Who Can Take the Credit? Why choose the credit, Why Choose the Credit? Prev  Up     Home   More Online Publications