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Turbotax 2010

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Turbotax 2010

Turbotax 2010 Index A Accident benefits, Accident and Health Benefits Achievement awards, Achievement Awards Additional Medicare Tax, Reminders, Additional Medicare Tax withholding. Turbotax 2010 Adoption assistance, Adoption Assistance Annual lease value, Annual Lease Value Assistance (see Tax help) Athletic facilities, Athletic Facilities Automobile (see Vehicles) Awards, achievement, Achievement Awards B Bicycle commuting reimbursement, qualified, Qualified bicycle commuting reimbursement. Turbotax 2010 C Cafeteria plans, Cafeteria Plans Cents-per-mile rule, What's New, Cents-Per-Mile Rule COBRA premiums, COBRA premiums. Turbotax 2010 Comments on publication, Comments and suggestions. Turbotax 2010 Commuter highway vehicle, Commuter highway vehicle. Turbotax 2010 Commuting rule, Commuting Rule Copying machine use, De Minimis (Minimal) Benefits D Daily lease value, Daily Lease Value De minimis (minimal) benefits In general, De Minimis (Minimal) Benefits Meals, De Minimis Meals Transportation, De Minimis Transportation Benefits Demonstrator cars, Demonstrator cars. Turbotax 2010 Dependent care assistance, Dependent Care Assistance Deposit rules, 4. Turbotax 2010 Rules for Withholding, Depositing, and Reporting Discounts for employees, Employee Discounts E Educational assistance, Educational Assistance Employee benefit programs Accident and health benefits, Accident and Health Benefits Cafeteria plans, Cafeteria Plans Dependent care assistance, Dependent Care Assistance Educational assistance, Educational Assistance Group-term life insurance, Group-Term Life Insurance Coverage Employee discounts, Employee Discounts Employee stock options, Employee Stock Options Employer-operated eating facility, Employer-operated eating facility for employees. Turbotax 2010 Employer-provided cell phones, Employer-Provided Cell Phones Exclusion rules, 2. Turbotax 2010 Fringe Benefit Exclusion Rules F Fair market value, Fair market value. Turbotax 2010 Fringe benefit overview, 1. Turbotax 2010 Fringe Benefit Overview Fringe benefits Special accounting rule, Special accounting rule. Turbotax 2010 Valuation rules, 3. Turbotax 2010 Fringe Benefit Valuation Rules G General valuation rule, General Valuation Rule Group-term life insurance, Group-Term Life Insurance Coverage H Health benefits, Accident and Health Benefits Health Savings Accounts, Health Savings Accounts Holiday gifts, De Minimis (Minimal) Benefits I Insurance Accident and health, Accident and Health Benefits Group-term life, Group-Term Life Insurance Coverage Long-term care, Exception for certain long-term care benefits. Turbotax 2010 L Lease value rule, Lease Value Rule Length of service awards, Achievement Awards Life insurance Group-term, Group-Term Life Insurance Coverage Spouse or dependent, De Minimis (Minimal) Benefits Lodging, Lodging on Your Business Premises Long-term care insurance, Exception for certain long-term care benefits. Turbotax 2010 M Meals De minimis, De Minimis Meals On your business premises, Meals on Your Business Premises Medical reimbursement plans, Accident and Health Benefits Minimal benefits, De Minimis (Minimal) Benefits Moving expense reimbursements, Moving Expense Reimbursements N No-additional-cost services, No-Additional-Cost Services Nonpersonal use vehicles, qualified, Qualified nonpersonal use vehicles. Turbotax 2010 O Options on stock, Employee Stock Options Outplacement services, Outplacement services. Turbotax 2010 P Parking, qualified, Qualified parking. Turbotax 2010 Parties, De Minimis (Minimal) Benefits Performance of services, Performance of services. Turbotax 2010 Pickup trucks, Pickup trucks. Turbotax 2010 Picnics, De Minimis (Minimal) Benefits Prorated annual lease value, Prorated Annual Lease Value Provider defined, Provider of benefit. Turbotax 2010 Publications (see Tax help) Q Qualified transportation benefits, Qualified Transportation Benefits R Recipient defined, Recipient of benefit. Turbotax 2010 Reimbursements, moving expense, Moving Expense Reimbursements Reporting rules, 4. Turbotax 2010 Rules for Withholding, Depositing, and Reporting Retirement planning services, Retirement Planning Services S Safety achievement awards, Achievement Awards Self insurance (medical reimbursement plans), Accident and Health Benefits Services, no-additional-cost, No-Additional-Cost Services Simple Cafeteria Plans, Simple Cafeteria Plans Special accounting rule, Special accounting rule. Turbotax 2010 Stock options, employee, Employee Stock Options Suggestions for publication, Comments and suggestions. Turbotax 2010 T Tax help, How To Get Tax Help Taxable benefits, Are Fringe Benefits Taxable? Tickets for theater or sporting events, De Minimis (Minimal) Benefits Transit pass, Transit pass. Turbotax 2010 Transportation benefits De minimis, De Minimis Transportation Benefits Qualified, Qualified Transportation Benefits TTY/TDD information, How To Get Tax Help Tuition reduction, Tuition Reduction U Unsafe conditions commuting rule, Unsafe Conditions Commuting Rule V Valuation rules, 3. Turbotax 2010 Fringe Benefit Valuation Rules Vans, Vans. Turbotax 2010 Vehicles Business use of (see Working condition benefits) Commuter highway, Commuter highway vehicle. Turbotax 2010 Qualified nonpersonal use, Qualified nonpersonal use vehicles. Turbotax 2010 Valuation of, Employer-provided vehicles. Turbotax 2010 W Withholding rules, 4. Turbotax 2010 Rules for Withholding, Depositing, and Reporting Working condition benefits, Working Condition Benefits Prev  Up     Home   More Online Publications
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The Turbotax 2010

Turbotax 2010 8. Turbotax 2010   Business Expenses Table of Contents Introduction Useful Items - You may want to see: Bad DebtsAccrual method. Turbotax 2010 Cash method. Turbotax 2010 Car and Truck ExpensesOffice in the home. Turbotax 2010 Methods for Deducting Car and Truck Expenses Reimbursing Your Employees for Expenses Depreciation Employees' PayFringe benefits. Turbotax 2010 InsuranceHow to figure the deduction. Turbotax 2010 Interest Legal and Professional FeesTax preparation fees. Turbotax 2010 Pension Plans Rent Expense Taxes Travel, Meals, and EntertainmentTransportation. Turbotax 2010 Taxi, commuter bus, and limousine. Turbotax 2010 Baggage and shipping. Turbotax 2010 Car or truck. Turbotax 2010 Meals and lodging. Turbotax 2010 Cleaning. Turbotax 2010 Telephone. Turbotax 2010 Tips. Turbotax 2010 More information. Turbotax 2010 Business Use of Your HomeExceptions to exclusive use. Turbotax 2010 Other Expenses You Can Deduct Expenses You Cannot Deduct Introduction You can deduct the costs of operating your business. Turbotax 2010 These costs are known as business expenses. Turbotax 2010 These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year. Turbotax 2010 To be deductible, a business expense must be both ordinary and necessary. Turbotax 2010 An ordinary expense is one that is common and accepted in your field of business. Turbotax 2010 A necessary expense is one that is helpful and appropriate for your business. Turbotax 2010 An expense does not have to be indispensable to be considered necessary. Turbotax 2010 For more information about the general rules for deducting business expenses, see chapter 1 in Publication 535, Business Expenses. Turbotax 2010 If you have an expense that is partly for business and partly personal, separate the personal part from the business part. Turbotax 2010 The personal part is not deductible. Turbotax 2010 Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 946 How To Depreciate Property See chapter 12 for information about getting publications and forms. Turbotax 2010 Bad Debts If someone owes you money you cannot collect, you have a bad debt. Turbotax 2010 There are two kinds of bad debts, business bad debts and nonbusiness bad debts. Turbotax 2010 A business bad debt is generally one that comes from operating your trade or business. Turbotax 2010 You may be able to deduct business bad debts as an expense on your business tax return. Turbotax 2010 Business bad debt. Turbotax 2010   A business bad debt is a loss from the worthlessness of a debt that was either of the following. Turbotax 2010 Created or acquired in your business. Turbotax 2010 Closely related to your business when it became partly or totally worthless. Turbotax 2010 A debt is closely related to your business if your primary motive for incurring the debt is a business reason. Turbotax 2010   Business bad debts are mainly the result of credit sales to customers. Turbotax 2010 They can also be the result of loans to suppliers, clients, employees, or distributors. Turbotax 2010 Goods and services customers have not paid for are shown in your books as either accounts receivable or notes receivable. Turbotax 2010 If you are unable to collect any part of these accounts or notes receivable, the uncollectible part is a business bad debt. Turbotax 2010    You can take a bad debt deduction for these accounts and notes receivable only if the amount you were owed was included in your gross income either for the year the deduction is claimed or for a prior year. Turbotax 2010 Accrual method. Turbotax 2010   If you use an accrual method of accounting, you normally report income as you earn it. Turbotax 2010 You can take a bad debt deduction for an uncollectible receivable if you have included the uncollectible amount in income. Turbotax 2010 Cash method. Turbotax 2010   If you use the cash method of accounting, you normally report income when you receive payment. Turbotax 2010 You cannot take a bad debt deduction for amounts owed to you that you have not received and cannot collect if you never included those amounts in income. Turbotax 2010 More information. Turbotax 2010   For more information about business bad debts, see chapter 10 in Publication 535. Turbotax 2010 Nonbusiness bad debts. Turbotax 2010   All other bad debts are nonbusiness bad debts and are deductible as short-term capital losses on Form 8949 and Schedule D (Form 1040). Turbotax 2010 For more information on nonbusiness bad debts, see Publication 550, Investment Income and Expenses. Turbotax 2010 Car and Truck Expenses If you use your car or truck in your business, you may be able to deduct the costs of operating and maintaining your vehicle. Turbotax 2010 You also may be able to deduct other costs of local transportation and traveling away from home overnight on business. Turbotax 2010 You may qualify for a tax credit for qualified plug-in electric vehicles, qualified plug-in electric drive motor vehicles, and alternative motor vehicles you place in service during the year. Turbotax 2010 See Form 8936 and Form 8910 for more information. Turbotax 2010 Local transportation expenses. Turbotax 2010   Local transportation expenses include the ordinary and necessary costs of all the following. Turbotax 2010 Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Turbotax 2010 Tax home is defined later. Turbotax 2010 Visiting clients or customers. Turbotax 2010 Going to a business meeting away from your regular workplace. Turbotax 2010 Getting from your home to a temporary workplace when you have one or more regular places of work. Turbotax 2010 These temporary workplaces can be either within the area of your tax home or outside that area. Turbotax 2010 Local business transportation does not include expenses you have while traveling away from home overnight. Turbotax 2010 Those expenses are deductible as travel expenses and are discussed later under Travel, Meals, and Entertainment. Turbotax 2010 However, if you use your car while traveling away from home overnight, use the rules in this section to figure your car expense deduction. Turbotax 2010   Generally, your tax home is your regular place of business, regardless of where you maintain your family home. Turbotax 2010 It includes the entire city or general area in which your business or work is located. Turbotax 2010 Example. Turbotax 2010 You operate a printing business out of rented office space. Turbotax 2010 You use your van to deliver completed jobs to your customers. Turbotax 2010 You can deduct the cost of round-trip transportation between your customers and your print shop. Turbotax 2010    You cannot deduct the costs of driving your car or truck between your home and your main or regular workplace. Turbotax 2010 These costs are personal commuting expenses. Turbotax 2010 Office in the home. Turbotax 2010   Your workplace can be your home if you have an office in your home that qualifies as your principal place of business. Turbotax 2010 For more information, see Business Use of Your Home, later. Turbotax 2010 Example. Turbotax 2010 You are a graphics designer. Turbotax 2010 You operate your business out of your home. Turbotax 2010 Your home qualifies as your principal place of business. Turbotax 2010 You occasionally have to drive to your clients to deliver your completed work. Turbotax 2010 You can deduct the cost of the round-trip transportation between your home and your clients. Turbotax 2010 Methods for Deducting Car and Truck Expenses For local transportation or overnight travel by car or truck, you generally can use one of the following methods to figure your expenses. Turbotax 2010 Standard mileage rate. Turbotax 2010 Actual expenses. Turbotax 2010 Standard mileage rate. Turbotax 2010   You may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. Turbotax 2010 For 2013, the standard mileage rate is 56. Turbotax 2010 5 cents per mile. Turbotax 2010    If you choose to use the standard mileage rate for a year, you cannot deduct your actual expenses for that year except for business-related parking fees and tolls. Turbotax 2010 Choosing the standard mileage rate. Turbotax 2010   If you want to use the standard mileage rate for a car or truck you own, you must choose to use it in the first year the car is available for use in your business. Turbotax 2010 In later years, you can choose to use either the standard mileage rate or actual expenses. Turbotax 2010   If you use the standard mileage rate for a car you lease, you must choose to use it for the entire lease period (including renewals). Turbotax 2010 Standard mileage rate not allowed. Turbotax 2010   You cannot use the standard mileage rate if you: Operate five or more cars at the same time, Claimed a depreciation deduction using any method other than straight line, for example, ACRS or MACRS, Claimed a section 179 deduction on the car, Claimed the special depreciation allowance on the car, Claimed actual car expenses for a car you leased, or Are a rural mail carrier who received a qualified reimbursement. Turbotax 2010 Parking fees and tolls. Turbotax 2010   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. Turbotax 2010 (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. Turbotax 2010 ) Actual expenses. Turbotax 2010   If you do not choose to use the standard mileage rate, you may be able to deduct your actual car or truck expenses. Turbotax 2010    If you qualify to use both methods, figure your deduction both ways to see which gives you a larger deduction. Turbotax 2010   Actual car expenses include the costs of the following items. Turbotax 2010 Depreciation Lease payments Registration Garage rent Licenses Repairs Gas Oil Tires Insurance Parking fees Tolls   If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. Turbotax 2010 You can divide your expenses based on the miles driven for each purpose. Turbotax 2010 Example. Turbotax 2010 You are the sole proprietor of a flower shop. Turbotax 2010 You drove your van 20,000 miles during the year. Turbotax 2010 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use (including commuting miles). Turbotax 2010 You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. Turbotax 2010 More information. Turbotax 2010   For more information about the rules for claiming car and truck expenses, see Publication 463. Turbotax 2010 Reimbursing Your Employees for Expenses You generally can deduct the amount you reimburse your employees for car and truck expenses. Turbotax 2010 The reimbursement you deduct and the manner in which you deduct it depend in part on whether you reimburse the expenses under an accountable plan or a nonaccountable plan. Turbotax 2010 For details, see chapter 11 in Publication 535. Turbotax 2010 That chapter explains accountable and nonaccountable plans and tells you whether to report the reimbursement on your employee's Form W-2, Wage and Tax Statement. Turbotax 2010 Depreciation If property you acquire to use in your business is expected to last more than 1 year, you generally cannot deduct the entire cost as a business expense in the year you acquire it. Turbotax 2010 You must spread the cost over more than 1 tax year and deduct part of it each year on Schedule C. Turbotax 2010 This method of deducting the cost of business property is called depreciation. Turbotax 2010 The discussion here is brief. Turbotax 2010 You will find more information about depreciation in Publication 946. Turbotax 2010 What property can be depreciated?   You can depreciate property if it meets all the following requirements. Turbotax 2010 It must be property you own. Turbotax 2010 It must be used in business or held to produce income. Turbotax 2010 You never can depreciate inventory (explained in chapter 2) because it is not held for use in your business. Turbotax 2010 It must have a useful life that extends substantially beyond the year it is placed in service. Turbotax 2010 It must have a determinable useful life, which means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Turbotax 2010 You never can depreciate the cost of land because land does not wear out, become obsolete, or get used up. Turbotax 2010 It must not be excepted property. Turbotax 2010 This includes property placed in service and disposed of in the same year. Turbotax 2010 Repairs. Turbotax 2010    You cannot depreciate repairs and replacements that do not increase the value of your property, make it more useful, or lengthen its useful life. Turbotax 2010 You can deduct these amounts on line 21 of Schedule C or line 2 of Schedule C-EZ. Turbotax 2010 Depreciation method. Turbotax 2010   The method for depreciating most business and investment property placed in service after 1986 is called the Modified Accelerated Cost Recovery System (MACRS). Turbotax 2010 MACRS is discussed in detail in Publication 946. Turbotax 2010 Section 179 deduction. Turbotax 2010   You can elect to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. Turbotax 2010 This deduction is known as the “section 179 deduction. Turbotax 2010 ” The maximum amount you can elect to deduct during 2013 is generally $500,000 (higher limits apply to certain property). Turbotax 2010 See IRC 179(e). Turbotax 2010   This limit is generally reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. Turbotax 2010 The total amount of depreciation (including the section 179 deduction) you can take for a passenger automobile you use in your business and first place in service in 2013 is $3,160 ($11,160 if you take the special depreciation allowance for qualified passenger automobiles placed in service in 2013). Turbotax 2010 Special rules apply to trucks and vans. Turbotax 2010 For more information, see Publication 946. Turbotax 2010 It explains what property qualifies for the deduction, what limits apply to the deduction, and when and how to recapture the deduction. Turbotax 2010    Your section 179 election for the cost of any sport utility vehicle (SUV) and certain other vehicles is limited to $25,000. Turbotax 2010 For more information, see the Instructions for Form 4562 or Publication 946. Turbotax 2010 Listed property. Turbotax 2010   You must follow special rules and recordkeeping requirements when depreciating listed property. Turbotax 2010 Listed property is any of the following. Turbotax 2010 Most passenger automobiles. Turbotax 2010 Most other property used for transportation. Turbotax 2010 Any property of a type generally used for entertainment, recreation, or amusement. Turbotax 2010 Certain computers and related peripheral equipment. Turbotax 2010   For more information about listed property, see Publication 946. Turbotax 2010 Form 4562. Turbotax 2010   Use Form 4562, Depreciation and Amortization, if you are claiming any of the following. Turbotax 2010 Depreciation on property placed in service during the current tax year. Turbotax 2010 A section 179 deduction. Turbotax 2010 Depreciation on any listed property (regardless of when it was placed in service). Turbotax 2010    If you have to use Form 4562, you must file Schedule C. Turbotax 2010 You cannot use Schedule C-EZ. Turbotax 2010   Employees' Pay You can generally deduct on Schedule C the pay you give your employees for the services they perform for your business. Turbotax 2010 The pay may be in cash, property, or services. Turbotax 2010 To be deductible, your employees' pay must be an ordinary and necessary expense and you must pay or incur it in the tax year. Turbotax 2010 In addition, the pay must meet both the following tests. Turbotax 2010 The pay must be reasonable. Turbotax 2010 The pay must be for services performed. Turbotax 2010 Chapter 2 in Publication 535 explains and defines these requirements. Turbotax 2010 You cannot deduct your own salary or any personal withdrawals you make from your business. Turbotax 2010 As a sole proprietor, you are not an employee of the business. Turbotax 2010 If you had employees during the year, you must use Schedule C. Turbotax 2010 You cannot use Schedule C-EZ. Turbotax 2010 Kinds of pay. Turbotax 2010   Some of the ways you may provide pay to your employees are listed below. Turbotax 2010 For an explanation of each of these items, see chapter 2 in Publication 535. Turbotax 2010 Awards. Turbotax 2010 Bonuses. Turbotax 2010 Education expenses. Turbotax 2010 Fringe benefits (discussed later). Turbotax 2010 Loans or advances you do not expect the employee to repay if they are for personal services actually performed. Turbotax 2010 Property you transfer to an employee as payment for services. Turbotax 2010 Reimbursements for employee business expenses. Turbotax 2010 Sick pay. Turbotax 2010 Vacation pay. Turbotax 2010 Fringe benefits. Turbotax 2010   A fringe benefit is a form of pay for the performance of services. Turbotax 2010 The following are examples of fringe benefits. Turbotax 2010 Benefits under qualified employee benefit programs. Turbotax 2010 Meals and lodging. Turbotax 2010 The use of a car. Turbotax 2010 Flights on airplanes. Turbotax 2010 Discounts on property or services. Turbotax 2010 Memberships in country clubs or other social clubs. Turbotax 2010 Tickets to entertainment or sporting events. Turbotax 2010   Employee benefit programs include the following. Turbotax 2010 Accident and health plans. Turbotax 2010 Adoption assistance. Turbotax 2010 Cafeteria plans. Turbotax 2010 Dependent care assistance. Turbotax 2010 Educational assistance. Turbotax 2010 Group-term life insurance coverage. Turbotax 2010 Welfare benefit funds. Turbotax 2010   You can generally deduct the cost of fringe benefits you provide on your Schedule C in whatever category the cost falls. Turbotax 2010 For example, if you allow an employee to use a car or other property you lease, deduct the cost of the lease as a rent or lease expense. Turbotax 2010 If you own the property, include your deduction for its cost or other basis as a section 179 deduction or a depreciation deduction. Turbotax 2010    You may be able to exclude all or part of the fringe benefits you provide from your employees' wages. Turbotax 2010 For more information about fringe benefits and the exclusion of benefits, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. Turbotax 2010 Insurance You can generally deduct premiums you pay for the following kinds of insurance related to your business. Turbotax 2010 Fire, theft, flood, or similar insurance. Turbotax 2010 Credit insurance that covers losses from business bad debts. Turbotax 2010 Group hospitalization and medical insurance for employees, including long-term care insurance. Turbotax 2010 Liability insurance. Turbotax 2010 Malpractice insurance that covers your personal liability for professional negligence resulting in injury or damage to patients or clients. Turbotax 2010 Workers' compensation insurance set by state law that covers any claims for bodily injuries or job-related diseases suffered by employees in your business, regardless of fault. Turbotax 2010 Contributions to a state unemployment insurance fund are deductible as taxes if they are considered taxes under state law. Turbotax 2010 Overhead insurance that pays for business overhead expenses you have during long periods of disability caused by your injury or sickness. Turbotax 2010 Car and other vehicle insurance that covers vehicles used in your business for liability, damages, and other losses. Turbotax 2010 If you operate a vehicle partly for personal use, deduct only the part of the insurance premium that applies to the business use of the vehicle. Turbotax 2010 If you use the standard mileage rate to figure your car expenses, you cannot deduct any car insurance premiums. Turbotax 2010 Life insurance covering your employees if you are not directly or indirectly the beneficiary under the contract. Turbotax 2010 Business interruption insurance that pays for lost profits if your business is shut down due to a fire or other cause. Turbotax 2010 Nondeductible premiums. Turbotax 2010   You cannot deduct premiums on the following kinds of insurance. Turbotax 2010 Self-insurance reserve funds. Turbotax 2010 You cannot deduct amounts credited to a reserve set up for self-insurance. Turbotax 2010 This applies even if you cannot get business insurance coverage for certain business risks. Turbotax 2010 However, your actual losses may be deductible. Turbotax 2010 For more information, see Publication 547, Casualties, Disasters, and Thefts. Turbotax 2010 Loss of earnings. Turbotax 2010 You cannot deduct premiums for a policy that pays for your lost earnings due to sickness or disability. Turbotax 2010 However, see item (8) in the previous list. Turbotax 2010 Certain life insurance and annuities. Turbotax 2010 For contracts issued before June 9, 1997, you cannot deduct the premiums on a life insurance policy covering you, an employee, or any person with a financial interest in your business if you are directly or indirectly a beneficiary of the policy. Turbotax 2010 You are included among possible beneficiaries of the policy if the policy owner is obligated to repay a loan from you using the proceeds of the policy. Turbotax 2010 A person has a financial interest in your business if the person is an owner or part owner of the business or has lent money to the business. Turbotax 2010 For contracts issued after June 8, 1997, you generally cannot deduct the premiums on any life insurance policy, endowment contract, or annuity contract if you are directly or indirectly a beneficiary. Turbotax 2010 The disallowance applies without regard to whom the policy covers. Turbotax 2010 Insurance to secure a loan. Turbotax 2010 If you take out a policy on your life or on the life of another person with a financial interest in your business to get or protect a business loan, you cannot deduct the premiums as a business expense. Turbotax 2010 Nor can you deduct the premiums as interest on business loans or as an expense of financing loans. Turbotax 2010 In the event of death, the proceeds of the policy are not taxed as income even if they are used to liquidate the debt. Turbotax 2010 Self-employed health insurance deduction. Turbotax 2010   You may be able to deduct the amount you paid for medical and dental insurance and qualified long-term care insurance for you and your family. Turbotax 2010 How to figure the deduction. Turbotax 2010   Generally, you can use the worksheet in the Form 1040 instructions to figure your deduction. Turbotax 2010 However, if any of the following apply, you must use the worksheet in chapter 6 of Publication 535. Turbotax 2010 You have more than one source of income subject to self-employment tax. Turbotax 2010 You file Form 2555 or Form 2555-EZ (relating to foreign earned income). Turbotax 2010 You are using amounts paid for qualified long-term care insurance to figure the deduction. Turbotax 2010 Prepayment. Turbotax 2010   You cannot deduct expenses in advance, even if you pay them in advance. Turbotax 2010 This rule applies to any expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. Turbotax 2010 Example. Turbotax 2010 In 2013, you signed a 3-year insurance contract. Turbotax 2010 Even though you paid the premiums for 2013, 2014, and 2015 when you signed the contract, you can only deduct the premium for 2013 on your 2013 tax return. Turbotax 2010 You can deduct in 2014 and 2015 the premium allocable to those years. Turbotax 2010 More information. Turbotax 2010   For more information about deducting insurance, see chapter 6 in Publication 535. Turbotax 2010 Interest You can generally deduct as a business expense all interest you pay or accrue during the tax year on debts related to your business. Turbotax 2010 Interest relates to your business if you use the proceeds of the loan for a business expense. Turbotax 2010 It does not matter what type of property secures the loan. Turbotax 2010 You can deduct interest on a debt only if you meet all of the following requirements. Turbotax 2010 You are legally liable for that debt. Turbotax 2010 Both you and the lender intend that the debt be repaid. Turbotax 2010 You and the lender have a true debtor-creditor relationship. Turbotax 2010 You cannot deduct on Schedule C or C-EZ the interest you paid on personal loans. Turbotax 2010 If a loan is part business and part personal, you must divide the interest between the personal part and the business part. Turbotax 2010 Example. Turbotax 2010 In 2013, you paid $600 interest on a car loan. Turbotax 2010 During 2013, you used the car 60% for business and 40% for personal purposes. Turbotax 2010 You are claiming actual expenses on the car. Turbotax 2010 You can only deduct $360 (60% × $600) for 2013 on Schedule C or C-EZ. Turbotax 2010 The remaining interest of $240 is a nondeductible personal expense. Turbotax 2010 More information. Turbotax 2010   For more information about deducting interest, see chapter 4 in Publication 535. Turbotax 2010 That chapter explains the following items. Turbotax 2010 Interest you can deduct. Turbotax 2010 Interest you cannot deduct. Turbotax 2010 How to allocate interest between personal and business use. Turbotax 2010 When to deduct interest. Turbotax 2010 The rules for a below-market interest rate loan. Turbotax 2010 (This is generally a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Turbotax 2010 ) Legal and Professional Fees Legal and professional fees, such as fees charged by accountants, that are ordinary and necessary expenses directly related to operating your business are deductible on Schedule C or C-EZ. Turbotax 2010 However, you usually cannot deduct legal fees you pay to acquire business assets. Turbotax 2010 Add them to the basis of the property. Turbotax 2010 If the fees include payments for work of a personal nature (such as making a will), you can take a business deduction only for the part of the fee related to your business. Turbotax 2010 The personal part of legal fees for producing or collecting taxable income, doing or keeping your job, or for tax advice may be deductible on Schedule A (Form 1040) if you itemize deductions. Turbotax 2010 For more information, see Publication 529, Miscellaneous Deductions. Turbotax 2010 Tax preparation fees. Turbotax 2010   You can deduct on Schedule C or C-EZ the cost of preparing that part of your tax return relating to your business as a sole proprietor or statutory employee. Turbotax 2010 You can deduct the remaining cost on Schedule A (Form 1040) if you itemize your deductions. Turbotax 2010   You can also deduct on Schedule C or C-EZ the amount you pay or incur in resolving asserted tax deficiencies for your business as a sole proprietor or statutory employee. Turbotax 2010 Pension Plans You can set up and maintain the following small business retirement plans for yourself and your employees. Turbotax 2010 SEP (Simplified Employee Pension) plans. Turbotax 2010 SIMPLE (Savings Incentive Match Plan for Employees) plans. Turbotax 2010 Qualified plans (including Keogh or H. Turbotax 2010 R. Turbotax 2010 10 plans). Turbotax 2010 SEP, SIMPLE, and qualified plans offer you and your employees a tax favored way to save for retirement. Turbotax 2010 You can deduct contributions you make to the plan for your employees on line 19 of Schedule C. Turbotax 2010 If you are a sole proprietor, you can deduct contributions you make to the plan for yourself on line 28 of Form 1040. Turbotax 2010 You can also deduct trustees' fees if contributions to the plan do not cover them. Turbotax 2010 Earnings on the contributions are generally tax free until you or your employees receive distributions from the plan. Turbotax 2010 You may also be able to claim a tax credit of 50% of the first $1,000 of qualified startup costs if you begin a new qualified defined benefit or defined contribution plan (including a 401(k) plan), SIMPLE plan, or simplified employee pension. Turbotax 2010 Under certain plans, employees can have you contribute limited amounts of their before-tax pay to a plan. Turbotax 2010 These amounts (and earnings on them) are generally tax free until your employees receive distributions from the plan. Turbotax 2010 For more information on retirement plans for small business, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). Turbotax 2010 Publication 590, Individual Retirement Arrangements (IRAs), discusses other tax favored ways to save for retirement. Turbotax 2010 Rent Expense Rent is any amount you pay for the use of property you do not own. Turbotax 2010 In general, you can deduct rent as a business expense only if the rent is for property you use in your business. Turbotax 2010 If you have or will receive equity in or title to the property, you cannot deduct the rent. Turbotax 2010 Unreasonable rent. Turbotax 2010   You cannot take a rental deduction for unreasonable rents. Turbotax 2010 Ordinarily, the issue of reasonableness arises only if you and the lessor are related. Turbotax 2010 Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. Turbotax 2010 Rent is not unreasonable just because it is figured as a percentage of gross receipts. Turbotax 2010   Related persons include members of your immediate family, including only brothers and sisters (either whole or half), your spouse, ancestors, and lineal descendants. Turbotax 2010 For a list of the other related persons, see section 267 of the Internal Revenue Code. Turbotax 2010 Rent on your home. Turbotax 2010   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. Turbotax 2010 You must meet the requirements for business use of your home. Turbotax 2010 For more information, see Business Use of Your Home , later. Turbotax 2010 Rent paid in advance. Turbotax 2010   Generally, rent paid in your business is deductible in the year paid or accrued. Turbotax 2010 If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. Turbotax 2010 You can deduct the rest of your payment only over the period to which it applies. Turbotax 2010 More information. Turbotax 2010   For more information about rent, see chapter 3 in Publication 535. Turbotax 2010 Taxes You can deduct on Schedule C or C-EZ various federal, state, local, and foreign taxes directly attributable to your business. Turbotax 2010 Income taxes. Turbotax 2010   You can deduct on Schedule C or C-EZ a state tax on gross income (as distinguished from net income) directly attributable to your business. Turbotax 2010 You can deduct other state and local income taxes on Schedule A (Form 1040) if you itemize your deductions. Turbotax 2010 Do not deduct federal income tax. Turbotax 2010 Employment taxes. Turbotax 2010   You can deduct the social security, Medicare, and federal unemployment (FUTA) taxes you paid out of your own funds as an employer. Turbotax 2010 Employment taxes are discussed briefly in chapter 1. Turbotax 2010 You can also deduct payments you made as an employer to a state unemployment compensation fund or to a state disability benefit fund. Turbotax 2010 Deduct these payments as taxes. Turbotax 2010 Self-employment tax. Turbotax 2010   You can deduct one-half of your self-employment tax on line 27 of Form 1040. Turbotax 2010 Self-employment tax is discussed in chapters 1 and 10. Turbotax 2010 Personal property tax. Turbotax 2010   You can deduct on Schedule C or C-EZ any tax imposed by a state or local government on personal property used in your business. Turbotax 2010   You can also deduct registration fees for the right to use property within a state or local area. Turbotax 2010 Example. Turbotax 2010 May and Julius Winter drove their car 7,000 business miles out of a total of 10,000 miles. Turbotax 2010 They had to pay $25 for their annual state license tags and $20 for their city registration sticker. Turbotax 2010 They also paid $235 in city personal property tax on the car, for a total of $280. Turbotax 2010 They are claiming their actual car expenses. Turbotax 2010 Because they used the car 70% for business, they can deduct 70% of the $280, or $196, as a business expense. Turbotax 2010 Real estate taxes. Turbotax 2010   You can deduct on Schedule C or C-EZ the real estate taxes you pay on your business property. Turbotax 2010 Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. Turbotax 2010 The taxing authority must base the taxes on the assessed value of the real estate and charge them uniformly against all property under its jurisdiction. Turbotax 2010   For more information about real estate taxes, see chapter 5 in Publication 535. Turbotax 2010 That chapter explains special rules for deducting the following items. Turbotax 2010 Taxes for local benefits, such as those for sidewalks, streets, water mains, and sewer lines. Turbotax 2010 Real estate taxes when you buy or sell property during the year. Turbotax 2010 Real estate taxes if you use an accrual method of accounting and choose to accrue real estate tax related to a definite period ratably over that period. Turbotax 2010 Sales tax. Turbotax 2010   Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. Turbotax 2010 If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost. Turbotax 2010 If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. Turbotax 2010 If the property is depreciable, add the sales tax to the basis for depreciation. Turbotax 2010 For information on the basis of property, see Publication 551, Basis of Assets. Turbotax 2010    Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. Turbotax 2010 Do not include these taxes in gross receipts or sales. Turbotax 2010 Excise taxes. Turbotax 2010   You can deduct on Schedule C or C-EZ all excise taxes that are ordinary and necessary expenses of carrying on your business. Turbotax 2010 Excise taxes are discussed briefly in chapter 1. Turbotax 2010 Fuel taxes. Turbotax 2010   Taxes on gasoline, diesel fuel, and other motor fuels you use in your business are usually included as part of the cost of the fuel. Turbotax 2010 Do not deduct these taxes as a separate item. Turbotax 2010   You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. Turbotax 2010 For more information, see Publication 510, Excise Taxes. Turbotax 2010 Travel, Meals, and Entertainment This section briefly explains the kinds of travel and entertainment expenses you can deduct on Schedule C or C-EZ. Turbotax 2010 Table 8-1. Turbotax 2010 When Are Entertainment Expenses Deductible? (Note. Turbotax 2010 The following is a summary of the rules for deducting entertainment expenses. Turbotax 2010 For more details about these rules, see Publication 463. Turbotax 2010 ) 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. Turbotax 2010 Definitions Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation, and includes meals provided to a customer or client. Turbotax 2010 An ordinary expense is one that is common and accepted in your field of business, trade, or profession. Turbotax 2010 A necessary expense is one that is helpful and appropriate, although not necessarily required, for your business. Turbotax 2010 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. Turbotax 2010   Associated test Entertainment is associated with your trade or business, and Entertainment directly precedes or follows a substantial business discussion. Turbotax 2010 Other rules You cannot deduct the cost of your meal as an entertainment expense if you are claiming the meal as a travel expense. Turbotax 2010 You cannot deduct expenses that are lavish or extravagant under the circumstances. Turbotax 2010 You generally can deduct only 50% of your unreimbursed entertainment expenses. Turbotax 2010 Travel expenses. Turbotax 2010   These are the ordinary and necessary expenses of traveling away from home for your business. Turbotax 2010 You are traveling away from home if both the following conditions are met. Turbotax 2010 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. Turbotax 2010 You need to get sleep or rest to meet the demands of your work while away from home. Turbotax 2010 Generally, your tax home is your regular place of business, regardless of where you maintain your family home. Turbotax 2010 It includes the entire city or general area in which your business is located. Turbotax 2010 See Publication 463 for more information. Turbotax 2010   The following is a brief discussion of the expenses you can deduct. Turbotax 2010 Transportation. Turbotax 2010   You can deduct the cost of travel by airplane, train, bus, or car between your home and your business destination. Turbotax 2010 Taxi, commuter bus, and limousine. Turbotax 2010   You can deduct fares for these and other types of transportation between the airport or station and your hotel, or between the hotel and your work location away from home. Turbotax 2010 Baggage and shipping. Turbotax 2010   You can deduct the cost of sending baggage and sample or display material between your regular and temporary work locations. Turbotax 2010 Car or truck. Turbotax 2010   You can deduct the costs of operating and maintaining your vehicle when traveling away from home on business. Turbotax 2010 You can deduct actual expenses or the standard mileage rate (discussed earlier under Car and Truck Expenses), as well as business-related tolls and parking. Turbotax 2010 If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses. Turbotax 2010 Meals and lodging. Turbotax 2010   You can deduct the cost of meals and lodging if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. Turbotax 2010 In most cases, you can deduct only 50% of your meal expenses. Turbotax 2010 Cleaning. Turbotax 2010   You can deduct the costs of dry cleaning and laundry while on your business trip. Turbotax 2010 Telephone. Turbotax 2010   You can deduct the cost of business calls while on your business trip, including business communication by fax machine or other communication devices. Turbotax 2010 Tips. Turbotax 2010   You can deduct the tips you pay for any expense in this list. Turbotax 2010 More information. Turbotax 2010   For more information about travel expenses, see Publication 463. Turbotax 2010 Entertainment expenses. Turbotax 2010   You may be able to deduct business-related entertainment expenses for entertaining a client, customer, or employee. Turbotax 2010 In most cases, you can deduct only 50% of these expenses. Turbotax 2010   The following are examples of entertainment expenses. Turbotax 2010 Entertaining guests at nightclubs, athletic clubs, theaters, or sporting events. Turbotax 2010 Providing meals, a hotel suite, or a car to business customers or their families. Turbotax 2010 To be deductible, the expenses must meet the rules listed in Table 8-1. Turbotax 2010 For details about these rules, see Publication 463. Turbotax 2010 Reimbursing your employees for expenses. Turbotax 2010   You generally can deduct the amount you reimburse your employees for travel and entertainment expenses. Turbotax 2010 The reimbursement you deduct and the manner in which you deduct it depend in part on whether you reimburse the expenses under an accountable plan or a nonaccountable plan. Turbotax 2010 For details, see chapter 11 in Publication 535. Turbotax 2010 That chapter explains accountable and nonaccountable plans and tells you whether to report the reimbursement on your employee's Form W-2, Wage and Tax Statement. Turbotax 2010 Business Use of Your Home To deduct expenses related to the part of your home used for business, you must meet specific requirements. Turbotax 2010 Even then, your deduction may be limited. Turbotax 2010 To qualify to claim expenses for business use of your home, you must meet the following tests. Turbotax 2010 Your use of the business part of your home must be: Exclusive (however, see Exceptions to exclusive use , later), Regular, For your business, and The business part of your home must be one of the following: Your principal place of business (defined later), A place where you meet or deal with patients, clients, or customers in the normal course of your business, or A separate structure (not attached to your home) you use in connection with your business. Turbotax 2010 Exclusive use. Turbotax 2010   To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Turbotax 2010 The area used for business can be a room or other separately identifiable space. Turbotax 2010 The space does not need to be marked off by a permanent partition. Turbotax 2010   You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. Turbotax 2010 Example. Turbotax 2010 You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. Turbotax 2010 Your family also uses the den for recreation. Turbotax 2010 The den is not used exclusively in your profession, so you cannot claim a business deduction for its use. Turbotax 2010 Exceptions to exclusive use. Turbotax 2010   You do not have to meet the exclusive use test if you use part of your home in either of the following ways. Turbotax 2010 For the storage of inventory or product samples. Turbotax 2010 As a daycare facility. Turbotax 2010 For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). Turbotax 2010 Regular use. Turbotax 2010   To qualify under the regular use test, you must use a specific area of your home for business on a continuing basis. Turbotax 2010 You do not meet the test if your business use of the area is only occasional or incidental, even if you do not use that area for any other purpose. Turbotax 2010 Principal place of business. Turbotax 2010   You can have more than one business location, including your home, for a single trade or business. Turbotax 2010 To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that business. Turbotax 2010 To determine your principal place of business, you must consider all the facts and circumstances. Turbotax 2010   Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. Turbotax 2010 You use it exclusively and regularly for administrative or management activities of your business. Turbotax 2010 You have no other fixed location where you conduct substantial administrative or management activities of your business. Turbotax 2010   Alternatively, if you use your home exclusively and regularly for your business, but your home office does not qualify as your principal place of business based on the previous rules, you determine your principal place of business based on the following factors. Turbotax 2010 The relative importance of the activities performed at each location. Turbotax 2010 If the relative importance factor does not determine your principal place of business, you can also consider the time spent at each location. Turbotax 2010   If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Turbotax 2010 However, for other ways to qualify to deduct home office expenses, see Publication 587. Turbotax 2010 Deduction limit. Turbotax 2010   If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. Turbotax 2010 If your gross income from the business use is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. Turbotax 2010   Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation (with depreciation taken last), allocable to the business is limited to the gross income from the business use of your home minus the sum of the following. Turbotax 2010 The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). Turbotax 2010 The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. Turbotax 2010 Do not include in (2) above your deduction for one-half of your self-employment tax. Turbotax 2010   Use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. Turbotax 2010 New simplified method. Turbotax 2010    The IRS now provides a simplified method to determine your expenses for business use of your home. Turbotax 2010 The simplified method is an alternative to calculating and substantiating actual expenses. Turbotax 2010 In most cases, you will figure your deduction by multiplying $5 by the area of your home used for a qualified business use. Turbotax 2010 The area you use to figure your deduction is limited to 300 square feet. Turbotax 2010 For more information, see the Instructions for Schedule C. Turbotax 2010 More information. Turbotax 2010   For more information on deducting expenses for the business use of your home, see Publication 587. Turbotax 2010 Other Expenses You Can Deduct You may also be able to deduct the following expenses. Turbotax 2010 See Publication 535 to find out whether you can deduct them. Turbotax 2010 Advertising. Turbotax 2010 Bank fees. Turbotax 2010 Donations to business organizations. Turbotax 2010 Education expenses. Turbotax 2010 Energy efficient commercial buildings deduction expenses. Turbotax 2010 Impairment-related expenses. Turbotax 2010 Interview expense allowances. Turbotax 2010 Licenses and regulatory fees. Turbotax 2010 Moving machinery. Turbotax 2010 Outplacement services. Turbotax 2010 Penalties and fines you pay for late performance or nonperformance of a contract. Turbotax 2010 Repairs that keep your property in a normal efficient operating condition. Turbotax 2010 Repayments of income. Turbotax 2010 Subscriptions to trade or professional publications. Turbotax 2010 Supplies and materials. Turbotax 2010 Utilities. Turbotax 2010 Expenses You Cannot Deduct You usually cannot deduct the following as business expenses. Turbotax 2010 For more information, see Publication 535. Turbotax 2010 Bribes and kickbacks. Turbotax 2010 Charitable contributions. Turbotax 2010 Demolition expenses or losses. Turbotax 2010 Dues to business, social, athletic, luncheon, sporting, airline, and hotel clubs. Turbotax 2010 Lobbying expenses. Turbotax 2010 Penalties and fines you pay to a governmental agency or instrumentality because you broke the law. Turbotax 2010 Personal, living, and family expenses. Turbotax 2010 Political contributions. Turbotax 2010 Repairs that add to the value of your property or significantly increase its life. Turbotax 2010 Prev  Up  Next   Home   More Online Publications