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Efile 1040x

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Efile 1040x

Efile 1040x 27. Efile 1040x   Tax Benefits for Work-Related Education Table of Contents What's New Introduction Useful Items - You may want to see: Qualifying Work-Related EducationEducation Required by Employer or by Law Education To Maintain or Improve Skills Education To Meet Minimum Requirements Education That Qualifies You for a New Trade or Business What Expenses Can Be DeductedUnclaimed reimbursement. Efile 1040x Transportation Expenses Travel Expenses No Double Benefit Allowed Reimbursements Deducting Business ExpensesSelf-Employed Persons Employees Performing Artists and Fee-Basis Officials Impairment-Related Work Expenses Recordkeeping What's New Standard mileage rate. Efile 1040x  Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount you can deduct for miles driven from January 1, 2013, through December 31, 2013, is 56½ cents per mile. Efile 1040x For more information, see Transportation Expenses under What Expenses Can Be Deducted. Efile 1040x Introduction This chapter discusses work-related education expenses that you may be able to deduct as business expenses. Efile 1040x To claim such a deduction, you must: Itemize your deductions on Schedule A (Form 1040) if you are an employee, File Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040) if you are self-employed, and Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education . Efile 1040x If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. Efile 1040x Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses (except for impairment-related work expenses of disabled individuals) is greater than 2% of your adjusted gross income. Efile 1040x See chapter 28. Efile 1040x If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. Efile 1040x Your work-related education expenses may also qualify you for other tax benefits, such as the American opportunity and lifetime learning credits (see chapter 35). Efile 1040x You may qualify for these other benefits even if you do not meet the requirements listed earlier. Efile 1040x Also, keep in mind that your work-related education expenses may qualify you to claim more than one tax benefit. Efile 1040x Generally, you may claim any number of benefits as long as you use different expenses to figure each one. Efile 1040x When you figure your taxes, you may want to compare these tax benefits so you can choose the method(s) that give you the lowest tax liability. Efile 1040x Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 970 Tax Benefits for Education Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Schedule A (Form 1040) Itemized Deductions Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. Efile 1040x This is education that meets at least one of the following two tests. Efile 1040x The education is required by your employer or the law to keep your present salary, status, or job. Efile 1040x The required education must serve a bona fide business purpose of your employer. Efile 1040x The education maintains or improves skills needed in your present work. Efile 1040x However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. Efile 1040x You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. Efile 1040x Use Figure 27-A, later, as a quick check to see if your education qualifies. Efile 1040x Education Required by Employer or by Law Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. Efile 1040x This additional education is qualifying work-related education if all three of the following requirements are met. Efile 1040x It is required for you to keep your present salary, status, or job, The requirement serves a bona fide business purpose of your employer, and The education is not part of a program that will qualify you for a new trade or business. Efile 1040x When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work. Efile 1040x See Education To Maintain or Improve Skills , later. Efile 1040x Example. Efile 1040x You are a teacher who has satisfied the minimum requirements for teaching. Efile 1040x Your employer requires you to take an additional college course each year to keep your teaching job. Efile 1040x If the courses will not qualify you for a new trade or business, they are qualifying work-related education even if you eventually receive a master's degree and an increase in salary because of this extra education. Efile 1040x Education To Maintain or Improve Skills If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. Efile 1040x This could include refresher courses, courses on current developments, and academic or vocational courses. Efile 1040x Example. Efile 1040x You repair televisions, radios, and stereo systems for XYZ Store. Efile 1040x To keep up with the latest changes, you take special courses in radio and stereo service. Efile 1040x These courses maintain and improve skills required in your work. Efile 1040x Maintaining skills vs. Efile 1040x qualifying for new job. Efile 1040x   Education to maintain or improve skills needed in your present work is not qualifying education if it will also qualify you for a new trade or business. Efile 1040x Education during temporary absence. Efile 1040x   If you stop working for a year or less in order to get education to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. Efile 1040x Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. Efile 1040x Example. Efile 1040x You quit your biology research job to become a full-time biology graduate student for one year. Efile 1040x If you return to work in biology research after completing the courses, the education is related to your present work even if you do not go back to work with the same employer. Efile 1040x Education during indefinite absence. Efile 1040x   If you stop work for more than a year, your absence from your job is considered indefinite. Efile 1040x Education during an indefinite absence, even if it maintains or improves skills needed in the work from which you are absent, is considered to qualify you for a new trade or business. Efile 1040x Therefore, it is not qualifying work-related education. Efile 1040x Education To Meet Minimum Requirements Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. Efile 1040x The minimum educational requirements are determined by: Laws and regulations, Standards of your profession, trade, or business, and Your employer. Efile 1040x Once you have met the minimum educational requirements that were in effect when you were hired, you do not have to meet any new minimum educational requirements. Efile 1040x This means that if the minimum requirements change after you were hired, any education you need to meet the new requirements can be qualifying education. Efile 1040x You have not necessarily met the minimum educational requirements of your trade or business simply because you are already doing the work. Efile 1040x Example 1. Efile 1040x You are a full-time engineering student. Efile 1040x Although you have not received your degree or certification, you work part-time as an engineer for a firm that will employ you as a full-time engineer after you finish college. Efile 1040x Although your college engineering courses improve your skills in your present job, they are also needed to meet the minimum job requirements for a full-time engineer. Efile 1040x The education is not qualifying work-related education. Efile 1040x Example 2. Efile 1040x You are an accountant and you have met the minimum educational requirements of your employer. Efile 1040x Your employer later changes the minimum educational requirements and requires you to take college courses to keep your job. Efile 1040x These additional courses can be qualifying work-related education because you have already satisfied the minimum requirements that were in effect when you were hired. Efile 1040x Requirements for Teachers States or school districts usually set the minimum educational requirements for teachers. Efile 1040x The requirement is the college degree or the minimum number of college hours usually required of a person hired for that position. Efile 1040x If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. Efile 1040x The determination of whether you are a faculty member of an educational institution must be made on the basis of the particular practices of the institution. Efile 1040x You generally will be considered a faculty member when one or more of the following occurs. Efile 1040x You have tenure. Efile 1040x Your years of service count toward obtaining tenure. Efile 1040x You have a vote in faculty decisions. Efile 1040x Your school makes contributions for you to a retirement plan other than social security or a similar program. Efile 1040x Example 1. Efile 1040x The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional education courses. Efile 1040x In addition, to keep the job a teacher must complete a fifth year of training within 10 years from the date of hire. Efile 1040x If the employing school certifies to the state Department of Education that qualified teachers cannot be found, the school can hire persons with only 3 years of college. Efile 1040x However, to keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years. Efile 1040x Under these facts, the bachelor's degree, whether or not it includes the 10 professional education courses, is considered the minimum educational requirement for qualification as a teacher in your state. Efile 1040x If you have all the required education except the fifth year, you have met the minimum educational requirements. Efile 1040x The fifth year of training is qualifying work-related education unless it is part of a program of study that will qualify you for a new trade or business. Efile 1040x Figure 27-A Does Your Work-Related Education Qualify? Please click here for the text description of the image. Efile 1040x Figure 27-A. Efile 1040x Does Your Work-Related Education Qualify?" Example 2. Efile 1040x Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. Efile 1040x The additional four education courses can be qualifying work-related education. Efile 1040x Although you do not have all the required courses, you have already met the minimum educational requirements. Efile 1040x Example 3. Efile 1040x Assume the same facts as in Example 1 except that you are hired with only 3 years of college. Efile 1040x The courses you take that lead to a bachelor's degree (including those in education) are not qualifying work-related education. Efile 1040x They are needed to meet the minimum educational requirements for employment as a teacher. Efile 1040x Example 4. Efile 1040x You have a bachelor's degree and you work as a temporary instructor at a university. Efile 1040x At the same time, you take graduate courses toward an advanced degree. Efile 1040x The rules of the university state that you can become a faculty member only if you get a graduate degree. Efile 1040x Also, you can keep your job as an instructor only as long as you show satisfactory progress toward getting this degree. Efile 1040x You have not met the minimum educational requirements to qualify you as a faculty member. Efile 1040x The graduate courses are not qualifying work-related education. Efile 1040x Certification in a new state. Efile 1040x   Once you have met the minimum educational requirements for teachers for your state, you are considered to have met the minimum educational requirements in all states. Efile 1040x This is true even if you must get additional education to be certified in another state. Efile 1040x Any additional education you need is qualifying work-related education. Efile 1040x You have already met the minimum requirements for teaching. Efile 1040x Teaching in another state is not a new trade or business. Efile 1040x Example. Efile 1040x You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. Efile 1040x You move to State B and are promptly hired as a teacher. Efile 1040x You are required, however, to complete certain prescribed courses to get a permanent teaching certificate in State B. Efile 1040x These additional courses are qualifying work-related education because the teaching position in State B involves the same general kind of work for which you were qualified in State A. Efile 1040x Education That Qualifies You for a New Trade or Business Education that is part of a program of study that will qualify you for a new trade or business is not qualifying work-related education. Efile 1040x This is true even if you do not plan to enter that trade or business. Efile 1040x If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business. Efile 1040x Example 1. Efile 1040x You are an accountant. Efile 1040x Your employer requires you to get a law degree at your own expense. Efile 1040x You register at a law school for the regular curriculum that leads to a law degree. Efile 1040x Even if you do not intend to become a lawyer, the education is not qualifying because the law degree will qualify you for a new trade or business. Efile 1040x Example 2. Efile 1040x You are a general practitioner of medicine. Efile 1040x You take a 2-week course to review developments in several specialized fields of medicine. Efile 1040x The course does not qualify you for a new profession. Efile 1040x It is qualifying work-related education because it maintains or improves skills required in your present profession. Efile 1040x Example 3. Efile 1040x While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. Efile 1040x The program will lead to qualifying you to practice psychoanalysis. Efile 1040x The psychoanalytic training does not qualify you for a new profession. Efile 1040x It is qualifying work-related education because it maintains or improves skills required in your present profession. Efile 1040x Bar or CPA Review Course Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are not qualifying work-related education. Efile 1040x They are part of a program of study that can qualify you for a new profession. Efile 1040x Teaching and Related Duties All teaching and related duties are considered the same general kind of work. Efile 1040x A change in duties in any of the following ways is not considered a change to a new business. Efile 1040x Elementary school teacher to secondary school teacher. Efile 1040x Teacher of one subject, such as biology, to teacher of another subject, such as art. Efile 1040x Classroom teacher to guidance counselor. Efile 1040x Classroom teacher to school administrator. Efile 1040x What Expenses Can Be Deducted If your education meets the requirements described earlier under Qualifying Work-Related Education , you can generally deduct your education expenses as business expenses. Efile 1040x If you are not self-employed, you can deduct business expenses only if you itemize your deductions. Efile 1040x You cannot deduct expenses related to tax-exempt and excluded income. Efile 1040x Deductible expenses. Efile 1040x   The following education expenses can be deducted. Efile 1040x Tuition, books, supplies, lab fees, and similar items. Efile 1040x Certain transportation and travel costs. Efile 1040x Other education expenses, such as costs of research and typing when writing a paper as part of an educational program. Efile 1040x Nondeductible expenses. Efile 1040x   You cannot deduct personal or capital expenses. Efile 1040x For example, you cannot deduct the dollar value of vacation time or annual leave you take to attend classes. Efile 1040x This amount is a personal expense. Efile 1040x Unclaimed reimbursement. Efile 1040x   If you do not claim reimbursement that you are entitled to receive from your employer, you cannot deduct the expenses that apply to that unclaimed reimbursement. Efile 1040x Example. Efile 1040x Your employer agrees to pay your education expenses if you file a voucher showing your expenses. Efile 1040x You do not file a voucher, and you do not get reimbursed. Efile 1040x Because you did not file a voucher, you cannot deduct the expenses on your tax return. Efile 1040x Transportation Expenses If your education qualifies, you can deduct local transportation costs of going directly from work to school. Efile 1040x If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning from school to home. Efile 1040x Temporary basis. Efile 1040x   You go to school on a temporary basis if either of the following situations applies to you. Efile 1040x Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less. Efile 1040x Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. Efile 1040x Your attendance is temporary up to the date you determine it will last more than 1 year. Efile 1040x Note. Efile 1040x If you are in either situation (1) or (2), your attendance is not temporary if facts and circumstances indicate otherwise. Efile 1040x Attendance not on a temporary basis. Efile 1040x   You do not go to school on a temporary basis if either of the following situations apply to you. Efile 1040x Your attendance at school is realistically expected to last more than 1 year. Efile 1040x It does not matter how long you actually attend. Efile 1040x Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. Efile 1040x Your attendance is not temporary after the date you determine it will last more than 1 year. Efile 1040x Deductible Transportation Expenses If you are regularly employed and go directly from home to school on a temporary basis, you can deduct the round-trip costs of transportation between your home and school. Efile 1040x This is true regardless of the location of the school, the distance traveled, or whether you attend school on nonwork days. Efile 1040x Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. Efile 1040x Transportation expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight. Efile 1040x Example 1. Efile 1040x You regularly work in a nearby town, and go directly from work to home. Efile 1040x You also attend school every work night for 3 months to take a course that improves your job skills. Efile 1040x Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation expenses in going between home and school. Efile 1040x This is true regardless of the distance traveled. Efile 1040x Example 2. Efile 1040x Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. Efile 1040x You can deduct your transportation expenses from your regular work site to school and then home. Efile 1040x Example 3. Efile 1040x Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. Efile 1040x Since you are attending school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school. Efile 1040x Example 4. Efile 1040x Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. Efile 1040x Since your attendance in school is not considered temporary, you cannot deduct your transportation expenses in going between home and school. Efile 1040x If you go directly from work to school, you can deduct the one-way transportation expenses of going from work to school. Efile 1040x If you go from work to home to school and return home, your transportation expenses cannot be more than if you had gone directly from work to school. Efile 1040x Using your car. Efile 1040x   If you use your car (whether you own or lease it) for transportation to school, you can deduct your actual expenses or use the standard mileage rate to figure the amount you can deduct. Efile 1040x The standard mileage rate for miles driven from January 1, 2013, through December 31, 2013 is 56½ cents per mile. Efile 1040x Whichever method you use, you can also deduct parking fees and tolls. Efile 1040x See chapter 26 for information on deducting your actual expenses of using a car. Efile 1040x Travel Expenses You can deduct expenses for travel, meals (see 50% limit on meals , later), and lodging if you travel overnight mainly to obtain qualifying work-related education. Efile 1040x Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business purposes. Efile 1040x For more information, see chapter 26. Efile 1040x You cannot deduct expenses for personal activities, such as sightseeing, visiting, or entertaining. Efile 1040x Mainly personal travel. Efile 1040x   If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging. Efile 1040x You can deduct only your expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities. Efile 1040x   Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. Efile 1040x An important factor is the comparison of time spent on personal activities with time spent on educational activities. Efile 1040x If you spend more time on personal activities, the trip is considered mainly educational only if you can show a substantial nonpersonal reason for traveling to a particular location. Efile 1040x Example 1. Efile 1040x John works in Newark, New Jersey. Efile 1040x He traveled to Chicago to take a deductible 1-week course at the request of his employer. Efile 1040x His main reason for going to Chicago was to take the course. Efile 1040x While there, he took a sight-seeing trip, entertained some friends, and took a side trip to Pleasantville for a day. Efile 1040x Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. Efile 1040x He cannot deduct his transportation expenses of going to Pleasantville. Efile 1040x He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities. Efile 1040x Example 2. Efile 1040x Sue works in Boston. Efile 1040x She went to a university in Michigan to take a course for work. Efile 1040x The course is qualifying work-related education. Efile 1040x She took one course, which is one-fourth of a full course load of study. Efile 1040x She spent the rest of the time on personal activities. Efile 1040x Her reasons for taking the course in Michigan were all personal. Efile 1040x Sue's trip is mainly personal because three-fourths of her time is considered personal time. Efile 1040x She cannot deduct the cost of her round-trip train ticket to Michigan. Efile 1040x She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended the university. Efile 1040x Example 3. Efile 1040x Dave works in Nashville and recently traveled to California to take a 2-week seminar. Efile 1040x The seminar is qualifying work-related education. Efile 1040x While there, he spent an extra 8 weeks on personal activities. Efile 1040x The facts, including the extra 8-week stay, show that his main purpose was to take a vacation. Efile 1040x Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. Efile 1040x He can deduct only his expenses for meals (subject to the 50% limit) and lodging for the 2 weeks he attended the seminar. Efile 1040x Cruises and conventions. Efile 1040x   Certain cruises and conventions offer seminars or courses as part of their itinerary. Efile 1040x Even if the seminars or courses are work-related, your deduction for travel may be limited. Efile 1040x This applies to: Travel by ocean liner, cruise ship, or other form of luxury water transportation, and Conventions outside the North American area. Efile 1040x   For a discussion of the limits on travel expense deductions that apply to cruises and conventions, see Luxury Water Travel and Conventions in chapter 1 of Publication 463. Efile 1040x 50% limit on meals. Efile 1040x   You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related education. Efile 1040x You cannot have been reimbursed for the meals. Efile 1040x   Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit. Efile 1040x Travel as Education You cannot deduct the cost of travel as a form of education even if it is directly related to your duties in your work or business. Efile 1040x Example. Efile 1040x You are a French language teacher. Efile 1040x While on sabbatical leave granted for travel, you traveled through France to improve your knowledge of the French language. Efile 1040x You chose your itinerary and most of your activities to improve your French language skills. Efile 1040x You cannot deduct your travel expenses as education expenses. Efile 1040x This is true even if you spent most of your time learning French by visiting French schools and families, attending movies or plays, and engaging in similar activities. Efile 1040x No Double Benefit Allowed You cannot do either of the following. Efile 1040x Deduct work-related education expenses as business expenses if you benefit from these expenses under any other provision of the law, for example, the tuition and fees deduction (see chapter 35). Efile 1040x Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance. Efile 1040x See Adjustments to Qualifying Work-Related Education Expenses , next. Efile 1040x Adjustments to Qualifying Work-Related Education Expenses If you pay qualifying work-related education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. Efile 1040x You must reduce the qualifying expenses by the amount of such expenses allocable to the tax-free educational assistance. Efile 1040x For more information, see chapter 12 of Publication 970. Efile 1040x Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see chapter 1 of Publication 970), The tax-free part of Pell grants (see chapter 1 of Publication 970), The tax-free part of employer-provided educational assistance (see chapter 11 of Publication 970), Veterans' educational assistance (see chapter 1 of Publication 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received for education assistance. Efile 1040x Amounts that do not reduce qualifying work-related education expenses. Efile 1040x   Do not reduce the qualifying work-related education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. Efile 1040x   Also, do not reduce the qualifying work-related education expenses by any scholarship or fellowship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualifying work-related education expenses. Efile 1040x Reimbursements How you treat reimbursements depends on the arrangement you have with your employer. Efile 1040x There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. Efile 1040x You can tell the type of plan you are reimbursed under by the way the reimbursement is reported on your Form W-2. Efile 1040x For information on how to treat reimbursements under both accountable and nonaccountable plans, see Reimbursements in chapter 26. Efile 1040x Deducting Business Expenses Self-employed persons and employees report business expenses differently. Efile 1040x The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense. Efile 1040x Self-Employed Persons If you are self-employed, report the cost of your qualifying work-related education on the appropriate form used to report your business income and expenses (generally Schedule C, C-EZ, or F). Efile 1040x If your educational expenses include expenses for a car or truck, travel, or meals, report those expenses the same way you report other business expenses for those items. Efile 1040x See the instructions for the form you file for information on how to complete it. Efile 1040x Employees If you are an employee, you can deduct the cost of qualifying work-related education only if you: Did not receive (and were not entitled to receive) any reimbursement from your employer, Were reimbursed under a nonaccountable plan (amount is included in box 1 of Form W-2), or Received reimbursement under an accountable plan, but the amount received was less than your expenses for which you claimed reimbursement. Efile 1040x If either (1) or (2) applies, you can deduct the total qualifying cost. Efile 1040x If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement. Efile 1040x In order to deduct the cost of your qualifying work-related education as a business expense, include the amount with your deduction for any other employee business expenses on Schedule A (Form 1040), line 21. Efile 1040x (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. Efile 1040x ) This deduction (except for impairment-related work expenses of disabled individuals) is subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. Efile 1040x See chapter 28. Efile 1040x Form 2106 or 2106-EZ. Efile 1040x   To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or Form 2106-EZ. Efile 1040x Form not required. Efile 1040x   Do not complete either Form 2106 or Form 2106-EZ if: If amounts included in box 1 of your Form W-2, are not considered reimbursements, and You are not claiming travel, transportation, meal, or entertainment expenses. Efile 1040x   If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 21. Efile 1040x (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. Efile 1040x ) Using Form 2106-EZ. Efile 1040x   This form is shorter and easier to use than Form 2106. Efile 1040x Generally, you can use this form if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are using the standard mileage rate if you are claiming vehicle expenses. Efile 1040x   If you do not meet both of these requirements, use Form 2106. Efile 1040x Performing Artists and Fee-Basis Officials If you are a qualified performing artist, or a state (or local) government official who is paid in whole or in part on a fee basis, you can deduct the cost of your qualifying work-related education as an adjustment to gross income rather than as an itemized deduction. Efile 1040x Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24. Efile 1040x You do not have to itemize your deductions on Schedule A (Form 1040), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income limit. Efile 1040x You must complete Form 2106 or 2106-EZ to figure your deduction, even if you meet the requirements described earlier under Form not required . Efile 1040x For more information on qualified performing artists, see chapter 6 of Publication 463. Efile 1040x Impairment-Related Work Expenses If you are disabled and have impairment-related work expenses that are necessary for you to be able to get qualifying work-related education, you can deduct these expenses on Schedule A (Form 1040), line 28. Efile 1040x They are not subject to the 2%-of-adjusted-gross-income limit. Efile 1040x To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required . Efile 1040x For more information on impairment-related work expenses, see chapter 6 of Publication 463. Efile 1040x Recordkeeping You must keep records as proof of any deduction claimed on your tax return. Efile 1040x Generally, you should keep your records for 3 years from the date of filing the tax return and claiming the deduction. Efile 1040x For specific information about keeping records of business expenses, see Recordkeeping in chapter 26. Efile 1040x Prev  Up  Next   Home   More Online Publications
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LT 11 (Letter 1058) Frequently Asked Questions (FAQs)

What is the notice telling me?

This notice is telling you that we intend to issue a levy against your bank accounts, wages or other assets because you still have a balance due on one of your tax accounts. It is also telling you that we will begin searching for other assets on which to issue a levy and that we may also file a Federal Tax Lien, if we have not already done so.

What do I have to do?

Pay the amount due as shown on the notice. Mail us your payment in the envelope we sent you. Include the bottom part of the notice to make sure we correctly credit your account.

If you can't pay the whole amount now, call us at the number printed at the top of the notice to see if you qualify for an installment agreement.

How much time do I have?

You should contact us or pay your balance due immediately. Enforcement action may be taken to collect that balance due 30 days after the date of this letter.

What happens if I don't pay?

If you don't pay or make arrangements to pay, we have several options available that we may use to collect the money. One option is to issue a levy against your state tax refund, wages, other income sources, or bank accounts. Another option is for us to file a Notice of Federal Tax Lien. The lien gives us a legal claim to your property as security or payment for your tax debt.

Who should I contact?

If you have any questions about the notice or wish to resolve your outstanding balance, call us at the number printed at the top of the notice. The person who answers the phone will assist you.

What if I don't agree or have already taken corrective action?

If you do not agree with this notice, you have the right to an appeal.  Call us immediately at the number printed at the top of the notice. We will do our best to help you. If you called us about this matter before, but we did not correct the problem, you may want to contact the Office of the Taxpayer Advocate.

If you have already paid or arranged for an installment agreement, you should still call us at the number printed at the top of the notice to make sure your account reflects this.

Page Last Reviewed or Updated: 30-Jan-2014

The Efile 1040x

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