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Priortax

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Priortax 11. Priortax   Other Expenses Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Reimbursement of Travel, Meals, and EntertainmentReimbursements Miscellaneous ExpensesMeaning of generally enforced. Priortax Kickbacks. Priortax Form 1099-MISC. Priortax Exception. Priortax Tax preparation fees. Priortax Covered executive branch official. Priortax Exceptions to denial of deduction. Priortax Indirect political contributions. Priortax Type of deduction. Priortax Repayment—$3,000 or less. Priortax Repayment—over $3,000. Priortax Method 1. Priortax Method 2. Priortax Repayment does not apply. Priortax Year of deduction (or credit). Priortax Telephone. Priortax What's New Standard mileage rate. Priortax  Beginning in 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for business use is 56. Priortax 5 cents per mile. Priortax For more information, see Car and truck expenses under Miscellaneous Expenses. Priortax Introduction This chapter covers business expenses that may not have been explained to you, as a business owner, in previous chapters of this publication. Priortax Topics - This chapter discusses: Travel, meals, and entertainment Bribes and kickbacks Charitable contributions Education expenses Lobbying expenses Penalties and fines Repayments (claim of right) Other miscellaneous expenses Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 463 Travel, Entertainment, Gift, and Car Expenses 526 Charitable Contributions 529 Miscellaneous Deductions 544 Sales and Other Dispositions of Assets 970 Tax Benefits for Education 1542 Per Diem Rates See chapter 12 for information about getting publications and forms. Priortax Reimbursement of Travel, Meals, and Entertainment The following discussion explains how to handle any reimbursements or allowances you may provide to your employees under a reimbursement or allowance arrangement for travel, meals, and entertainment expenses. Priortax If you are self-employed and report your income and expenses on Schedule C or C-EZ (Form 1040), see Publication 463. Priortax To be deductible for tax purposes, expenses incurred for travel, meals, and entertainment must be ordinary and necessary expenses incurred while carrying on your trade or business. Priortax Generally, you also must show that entertainment expenses (including meals) are directly related to, or associated with, the conduct of your trade or business. Priortax For more information on travel, meals, and entertainment, including deductibility, see Publication 463. Priortax Reimbursements A “reimbursement or allowance arrangement” provides for payment of advances, reimbursements, and allowances for travel, meals, and entertainment expenses incurred by your employees during the ordinary course of business. Priortax If the expenses are substantiated, you can deduct the allowable amount on your tax return. Priortax Because of differences between accounting methods and tax law, the amount you can deduct for tax purposes may not be the same as the amount you deduct on your business books and records. Priortax For example, you can deduct 100% of the cost of meals on your business books and records. Priortax However, only 50% of these costs are allowed by law as a tax deduction. Priortax How you deduct a business expense under a reimbursement or allowance arrangement depends on whether you have: An accountable plan, or A nonaccountable plan. Priortax If you reimburse these expenses under an accountable plan, deduct them as travel, meals, or entertainment expenses. Priortax If you reimburse these expenses under a nonaccountable plan, report the reimbursements as wages on Form W-2, Wage and Tax Statement, and deduct them as wages on the appropriate line of your tax return. Priortax If you make a single payment to your employees and it includes both wages and an expense reimbursement, you must specify the amount of the reimbursement and report it accordingly. Priortax See Table 11-1 , Reporting Reimbursements. Priortax Accountable Plans An accountable plan requires your employees to meet all of the following requirements. Priortax Each employee must: Have paid or incurred deductible expenses while performing services as your employee, Adequately account to you for these expenses within a reasonable period of time, and Return any excess reimbursement or allowance within a reasonable period of time. Priortax An arrangement under which you advance money to employees is treated as meeting (3) above only if the following requirements are also met. Priortax The advance is reasonably calculated not to exceed the amount of anticipated expenses. Priortax You make the advance within a reasonable period of time of your employee paying or incurring the expense. Priortax If any expenses reimbursed under this arrangement are not substantiated, or an excess reimbursement is not returned within a reasonable period of time by an employee, you cannot treat these expenses as reimbursed under an accountable plan. Priortax Instead, treat the reimbursed expenses as paid under a nonaccountable plan, discussed later. Priortax Adequate accounting. Priortax   Your employees must adequately account to you for their travel, meals, and entertainment expenses. Priortax They must give you documentary evidence of their travel, mileage, and other employee business expenses. Priortax This evidence should include items such as receipts, along with either a statement of expenses, an account book, a day-planner, or similar record in which the employee entered each expense at or near the time the expense was incurred. Priortax Excess reimbursement or allowance. Priortax   An excess reimbursement or allowance is any amount you pay to an employee that is more than the business-related expenses for which the employee adequately accounted. Priortax The employee must return any excess reimbursement or other expense allowance to you within a reasonable period of time. Priortax Reasonable period of time. Priortax   A reasonable period of time depends on the facts and circumstances. Priortax Generally, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. Priortax You give an advance within 30 days of the time the employee pays or incurs the expense. Priortax Your employees adequately account for their expenses within 60 days after the expenses were paid or incurred. Priortax Your employees return any excess reimbursement within 120 days after the expenses were paid or incurred. Priortax You give a periodic statement (at least quarterly) to your employees that asks them to either return or adequately account for outstanding advances and they comply within 120 days of the date of the statement. Priortax How to deduct. Priortax   You can claim a deduction for travel, meals, and entertainment expenses if you reimburse your employees for these expenses under an accountable plan. Priortax Generally, the amount you can deduct for meals and entertainment is subject to a 50% limit, discussed later. Priortax If you are a sole proprietor, or are filing as a single member limited liability company, deduct the travel reimbursement on line 24a and the deductible part of the meals and entertainment reimbursement on line 24b, Schedule C (Form 1040) or line 2, Schedule C-EZ (Form 1040). Priortax   If you are filing an income tax return for a corporation, include the reimbursement on the Other deductions line of Form 1120, U. Priortax S. Priortax Corporation Income Tax Return. Priortax If you are filing any other business income tax return, such as a partnership or S corporation return, deduct the reimbursement on the appropriate line of the return as provided in the instructions for that return. Priortax Table 11-1. Priortax Reporting Reimbursements IF the type of reimbursement (or other expense allowance) arrangement is under THEN the employer reports on Form W-2 An accountable plan with: Actual expense reimbursement:  Adequate accounting made and excess returned No amount. Priortax Actual expense reimbursement:  Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. Priortax Per diem or mileage allowance up to the federal rate:  Adequate accounting made and excess returned No amount. Priortax Per diem or mileage allowance up to the federal rate:  Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. Priortax The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Priortax Per diem or mileage allowance exceeds the federal rate:  Adequate accounting made up to the federal rate only and excess not returned The excess amount as wages in box 1. Priortax The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Priortax A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan The entire amount as wages in box 1. Priortax No reimbursement plan The entire amount as wages in box 1. Priortax Per Diem and Car Allowances You can reimburse your employees under an accountable plan based on travel days, miles, or some other fixed allowance. Priortax In these cases, your employee is considered to have accounted to you for the amount of the expense that does not exceed the rates established by the federal government. Priortax Your employee must actually substantiate to you the other elements of the expense, such as time, place, and business purpose. Priortax Federal rate. Priortax   The federal rate can be figured using any one of the following methods. Priortax For car expenses: The standard mileage rate. Priortax A fixed and variable rate (FAVR). Priortax For per diem amounts: The regular federal per diem rate. Priortax The standard meal allowance. Priortax The high-low rate. Priortax Car allowance. Priortax   Your employee is considered to have accounted to you for car expenses that do not exceed the standard mileage rate. Priortax Beginning in 2013, the standard business mileage rate is 56. Priortax 5 cents per mile. Priortax   You can choose to reimburse your employees using a fixed and variable rate (FAVR) allowance. Priortax This is an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your employees' variable operating costs (such as gas, oil, etc. Priortax ) plus a flat amount to cover your employees' fixed costs (such as depreciation, insurance, etc. Priortax ). Priortax For information on using a FAVR allowance, see Revenue Procedure 2010-51, available at www. Priortax irs. Priortax gov/irb/2010-51_IRB/ar14. Priortax html and Notice 2012-72, available at www. Priortax irs. Priortax gov/irb/2012-50_IRB/ar10. Priortax html. Priortax Per diem allowance. Priortax   If your employee actually substantiates to you the other elements (discussed earlier) of the expenses reimbursed using the per diem allowance, how you report and deduct the allowance depends on whether the allowance is for lodging and meal expenses or for meal expenses only and whether the allowance is more than the federal rate. Priortax Regular federal per diem rate. Priortax   The regular federal per diem rate is the highest amount the federal government will pay to its employees while away from home on travel. Priortax It has two components: Lodging expense, and Meal and incidental expense (M&IE). Priortax The rates are different for different locations. Priortax Publication 1542 lists the rates in the continental United States. Priortax Standard meal allowance. Priortax   The federal rate for meal and incidental expenses (M&IE) is the standard meal allowance. Priortax You can pay only an M&IE allowance to employees who travel away from home if: You pay the employee for actual expenses for lodging based on receipts submitted to you, You provide for the lodging, You pay for the actual expense of the lodging directly to the provider, You do not have a reasonable belief that lodging expenses were incurred by the employee, or The allowance is computed on a basis similar to that used in computing the employee's wages (that is, number of hours worked or miles traveled). Priortax Internet access. Priortax    Per diem rates are available on the Internet. Priortax You can access per diem rates at www. Priortax gsa. Priortax gov/perdiemrates. Priortax High-low method. Priortax   This is a simplified method of computing the federal per diem rate for travel within the continental United States. Priortax It eliminates the need to keep a current list of the per diem rate for each city. Priortax   Under the high-low method, the per diem amount for travel during January through September of 2013 is $242 ($65 for M&IE) for certain high-cost locations. Priortax All other areas have a per diem amount of $163 ($52 for M&IE). Priortax The high-cost locations eligible for the higher per diem amount under the high-low method are listed in Publication 1542. Priortax   Effective October 1, 2013, the per diem rate for high-cost locations increased to $251 ($65 for M&IE). Priortax The rate for all other locations increased to $170 ($52 for M&IE). Priortax For October, November, and December 2013, you can either continue to use the rates described in the preceding paragraph or change to the new rates. Priortax However, you must use the same rate for all employees reimbursed under the high-low method. Priortax   For more information about the high-low method, see Notice 2013-65, available at www. Priortax irs. Priortax gov/irb/2013-44_IRB/ar13. Priortax html. Priortax See Publication 1542 (available on the Internet at IRS. Priortax gov) for the current per diem rates for all locations. Priortax Reporting per diem and car allowances. Priortax   The following discussion explains how to report per diem and car allowances. Priortax The manner in which you report them depends on how the allowance compares to the federal rate. Priortax See Table 11-1. Priortax Allowance less than or equal to the federal rate. Priortax   If your allowance for the employee is less than or equal to the appropriate federal rate, that allowance is not included as part of the employee's pay in box 1 of the employee's Form W-2. Priortax Deduct the allowance as travel expenses (including meals that may be subject to the 50% limit, discussed later). Priortax See How to deduct under Accountable Plans, earlier. Priortax Allowance more than the federal rate. Priortax   If your employee's allowance is more than the appropriate federal rate, you must report the allowance as two separate items. Priortax   Include the allowance amount up to the federal rate in box 12 (code L) of the employee's Form W-2. Priortax Deduct it as travel expenses (as explained above). Priortax This part of the allowance is treated as reimbursed under an accountable plan. Priortax   Include the amount that is more than the federal rate in box 1 (and in boxes 3 and 5 if they apply) of the employee's Form W-2. Priortax Deduct it as wages subject to income tax withholding, social security, Medicare, and federal unemployment taxes. Priortax This part of the allowance is treated as reimbursed under a nonaccountable plan as explained later under Nonaccountable Plans. Priortax Meals and Entertainment Under an accountable plan, you can generally deduct only 50% of any otherwise deductible business-related meal and entertainment expenses you reimburse your employees. Priortax The deduction limit applies even if you reimburse them for 100% of the expenses. Priortax Application of the 50% limit. Priortax   The 50% deduction limit applies to reimbursements you make to your employees for expenses they incur for meals while traveling away from home on business and for entertaining business customers at your place of business, a restaurant, or another location. Priortax It applies to expenses incurred at a business convention or reception, business meeting, or business luncheon at a club. Priortax The deduction limit may also apply to meals you furnish on your premises to your employees. Priortax Related expenses. Priortax   Taxes and tips relating to a meal or entertainment activity you reimburse to your employee under an accountable plan are included in the amount subject to the 50% limit. Priortax Reimbursements you make for expenses, such as cover charges for admission to a nightclub, rent paid for a room to hold a dinner or cocktail party, or the amount you pay for parking at a sports arena, are all subject to the 50% limit. Priortax However, the cost of transportation to and from an otherwise allowable business meal or a business-related entertainment activity is not subject to the 50% limit. Priortax Amount subject to 50% limit. Priortax   If you provide your employees with a per diem allowance only for meal and incidental expenses, the amount treated as an expense for food and beverages is the lesser of the following. Priortax The per diem allowance. Priortax The federal rate for M&IE. Priortax   If you provide your employees with a per diem allowance that covers lodging, meals, and incidental expenses, you must treat an amount equal to the federal M&IE rate for the area of travel as an expense for food and beverages. Priortax If the per diem allowance you provide is less than the federal per diem rate for the area of travel, you can treat 40% of the per diem allowance as the amount for food and beverages. Priortax Meal expenses when subject to “hours of service” limits. Priortax   You can deduct 80% of the cost of reimbursed meals your employees consume while away from their tax home on business during, or incident to, any period subject to the Department of Transportation's “hours of service” limits. Priortax   See Publication 463 for a detailed discussion of individuals subject to the Department of Transportation's “hours of service” limits. Priortax De minimis (minimal) fringe benefit. Priortax   The 50% limit does not apply to an expense for food or beverage that is excluded from the gross income of an employee because it is a de minimis fringe benefit. Priortax See Publication 15-B for additional information on de minimis fringe benefits. Priortax Company cafeteria or executive dining room. Priortax   The cost of food and beverages you provide primarily to your employees on your business premises is deductible. Priortax This includes the cost of maintaining the facilities for providing the food and beverages. Priortax These expenses are subject to the 50% limit unless they qualify as a de minimis fringe benefit, as just discussed, or unless they are compensation to your employees (explained later). Priortax Employee activities. Priortax   The expense of providing recreational, social, or similar activities (including the use of a facility) for your employees is deductible and is not subject to the 50% limit. Priortax The benefit must be primarily for your employees who are not highly compensated. Priortax   For this purpose, a highly compensated employee is an employee who meets either of the following requirements. Priortax Owned a 10% or more interest in the business during the year or the preceding year. Priortax An employee is treated as owning any interest owned by his or her brother, sister, spouse, ancestors, and lineal descendants. Priortax Received more than $115,000 in pay for the preceding year. Priortax You can choose to include only employees who were also in the top 20% of employees when ranked by pay for the preceding year. Priortax   For example, the expenses for food, beverages, and entertainment for a company-wide picnic are not subject to the 50% limit. Priortax Meals or entertainment treated as compensation. Priortax   The 50% limit does not apply to either of the following. Priortax Expenses for meals or entertainment that you treat as: Compensation to an employee who was the recipient of the meals or entertainment, and Wages subject to withholding of federal income tax. Priortax Expenses for meals or entertainment if: A recipient of the meals or entertainment who is not your employee has to include the expenses in gross income as compensation for services or as a prize or award, and You include that amount on a Form 1099 issued to the recipient, if a Form 1099 is required. Priortax Sales of meals or entertainment. Priortax   You can deduct the cost of meals or entertainment (including the use of facilities) you sell to the public. Priortax For example, if you run a nightclub, your expense for the entertainment you furnish to your customers, such as a floor show, is a business expense that is fully deductible. Priortax The 50% limit does not apply to this expense. Priortax Providing meals or entertainment to general public to promote goodwill. Priortax   You can deduct the cost of providing meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. Priortax The 50% limit does not apply to this expense. Priortax Director, stockholder, or employee meetings. Priortax   You can deduct entertainment expenses directly related to business meetings of your employees, partners, stockholders, agents, or directors. Priortax You can provide some minor social activities, but the main purpose of the meeting must be your company's business. Priortax These expenses are subject to the 50% limit. Priortax Trade association meetings. Priortax   You can deduct expenses directly related to and necessary for attending business meetings or conventions of certain tax-exempt organizations. Priortax These organizations include business leagues, chambers of commerce, real estate boards, and trade and professional associations. Priortax Nonaccountable Plans A nonaccountable plan is an arrangement that does not meet the requirements for an accountable plan. Priortax All amounts paid, or treated as paid, under a nonaccountable plan are reported as wages on Form W-2. Priortax The payments are subject to income tax withholding, social security, Medicare, and federal unemployment taxes. Priortax You can deduct the reimbursement as compensation or wages only to the extent it meets the deductibility tests for employees' pay in chapter 2. Priortax Deduct the allowable amount as compensation or wages on the appropriate line of your income tax return, as provided in its instructions. Priortax Miscellaneous Expenses In addition to travel, meal, and entertainment expenses, there are other expenses you can deduct. Priortax Advertising expenses. Priortax   You generally can deduct reasonable advertising expenses that are directly related to your business activities. Priortax Generally, you cannot deduct amounts paid to influence legislation (i. Priortax e. Priortax , lobbying). Priortax See Lobbying expenses , later. Priortax   You can usually deduct as a business expense the cost of institutional or goodwill advertising to keep your name before the public if it relates to business you reasonably expect to gain in the future. Priortax For example, the cost of advertising that encourages people to contribute to the Red Cross, to buy U. Priortax S. Priortax Savings Bonds, or to participate in similar causes is usually deductible. Priortax Anticipated liabilities. Priortax   Anticipated liabilities or reserves for anticipated liabilities are not deductible. Priortax For example, assume you sold 1-year TV service contracts this year totaling $50,000. Priortax From experience, you know you will have expenses of about $15,000 in the coming year for these contracts. Priortax You cannot deduct any of the $15,000 this year by charging expenses to a reserve or liability account. Priortax You can deduct your expenses only when you actually pay or accrue them, depending on your accounting method. Priortax Bribes and kickbacks. Priortax   Engaging in the payment of bribes or kickbacks is a serious criminal matter. Priortax Such activity could result in criminal prosecution. Priortax Any payments that appear to have been made, either directly or indirectly, to an official or employee of any government or an agency or instrumentality of any government are not deductible for tax purposes and are in violation of the law. Priortax   Payments paid directly or indirectly to a person in violation of any federal or state law (but only if that state law is generally enforced, defined below) that provides for a criminal penalty or for the loss of a license or privilege to engage in a trade or business are also not allowed as a deduction for tax purposes. Priortax Meaning of “generally enforced. Priortax ”   A state law is considered generally enforced unless it is never enforced or enforced only for infamous persons or persons whose violations are extraordinarily flagrant. Priortax For example, a state law is generally enforced unless proper reporting of a violation of the law results in enforcement only under unusual circumstances. Priortax Kickbacks. Priortax   A kickback is a payment for referring a client, patient, or customer. Priortax The common kickback situation occurs when money or property is given to someone as payment for influencing a third party to purchase from, use the services of, or otherwise deal with the person who pays the kickback. Priortax In many cases, the person whose business is being sought or enjoyed by the person who pays the kickback is not aware of the payment. Priortax   For example, the Yard Corporation is in the business of repairing ships. Priortax It returns 10% of the repair bills as kickbacks to the captains and chief officers of the vessels it repairs. Priortax Although this practice is considered an ordinary and necessary expense of getting business, it is clearly a violation of a state law that is generally enforced. Priortax These expenditures are not deductible for tax purposes, whether or not the owners of the shipyard are subsequently prosecuted. Priortax Form 1099-MISC. Priortax   It does not matter whether any kickbacks paid during the tax year are deductible on your income tax return in regards to information reporting. Priortax See Form 1099-MISC for more information. Priortax Car and truck expenses. Priortax   The costs of operating a car, truck, or other vehicle in your business are deductible. Priortax For more information on how to figure your deduction, see Publication 463. Priortax Charitable contributions. Priortax   Cash payments to an organization, charitable or otherwise, may be deductible as business expenses if the payments are not charitable contributions or gifts and are directly related to your business. Priortax If the payments are charitable contributions or gifts, you cannot deduct them as business expenses. Priortax However, corporations (other than S corporations) can deduct charitable contributions on their income tax returns, subject to limitations. Priortax See the Instructions for Form 1120 for more information. Priortax Sole proprietors, partners in a partnership, or shareholders in an S corporation may be able to deduct charitable contributions made by their business on Schedule A (Form 1040). Priortax Example. Priortax You paid $15 to a local church for a half-page ad in a program for a concert it is sponsoring. Priortax The purpose of the ad was to encourage readers to buy your products. Priortax Your payment is not a charitable contribution. Priortax You can deduct it as an advertising expense. Priortax Example. Priortax You made a $100,000 donation to a committee organized by the local Chamber of Commerce to bring a convention to your city, intended to increase business activity, including yours. Priortax Your payment is not a charitable contribution. Priortax You can deduct it as a business expense. Priortax See Publication 526 for a discussion of donated inventory, including capital gain property. Priortax Club dues and membership fees. Priortax   Generally, you cannot deduct amounts paid or incurred for membership in any club organized for business, pleasure, recreation, or any other social purpose. Priortax This includes country clubs, golf and athletic clubs, hotel clubs, sporting clubs, airline clubs, and clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. Priortax Exception. Priortax   The following organizations are not treated as clubs organized for business, pleasure, recreation, or other social purpose unless one of the main purposes is to conduct entertainment activities for members or their guests or to provide members or their guests with access to entertainment facilities. Priortax Boards of trade. Priortax Business leagues. Priortax Chambers of commerce. Priortax Civic or public service organizations. Priortax Professional organizations such as bar associations and medical associations. Priortax Real estate boards. Priortax Trade associations. Priortax Credit card convenience fees. Priortax   Credit card companies charge a fee to businesses who accept their cards. Priortax This fee when paid or incurred by the business can be deducted as a business expense. Priortax Damages recovered. Priortax   Special rules apply to compensation you receive for damages sustained as a result of patent infringement, breach of contract or fiduciary duty, or antitrust violations. Priortax You must include this compensation in your income. Priortax However, you may be able to take a special deduction. Priortax The deduction applies only to amounts recovered for actual economic injury, not any additional amount. Priortax The deduction is the smaller of the following. Priortax The amount you received or accrued for damages in the tax year reduced by the amount you paid or incurred in the year to recover that amount. Priortax Your losses from the injury you have not deducted. Priortax Demolition expenses or losses. Priortax   Amounts paid or incurred to demolish a structure are not deductible. Priortax These amounts are added to the basis of the land where the demolished structure was located. Priortax Any loss for the remaining undepreciated basis of a demolished structure would not be recognized until the property is disposed of. Priortax Education expenses. Priortax   Ordinary and necessary expenses paid for the cost of the education and training of your employees are deductible. Priortax See Education Expenses in chapter 2. Priortax   You can also deduct the cost of your own education (including certain related travel) related to your trade or business. Priortax You must be able to show the education maintains or improves skills required in your trade or business, or that it is required by law or regulations, for keeping your license to practice, status, or job. Priortax For example, an attorney can deduct the cost of attending Continuing Legal Education (CLE) classes that are required by the state bar association to maintain his or her license to practice law. Priortax   Education expenses you incur to meet the minimum requirements of your present trade or business, or those that qualify you for a new trade or business, are not deductible. Priortax This is true even if the education maintains or improves skills presently required in your business. Priortax For more information on education expenses, see Publication 970. Priortax Franchise, trademark, trade name. Priortax   If you buy a franchise, trademark, or trade name, you can deduct the amount you pay or incur as a business expense only if your payments are part of a series of payments that are: Contingent on productivity, use, or disposition of the item, Payable at least annually for the entire term of the transfer agreement, and Substantially equal in amount (or payable under a fixed formula). Priortax   When determining the term of the transfer agreement, include all renewal options and any other period for which you and the transferrer reasonably expect the agreement to be renewed. Priortax   A franchise includes an agreement that gives one of the parties to the agreement the right to distribute, sell, or provide goods, services, or facilities within a specified area. Priortax Impairment-related expenses. Priortax   If you are disabled, you can deduct expenses necessary for you to be able to work (impairment-related expenses) as a business expense, rather than as a medical expense. Priortax   You are disabled if you have either of the following. Priortax A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed. Priortax A physical or mental impairment that substantially limits one or more of your major life activities. Priortax   The expense qualifies as a business expense if all the following apply. Priortax Your work clearly requires the expense for you to satisfactorily perform that work. Priortax The goods or services purchased are clearly not needed or used, other than incidentally, in your personal activities. Priortax Their treatment is not specifically provided for under other tax law provisions. Priortax Example. Priortax You are blind. Priortax You must use a reader to do your work, both at and away from your place of work. Priortax The reader's services are only for your work. Priortax You can deduct your expenses for the reader as a business expense. Priortax Internet-related expenses. Priortax   Generally, you can deduct internet-related expenses including domain registrations fees and webmaster consulting costs. Priortax If you are starting a business you may have to amortize these expenses as start-up costs. Priortax For more information about amortizing start-up and organizational costs, see chapter 8. Priortax Interview expense allowances. Priortax   Reimbursements you make to job candidates for transportation or other expenses related to interviews for possible employment are not wages. Priortax You can deduct the reimbursements as a business expense. Priortax However, expenses for food, beverages, and entertainment are subject to the 50% limit discussed earlier under Meals and Entertainment. Priortax Legal and professional fees. Priortax   Fees charged by accountants and attorneys that are ordinary and necessary expenses directly related to operating your business are deductible as business expenses. Priortax However, usually legal fees you pay to acquire business assets are not deductible. Priortax These costs are added to the basis of the property. Priortax   Fees that include payments for work of a personal nature (such as drafting a will, or damages arising from a personal injury) are not allowed as a business deduction on Schedule C or C-EZ. Priortax If the invoice includes both business and personal charges, compute the business portion as follows: multiply the total amount of the bill by a fraction, the numerator of which is the amount attributable to business matters, the denominator of which is the total amount paid. Priortax The result is the portion of the invoice attributable to business expenses. Priortax The portion attributable to personal matters is the difference between the total amount and the business portion (computed above). Priortax   Legal fees relating to personal tax advice may be deductible on Schedule A (Form 1040), if you itemize deductions. Priortax However, the deduction is subject to the 2% limitation on miscellaneous itemized deductions. Priortax See Publication 529, Miscellaneous Deductions. Priortax Tax preparation fees. Priortax   The cost of hiring a tax professional, such as a C. Priortax P. Priortax A. Priortax , to prepare that part of your tax return relating to your business as a sole proprietor is deductible on Schedule C or Schedule C-EZ. Priortax Any remaining cost may be deductible on Schedule A (Form 1040) if you itemize deductions. Priortax   You can also claim a business deduction for amounts paid or incurred in resolving asserted tax deficiencies for your business operated as a sole proprietor. Priortax Licenses and regulatory fees. Priortax   Licenses and regulatory fees for your trade or business paid annually to state or local governments generally are deductible. Priortax Some licenses and fees may have to be amortized. Priortax See chapter 8 for more information. Priortax Lobbying expenses. Priortax   Generally, lobbying expenses are not deductible. Priortax Lobbying expenses include amounts paid or incurred for any of the following activities. Priortax Influencing legislation. Priortax Participating in or intervening in any political campaign for, or against, any candidate for public office. Priortax Attempting to influence the general public, or segments of the public, about elections, legislative matters, or referendums. Priortax Communicating directly with covered executive branch officials (defined later) in any attempt to influence the official actions or positions of those officials. Priortax Researching, preparing, planning, or coordinating any of the preceding activities. Priortax   Your expenses for influencing legislation and communicating directly with a covered executive branch official include a portion of your labor costs and general and administrative costs of your business. Priortax For information on making this allocation, see section 1. Priortax 162-28 of the regulations. Priortax   You cannot claim a charitable or business expense deduction for amounts paid to an organization if both of the following apply. Priortax The organization conducts lobbying activities on matters of direct financial interest to your business. Priortax A principal purpose of your contribution is to avoid the rules discussed earlier that prohibit a business deduction for lobbying expenses. Priortax   If a tax-exempt organization, other than a section 501(c)(3) organization, provides you with a notice on the part of dues that is allocable to nondeductible lobbying and political expenses, you cannot deduct that part of the dues. Priortax Covered executive branch official. Priortax   For purposes of this discussion, a covered executive branch official is any of the following. Priortax The President. Priortax The Vice President. Priortax Any officer or employee of the White House Office of the Executive Office of the President and the two most senior level officers of each of the other agencies in the Executive Office. Priortax Any individual who: Is serving in a position in Level I of the Executive Schedule under section 5312 of title 5, United States Code, Has been designated by the President as having Cabinet-level status, or Is an immediate deputy of an individual listed in item (a) or (b). Priortax Exceptions to denial of deduction. Priortax   The general denial of the deduction does not apply to the following. Priortax Expenses of appearing before, or communicating with, any committee or member of any local council or similar governing body concerning its legislation (local legislation) if the legislation is of direct interest to you or to you and an organization of which you are a member. Priortax An Indian tribal government is treated as a local council or similar governing body. Priortax Any in-house expenses for influencing legislation and communicating directly with a covered executive branch official if those expenses for the tax year do not exceed $2,000 (excluding overhead expenses). Priortax Expenses incurred by taxpayers engaged in the trade or business of lobbying (professional lobbyists) on behalf of another person (but does apply to payments by the other person to the lobbyist for lobbying activities). Priortax Moving machinery. Priortax   Generally, the cost of moving machinery from one city to another is a deductible expense. Priortax So is the cost of moving machinery from one plant to another, or from one part of your plant to another. Priortax You can deduct the cost of installing the machinery in the new location. Priortax However, you must capitalize the costs of installing or moving newly purchased machinery. Priortax Outplacement services. Priortax   The costs of outplacement services you provide to your employees to help them find new employment, such as career counseling, résumé assistance, skills assessment, etc. Priortax are deductible. Priortax   The costs of outplacement services may cover more than one deduction category. Priortax For example, deduct as a utilities expense the cost of telephone calls made under this service and deduct as rental expense the cost of renting machinery and equipment for this service. Priortax   For information on whether the value of outplacement services is includable in your employees' income, see Publication 15-B. Priortax Penalties and fines. Priortax   Penalties paid for late performance or nonperformance of a contract are generally deductible. Priortax For instance, you own and operate a construction company. Priortax Under a contract, you are to finish construction of a building by a certain date. Priortax Due to construction delays, the building is not completed and ready for occupancy on the date stipulated in the contract. Priortax You are now required to pay an additional amount for each day that completion is delayed beyond the completion date stipulated in the contract. Priortax These additional costs are deductible business expenses. Priortax   On the other hand, penalties or fines paid to any government agency or instrumentality because of a violation of any law are not deductible. Priortax These fines or penalties include the following amounts. Priortax Paid because of a conviction for a crime or after a plea of guilty or no contest in a criminal proceeding. Priortax Paid as a penalty imposed by federal, state, or local law in a civil action, including certain additions to tax and additional amounts and assessable penalties imposed by the Internal Revenue Code. Priortax Paid in settlement of actual or possible liability for a fine or penalty, whether civil or criminal. Priortax Forfeited as collateral posted for a proceeding that could result in a fine or penalty. Priortax   Examples of nondeductible penalties and fines include the following. Priortax Fines for violating city housing codes. Priortax Fines paid by truckers for violating state maximum highway weight laws. Priortax Fines for violating air quality laws. Priortax Civil penalties for violating federal laws regarding mining safety standards and discharges into navigable waters. Priortax   A fine or penalty does not include any of the following. Priortax Legal fees and related expenses to defend yourself in a prosecution or civil action for a violation of the law imposing the fine or civil penalty. Priortax Court costs or stenographic and printing charges. Priortax Compensatory damages paid to a government. Priortax Political contributions. Priortax   Contributions or gifts paid to political parties or candidates are not deductible. Priortax In addition, expenses paid or incurred to take part in any political campaign of a candidate for public office are not deductible. Priortax Indirect political contributions. Priortax   You cannot deduct indirect political contributions and costs of taking part in political activities as business expenses. Priortax Examples of nondeductible expenses include the following. Priortax Advertising in a convention program of a political party, or in any other publication if any of the proceeds from the publication are for, or intended for, the use of a political party or candidate. Priortax Admission to a dinner or program (including, but not limited to, galas, dances, film presentations, parties, and sporting events) if any of the proceeds from the function are for, or intended for, the use of a political party or candidate. Priortax Admission to an inaugural ball, gala, parade, concert, or similar event if identified with a political party or candidate. Priortax Repairs. Priortax   The cost of repairing or improving property used in your trade or business is either a deductible or capital expense. Priortax Routine maintenance that keeps your property in a normal efficient operating condition, but that does not materially increase the value or substantially prolong the useful life of the property, is deductible in the year that it is incurred. Priortax Otherwise, the cost must be capitalized and depreciated. Priortax See Form 4562 and its instructions for how to compute and claim the depreciation deduction. Priortax   The cost of repairs includes the costs of labor, supplies, and certain other items. Priortax The value of your own labor is not deductible. Priortax Examples of repairs include: Reconditioning floors (but not replacement), Repainting the interior and exterior walls of a building, Cleaning and repairing roofs and gutters, and Fixing plumbing leaks (but not replacement of fixtures). Priortax Repayments. Priortax   If you had to repay an amount you included in your income in an earlier year, you may be able to deduct the amount repaid for the year in which you repaid it. Priortax Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. Priortax Type of deduction. Priortax   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. Priortax For instance, if you repay an amount you previously reported as a capital gain, deduct the repayment as a capital loss on Form 8949. Priortax If you reported it as self-employment income, deduct it as a business deduction on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). Priortax   If you reported the amount as wages, unemployment compensation, or other nonbusiness ordinary income, enter it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is subject to the 2% limitation. Priortax However, if the repayment is over $3,000 and Method 1 (discussed later) applies, deduct it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is not subject to the 2% limitation. Priortax Repayment—$3,000 or less. Priortax   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Priortax Repayment—over $3,000. Priortax   If the amount you repaid was more than $3,000, you can deduct the repayment, as described earlier. Priortax However, you can instead choose to take a tax credit for the year of repayment if you included the income under a “claim of right. Priortax ” This means that at the time you included the income, it appeared that you had an unrestricted right to it. Priortax If you qualify for this choice, figure your tax under both methods and use the method that results in less tax. Priortax Method 1. Priortax   Figure your tax for 2013 claiming a deduction for the repaid amount. Priortax Method 2. Priortax   Figure your tax for 2013 claiming a credit for the repaid amount. Priortax Follow these steps. Priortax Figure your tax for 2013 without deducting the repaid amount. Priortax Refigure your tax from the earlier year without including in income the amount you repaid in 2013. Priortax Subtract the tax in (2) from the tax shown on your return for the earlier year. Priortax This is the amount of your credit. Priortax Subtract the answer in (3) from the tax for 2013 figured without the deduction (step 1). Priortax   If Method 1 results in less tax, deduct the amount repaid as discussed earlier under Type of deduction. Priortax   If Method 2 results in less tax, claim the credit on line 71 of Form 1040, and write “I. Priortax R. Priortax C. Priortax 1341” next to line 71. Priortax Example. Priortax For 2012, you filed a return and reported your income on the cash method. Priortax In 2013, you repaid $5,000 included in your 2012 gross income under a claim of right. Priortax Your filing status in 2013 and 2012 is single. Priortax Your income and tax for both years are as follows:   2012  With Income 2012  Without Income Taxable Income $15,000 $10,000 Tax $ 1,819 $ 1,069   2013  Without Deduction 2013  With Deduction Taxable Income $49,950 $44,950 Tax $8,423 $7,173 Your tax under Method 1 is $7,173. Priortax Your tax under Method 2 is $7,673, figured as follows: Tax previously determined for 2012 $ 1,819 Less: Tax as refigured − 1,069 Decrease in 2012 tax $ 750 Regular tax liability for 2013 $8,423 Less: Decrease in 2012 tax − 750 Refigured tax for 2013 $ 7,673 Because you pay less tax under Method 1, you should take a deduction for the repayment in 2013. Priortax Repayment does not apply. Priortax   This discussion does not apply to the following. Priortax Deductions for bad debts. Priortax Deductions from sales to customers, such as returns and allowances, and similar items. Priortax Deductions for legal and other expenses of contesting the repayment. Priortax Year of deduction (or credit). Priortax   If you use the cash method of accounting, you can take the deduction (or credit, if applicable) for the tax year in which you actually make the repayment. Priortax If you use any other accounting method, you can deduct the repayment or claim a credit for it only for the tax year in which it is a proper deduction under your accounting method. Priortax For example, if you use the accrual method, you are entitled to the deduction or credit in the tax year in which the obligation for the repayment accrues. Priortax Subscriptions. Priortax   Subscriptions to professional, technical, and trade journals that deal with your business field are deductible. Priortax Supplies and materials. Priortax   Unless you have deducted the cost in any earlier year, you generally can deduct the cost of materials and supplies actually consumed and used during the tax year. Priortax   If you keep incidental materials and supplies on hand, you can deduct the cost of the incidental materials and supplies you bought during the tax year if all the following requirements are met. Priortax You do not keep a record of when they are used. Priortax You do not take an inventory of the amount on hand at the beginning and end of the tax year. Priortax This method does not distort your income. Priortax   You can also deduct the cost of books, professional instruments, equipment, etc. Priortax , if you normally use them within a year. Priortax However, if the usefulness of these items extends substantially beyond the year they are placed in service, you generally must recover their costs through depreciation. Priortax For more information regarding depreciation see Publication 946, How To Depreciate Property. Priortax Utilities. Priortax   Business expenses for heat, lights, power, telephone service, and water and sewerage are deductible. Priortax However, any part due to personal use is not deductible. Priortax Telephone. Priortax   You cannot deduct the cost of basic local telephone service (including any taxes) for the first telephone line you have in your home, even if you have an office in your home. Priortax However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. Priortax Prev  Up  Next   Home   More Online Publications
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Priortax Publication 529 - Main Content Table of Contents Deductions Subject to the 2% LimitUnreimbursed Employee Expenses Tax Preparation Fees Other Expenses Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses How To ReportWho can use Form 2106-EZ. Priortax Computer used in a home office. Priortax Example How To Get Tax HelpLow Income Taxpayer Clinics Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040 or Form 1040NR). Priortax You can claim the amount of expenses that is more than 2% of your adjusted gross income. Priortax You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. Priortax Your adjusted gross income is the amount on Form 1040, line 38, or Form 1040NR, line 37. Priortax Generally, you apply the 2% limit after you apply any other deduction limit. Priortax For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed later under Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging ) before you apply the 2% limit. Priortax Deductions subject to the 2% limit are discussed in the following three categories. Priortax Unreimbursed employee expenses (Schedule A (Form 1040), line 21 or Schedule A (Form 1040NR), line 7). Priortax Tax preparation fees (Schedule A (Form 1040), line 22 or Schedule A (Form 1040NR), line 8). Priortax Other expenses (Schedule A (Form 1040), line 23 or Schedule A (Form 1040NR), line 9). Priortax Unreimbursed Employee Expenses Generally, the following expenses are deducted on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. Priortax You can deduct only unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. Priortax An expense is ordinary if it is common and accepted in your trade, business, or profession. Priortax An expense is necessary if it is appropriate and helpful to your business. Priortax An expense does not have to be required to be considered necessary. Priortax You may be able to deduct the following items as unreimbursed employee expenses. Priortax Business bad debt of an employee. Priortax Business liability insurance premiums. Priortax Damages paid to a former employer for breach of an employment contract. Priortax Depreciation on a computer your employer requires you to use in your work. Priortax Dues to a chamber of commerce if membership helps you do your job. Priortax Dues to professional societies. Priortax Educator expenses. Priortax Home office or part of your home used regularly and exclusively in your work. Priortax Job search expenses in your present occupation. Priortax Laboratory breakage fees. Priortax Legal fees related to your job. Priortax Licenses and regulatory fees. Priortax Malpractice insurance premiums. Priortax Medical examinations required by an employer. Priortax Occupational taxes. Priortax Passport for a business trip. Priortax Repayment of an income aid payment received under an employer's plan. Priortax Research expenses of a college professor. Priortax Rural mail carriers' vehicle expenses. Priortax Subscriptions to professional journals and trade magazines related to your work. Priortax Tools and supplies used in your work. Priortax Travel, transportation, meals, entertainment, gifts, and local lodging related to your work. Priortax Union dues and expenses. Priortax Work clothes and uniforms if required and not suitable for everyday use. Priortax Work-related education. Priortax Business Bad Debt A business bad debt is a loss from a debt created or acquired in your trade or business. Priortax Any other worthless debt is a business bad debt only if there is a very close relationship between the debt and your trade or business when the debt becomes worthless. Priortax A debt has a very close relationship to your trade or business of being an employee if your main motive for incurring the debt is a business reason. Priortax Example. Priortax You make a bona fide loan to the corporation you work for. Priortax It fails to pay you back. Priortax You had to make the loan in order to keep your job. Priortax You have a business bad debt as an employee. Priortax More information. Priortax   For more information on business bad debts, see chapter 10 in Publication 535. Priortax For information on nonbusiness bad debts, see chapter 4 in Publication 550, Investment Income and Expenses. Priortax Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. Priortax Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer if the damages are attributable to the pay you received from that employer. Priortax Depreciation on Computers You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is: For the convenience of your employer, and Required as a condition of your employment. Priortax For the convenience of your employer. Priortax   This means that your use of the computer is for a substantial business reason of your employer. Priortax You must consider all facts in making this determination. Priortax Use of your computer during your regular working hours to carry on your employer's business is generally for the convenience of your employer. Priortax Required as a condition of your employment. Priortax   This means that you cannot properly perform your duties without the computer. Priortax Whether you can properly perform your duties without it depends on all the facts and circumstances. Priortax It is not necessary that your employer explicitly requires you to use your computer. Priortax But neither is it enough that your employer merely states that your use of the item is a condition of your employment. Priortax Example. Priortax You are an engineer with an engineering firm. Priortax You occasionally take work home at night rather than work late at the office. Priortax You own and use a computer that is similar to the one you use at the office to complete your work at home. Priortax Since your use of the computer is not for the convenience of your employer and is not required as a condition of your employment, you cannot claim a depreciation deduction for it. Priortax Which depreciation method to use. Priortax   The depreciation method you use depends on whether you meet the more-than-50%-use test. Priortax More-than-50%-use test met. Priortax   You meet this test if you use the computer more than 50% in your work. Priortax If you meet this test, you can claim accelerated depreciation under the General Depreciation System (GDS). Priortax In addition, you may be able to take the section 179 deduction for the year you place the item in service. Priortax More-than-50%-use test not met. Priortax   If you do not meet the more-than-50%-use test, you are limited to the straight line method of depreciation under the Alternative Depreciation System (ADS). Priortax You also cannot claim the section 179 deduction. Priortax (But if you use your computer in a home office, see the exception below. Priortax ) Investment use. Priortax   Your use of a computer in connection with investments (described later under Other Expenses ) does not count as use in your work. Priortax However, you can combine your investment use with your work use in figuring your depreciation deduction. Priortax Exception for computer used in a home office. Priortax   The more-than-50%-use test does not apply to a computer used only in a part of your home that meets the requirements described later under Home Office . Priortax You can claim accelerated depreciation using GDS for a computer used in a qualifying home office, even if you do not use it more than 50% in your work. Priortax You also may be able to take a section 179 deduction for the year you place the computer in service. Priortax See Computer used in a home office under How To Report, later. Priortax More information. Priortax   For more information on depreciation and the section 179 deduction for computers and other items used in a home office, see Business Furniture and Equipment in Publication 587. Priortax Publication 946 has detailed information about the section 179 deduction and depreciation deductions using GDS and ADS. Priortax Reporting your depreciation deduction. Priortax    See How To Report, later, for information about reporting a deduction for depreciation. Priortax You must keep records to prove your percentage of business and investment use. Priortax Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. Priortax Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. Priortax Lobbying and political activities. Priortax    You may not be able to deduct that part of your dues that is for certain lobbying and political activities. Priortax See Lobbying Expenses under Nondeductible Expenses, later. Priortax Educator Expenses If you were an eligible educator in 2013, you can deduct up to $250 of qualified expenses you paid in 2013 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. Priortax If you file Form 1040A, you can deduct these expenses on line 16. Priortax If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. Priortax However, neither spouse can deduct more than $250 of his or her qualified expenses. Priortax Eligible educator. Priortax   An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in school for at least 900 hours during a school year. Priortax Qualified expenses. Priortax   Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. Priortax An ordinary expense is one that is common and accepted in your educational field. Priortax A necessary expense is one that is helpful and appropriate for your profession as an educator. Priortax An expense does not have to be required to be considered necessary. Priortax   Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. Priortax You must reduce your qualified expenses by the following amounts. Priortax Excludable U. Priortax S. Priortax series EE and I savings bond interest from Form 8815. Priortax Nontaxable qualified state tuition program earnings. Priortax Nontaxable earnings from Coverdell education savings accounts. Priortax Any reimbursements you received for those expenses that were not reported to you on your Form W-2, box 1. Priortax Educator expenses over limit. Priortax   If you were an educator in 2013 and you had qualified expenses that you cannot take as an adjustment to gross income, you can deduct the rest as an itemized deduction subject to the 2% limit. Priortax Home Office If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home. Priortax You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business, As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or In the case of a separate structure not attached to your home, in connection with your trade or business. Priortax The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. Priortax Principal place of business. Priortax   If you have more than one place of business, the business part of your home is your principal place of business if: You use it regularly and exclusively for administrative or management activities of your trade or business, and You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Priortax   Otherwise, the location of your principal place of business generally depends on the relative importance of the activities performed at each location and the time spent at each location. Priortax You should keep records that will give the information needed to figure the deduction according to these rules. Priortax Also keep canceled checks, substitute checks, or account statements and receipts of the expenses paid to prove the deductions you claim. Priortax More information. Priortax   See Publication 587 for more detailed information and a worksheet for figuring the deduction. Priortax Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. Priortax You cannot deduct these expenses if: You are looking for a job in a new occupation, There was a substantial break between the ending of your last job and your looking for a new one, or You are looking for a job for the first time. Priortax Employment and outplacement agency fees. Priortax    You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. Priortax Employer pays you back. Priortax   If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. Priortax See Recoveries in Publication 525. Priortax Employer pays the employment agency. Priortax   If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. Priortax Résumé. Priortax   You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation. Priortax Travel and transportation expenses. Priortax   If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. Priortax You can deduct the travel expenses if the trip is primarily to look for a new job. Priortax The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. Priortax   Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. Priortax    You can choose to use the standard mileage rate to figure your car expenses. Priortax The 2013 rate for business use of a vehicle is 56½ cents per mile. Priortax See Publication 463 for more information on travel and car expenses. Priortax Legal Fees You can deduct legal fees related to doing or keeping your job. Priortax Licenses and Regulatory Fees You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession. Priortax Occupational Taxes You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Priortax If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return. Priortax Repayment of Income Aid Payment An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. Priortax If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment. Priortax Research Expenses of a College Professor If you are a college professor, you can deduct your research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. Priortax You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. Priortax However, you cannot deduct the cost of travel as a form of education. Priortax Rural Mail Carriers' Vehicle Expenses If your expenses to use a vehicle in performing services as a rural mail carrier are more than the amount of your reimbursements, you can deduct the unreimbursed expenses. Priortax See chapter 4 of Publication 463 for more information. Priortax Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. Priortax You can depreciate the cost of tools that have a useful life substantially beyond the tax year. Priortax For more information about depreciation, see Publication 946. Priortax Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging If you are an employee and have ordinary and necessary business-related expenses for travel away from home, local transportation, entertainment, and gifts, you may be able to deduct these expenses. Priortax Generally, you must file Form 2106 or Form 2106-EZ to claim these expenses. Priortax Travel expenses. Priortax   Travel expenses are those incurred while traveling away from home for your employer. Priortax You can deduct travel expenses paid or incurred in connection with a temporary work assignment. Priortax Generally, you cannot deduct travel expenses paid or incurred in connection with an indefinite work assignment. Priortax   Travel expenses may include: The cost of getting to and from your business destination (air, rail, bus, car, etc. Priortax ), Meals and lodging while away from home, Taxi fares, Baggage charges, and Cleaning and laundry expenses. Priortax   Travel expenses are discussed more fully in chapter 1 of Publication 463. Priortax Temporary work assignment. Priortax    If your assignment or job away from home in a single location is realistically expected to last (and does in fact last) for 1 year or less, it is temporary, unless there are facts and circumstances that indicate it is not. Priortax Indefinite work assignment. Priortax   If your assignment or job away from home in a single location is realistically expected to last for more than 1 year, it is indefinite, whether or not it actually lasts for more than 1 year. Priortax If your assignment or job away from home in a single location is realistically expected to last for 1 year or less, but at some later date it is realistically expected to exceed 1 year, it will be treated as temporary (in the absence of facts and circumstances indicating otherwise) until the date that your realistic expectation changes, and it will be treated as indefinite after that date. Priortax Federal crime investigation and prosecution. Priortax   If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the 1-year rule for deducting temporary travel expenses. Priortax This means that you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year. Priortax   To qualify, the Attorney General must certify that you are traveling: For the Federal Government, In a temporary duty status, and To investigate, prosecute, or provide support services for the investigation or prosecution of a federal crime. Priortax Armed Forces reservists traveling more than 100 miles from home. Priortax   If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct some of your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. Priortax The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. Priortax The balance, if any, is reported on Schedule A. Priortax   You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Naval, Marine Corps, Air Force, Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service. Priortax   For more information on travel expenses, see Publication 463. Priortax Local transportation expenses. Priortax   Local transportation expenses are the expenses of getting from one workplace to another when you are not traveling away from home. Priortax They include the cost of transportation by air, rail, bus, taxi, and the cost of using your car. Priortax   You can choose to use the standard mileage rate to figure your car expenses. Priortax The 2013 rate for business use of a vehicle is 56½ cents per mile. Priortax    In general, the costs of commuting between your residence and your place of business are nondeductible. Priortax Work at two places in a day. Priortax   If you work at two places in a day, whether or not for the same employer, you can generally deduct the expenses of getting from one workplace to the other. Priortax Temporary work location. Priortax   You can deduct expenses incurred in going between your home and a temporary work location if at least one of the following applies. Priortax The work location is outside the metropolitan area where you live and normally work. Priortax You have at least one regular work location (other than your home) for the same trade or business. Priortax (If this applies, the distance between your home and the temporary work location does not matter. Priortax )   For this purpose, a work location is generally considered temporary if your work there is realistically expected to last (and does in fact last) for 1 year or less. Priortax It is not temporary if your work there is realistically expected to last for more than 1 year, even if it actually lasts for 1 year or less. Priortax If your work there initially is realistically expected to last for 1 year or less, but later is realistically expected to last for more than 1 year, the work location is generally considered temporary until the date your realistic expectation changes and not temporary after that date. Priortax For more information, see chapter 1 of Publication 463. Priortax Home office. Priortax   You can deduct expenses incurred in going between your home and a workplace if your home is your principal place of business for the same trade or business. Priortax (In this situation, whether the other workplace is temporary or regular and its distance from your home do not matter. Priortax ) See Home Office , earlier, for a discussion on the use of your home as your principal place of business. Priortax Meals and entertainment. Priortax   Generally, you can deduct entertainment expenses (including entertainment-related meals) only if they are directly related to the active conduct of your trade or business. Priortax However, the expense only needs to be associated with the active conduct of your trade or business if it directly precedes or follows a substantial and bona fide business-related discussion. Priortax   You can deduct only 50% of your business-related meal and entertainment expenses unless the expenses meet certain exceptions. Priortax You apply this 50% limit before you apply the 2%-of-adjusted-gross-income limit. Priortax Meals when subject to “hours of service” limits. Priortax   You can deduct 80% of your business-related meal expenses if you consume the meals during or incident to any period subject to the Department of Transportation's “hours of service” limits. Priortax You apply this 80% limit before you apply the 2%-of-adjusted-gross-income limit. Priortax Gift expenses. Priortax   You can generally deduct up to $25 of business gifts you give to any one individual during the year. Priortax The following items do not count toward the $25 limit. Priortax Identical, widely distributed items costing $4 or less that have your name clearly and permanently imprinted. Priortax Signs, racks, and promotional materials to be displayed on the business premises of the recipient. Priortax Local lodging. Priortax   If your employer provides or requires you to obtain lodging while you are not traveling away from home, you can deduct the cost of the lodging if it is: on a temporary basis, necessary for you to participate in or be available for a business meeting or employer function, and the costs are ordinary and necessary, but not lavish or extravagant. Priortax   If your employer provides the lodging or reimburses you for the cost of the lodging, you can deduct the cost only if the value or the reimbursement is included in your gross income because it is reported as wages on your Form W-2. Priortax Additional information. Priortax    See Publication 463 for more information on travel, transportation, meal, entertainment, and gift expenses, and reimbursements for these expenses. Priortax Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. Priortax You can also deduct assessments for benefit payments to unemployed union members. Priortax However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. Priortax Also, you cannot deduct contributions to a pension fund even if the union requires you to make the contributions. Priortax You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. Priortax See Lobbying Expenses under Nondeductible Expenses, later. Priortax Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. Priortax You must wear them as a condition of your employment. Priortax The clothes are not suitable for everyday wear. Priortax It is not enough that you wear distinctive clothing. Priortax The clothing must be specifically required by your employer. Priortax Nor is it enough that you do not, in fact, wear your work clothes away from work. Priortax The clothing must not be suitable for taking the place of your regular clothing. Priortax Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc. Priortax ). Priortax Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. Priortax However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. Priortax Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. Priortax Protective clothing. Priortax   You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. Priortax   Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers. Priortax Military uniforms. Priortax   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. Priortax However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. Priortax In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. Priortax   If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. Priortax   If you are a student at an armed forces academy, you cannot deduct the cost of your uniforms if they replace regular clothing. Priortax However, you can deduct the cost of insignia, shoulder boards, and related items. Priortax    You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. Priortax Work-Related Education You can deduct expenses you have for education, even if the education may lead to a degree, if the education meets at least one of the following two tests. Priortax It maintains or improves skills required in your present work. Priortax It is required by your employer or the law to keep your salary, status, or job, and the requirement serves a business purpose of your employer. Priortax You cannot deduct expenses you have for education, even though one or both of the preceding tests are met, if the education: Is needed to meet the minimum educational requirements to qualify you in your trade or business, or Is part of a program of study that will lead to qualifying you in a new trade or business. Priortax If your education qualifies, you can deduct expenses for tuition, books, supplies, laboratory fees, and similar items, and certain transportation costs. Priortax If the education qualifies you for a new trade or business, you cannot deduct the educational expenses even if you do not intend to enter that trade or business. Priortax Travel as education. Priortax   You cannot deduct the cost of travel that in itself constitutes a form of education. Priortax For example, a French teacher who travels to France to maintain general familiarity with the French language and culture cannot deduct the cost of the trip as an educational expense. Priortax More information. Priortax    See Publication 970, Tax Benefits for Education, for a complete discussion of the deduction for work-related education expenses. Priortax Education Expenses During Unemployment If you stop working for a year or less in order to get education in order 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. Priortax Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. Priortax Tax Preparation Fees You can usually deduct tax preparation fees on the return for the year in which you pay them. Priortax Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. Priortax These fees include the cost of tax preparation software programs and tax publications. Priortax They also include any fee you paid for electronic filing of your return. Priortax See Tax preparation fees under How To Report, later. Priortax Other Expenses You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2%-of-adjusted-gross-income limit. Priortax On Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9, you can deduct the ordinary and necessary expenses that you pay: To produce or collect income that must be included in your gross income, To manage, conserve, or maintain property held for producing such income, or To determine, contest, pay, or claim a refund of any tax. Priortax You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonable and closely related to these purposes. Priortax These other expenses include the following items. Priortax Appraisal fees for a casualty loss or charitable contribution. Priortax Casualty and theft losses from property used in performing services as an employee. Priortax Clerical help and office rent in caring for investments. Priortax Depreciation on home computers used for investments. Priortax Excess deductions (including administrative expenses) allowed a beneficiary on termination of an estate or trust. Priortax Fees to collect interest and dividends. Priortax Hobby expenses, but generally not more than hobby income. Priortax Indirect miscellaneous deductions from pass-through entities. Priortax Investment fees and expenses. Priortax Legal fees related to producing or collecting taxable income or getting tax advice. Priortax Loss on deposits in an insolvent or bankrupt financial institution. Priortax Loss on traditional IRAs or Roth IRAs, when all amounts have been distributed to you. Priortax Repayments of income. Priortax Repayments of social security benefits. Priortax Safe deposit box rental, except for storing jewelry and other personal effects. Priortax Service charges on dividend reinvestment plans. Priortax Tax advice fees. Priortax Trustee's fees for your IRA, if separately billed and paid. Priortax If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses, later, under Nondeductible Expenses. Priortax Appraisal Fees You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property. Priortax Casualty and Theft Losses You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. Priortax First report the loss in Section B of Form 4684, Casualties and Thefts. Priortax You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Priortax To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Priortax For more information on casualty and theft losses, see Publication 547, Casualties, Disasters, and Thefts. Priortax Clerical Help and Office Rent You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them. Priortax Credit or Debit Card Convenience Fees You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. Priortax The fees are deductible on the return for the year in which you paid them. Priortax For example, fees charged to payments made in 2013 can be claimed on the 2013 tax return. Priortax Depreciation on Home Computer You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). Priortax You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. Priortax But if you work as an employee and also use the computer in that work, see Depreciation on Computers under Unreimbursed Employee Expenses, earlier. Priortax For more information on depreciation, see Publication 946. Priortax Excess Deductions of an Estate If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. Priortax Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. Priortax The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. Priortax For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. Priortax Fees To Collect Interest and Dividends You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. Priortax But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. Priortax You must add the fee to the cost of the property. Priortax You cannot deduct the fee you pay to a broker to sell securities. Priortax You can use the fee only to figure gain or loss from the sale. Priortax See the instructions for Schedule D (Form 1040) for information on how to report the fee. Priortax Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. Priortax A hobby is not a business because it is not carried on to make a profit. Priortax See Not-for-Profit Activities in chapter 1 of Publication 535. Priortax Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. Priortax Deductions of pass-through entities are passed through to the partners or shareholders. Priortax The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit. Priortax Example. Priortax You are a member of an investment club that is formed solely to invest in securities. Priortax The club is treated as a partnership. Priortax The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. Priortax In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. Priortax However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income. Priortax Publicly offered mutual funds. Priortax   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. Priortax A mutual fund is “publicly offered” if it is: Continuously offered pursuant to a public offering, Regularly traded on an established securities market, or Held by or for at least 500 persons at all times during the tax year. Priortax   A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing the net amount of dividend income (gross dividends minus investment expenses). Priortax This net figure is the amount you report on your return as income. Priortax You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount. Priortax Information returns. Priortax   You should receive information returns from pass-through entities. Priortax Partnerships and S corporations. Priortax   These entities issue Schedule K-1, which lists the items and amounts you must report, and identifies the tax return schedules and lines to use. Priortax Nonpublicly offered mutual funds. Priortax   These funds will send you a Form 1099-DIV, or a substitute form, showing your share of gross income and investment expenses. Priortax You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. Priortax Investment Fees and Expenses You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income. Priortax Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax. Priortax You can also deduct legal expenses that are: Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business, For tax advice related to a divorce if the bill specifies how much is for tax advice and it is determined in a reasonable way, or To collect taxable alimony. Priortax You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F) on the appropriate schedule. Priortax You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040 or Form 1040NR). Priortax See Tax Preparation Fees, earlier. Priortax Unlawful discrimination claims. Priortax   You may be able to deduct, as an adjustment to income on Form 1040, line 36, or Form 1040NR, line 35, rather than as a miscellaneous itemized deduction, attorney fees and court costs for actions settled or decided after October 22, 2004, involving a claim of unlawful discrimination, a claim against the U. Priortax S. Priortax Government, or a claim made under section 1862(b)(3)(A) of the Social Security Act. Priortax However, the amount you can deduct on Form 1040, line 36, or Form 1040NR, line 35, is limited to the amount of the judgment or settlement you are including in income for the tax year. Priortax See Publication 525 for more information. Priortax Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. Priortax If you can reasonably estimate the amount of your loss on money you have on deposit in a financial institution that becomes insolvent or bankrupt, you can generally choose to deduct it in the current year even though its exact amount has not been finally determined. Priortax If elected, the casualty loss is subject to certain deduction limitations. Priortax The election is made on Form 4684. Priortax Once you make this choice, you cannot change it without IRS approval. Priortax If none of the deposit is federally insured, you can deduct the loss in either of the following ways. Priortax As an ordinary loss (as a miscellaneous itemized deduction subject to the 2% limit). Priortax Write the name of the financial institution and “Insolvent Financial Institution” beside the amount on Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9. Priortax This deduction is limited to $20,000 ($10,000 if you are married filing separately) for each financial institution, reduced by any expected state insurance proceeds. Priortax As a casualty loss. Priortax Report it on Form 4684 first and then on Schedule A (Form 1040). Priortax See Publication 547 for details. Priortax As a nonbusiness bad debt. Priortax Report it on Schedule D (Form 1040). Priortax If any part of the deposit is federally insured, you can deduct the loss only as a casualty loss. Priortax Exception. Priortax   You cannot make this choice if you are a 1%-or-more-owner or an officer of the financial institution, or are related to such owner or officer. Priortax For a definition of “related,” see Deposit in Insolvent or Bankrupt Financial Institution in chapter 4 of Publication 550. Priortax Actual loss different from estimated loss. Priortax   If you make this choice and your actual loss is less than your estimated loss, you must include the excess in income. Priortax See Recoveries in Publication 525. Priortax If your actual loss is more than your estimated loss, treat the excess loss as explained under Choice not made, next. Priortax Choice not made. Priortax   If you do not make this choice (or if you have an excess actual loss after choosing to deduct your estimated loss), treat your loss (or excess loss) as a nonbusiness bad debt (deductible as a short-term capital loss) in the year its amount is finally determined. Priortax See Nonbusiness Bad Debts in chapter 4 of Publication 550. Priortax Loss on IRA If you have a loss on your traditional IRA (or Roth IRA) investment, you can deduct the loss as a miscellaneous itemized deduction subject to the 2% limit, but only when all the amounts in all your traditional IRA (or Roth IRA) accounts have been distributed to you and the total distributions are less than your unrecovered basis. Priortax For more information, see Publication 590, Individual Retirement Arrangements (IRAs). Priortax Repayments of Income If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. Priortax If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. Priortax If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. Priortax Repayments of Social Security Benefits If the total of the amounts in box 5 (net benefits for 2013) of all your Forms SSA-1099, Social Security Benefit Statement, and Forms RRB-1099, Payments By the Railroad Retirement Board, is a negative figure (a figure in parentheses), you may be able to take a miscellaneous itemized deduction subject to the 2% limit. Priortax The amount you can deduct is the part of the negative figure that represents an amount you included in gross income in an earlier year. Priortax The amount in box 5 of Form SSA-1099 or RRB-1099 is the net amount of your benefits for the year. Priortax It will be a negative figure if the amount of benefits you repaid in 2013 (box 4) is more than the gross amount of benefits paid to you in 2013 (box 3). Priortax If the deduction is more than $3,000, you will have to use a special computation to figure your tax. Priortax See Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for additional information. Priortax Safe Deposit Box Rent You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. Priortax You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. Priortax Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. Priortax These service charges include payments for: Holding shares acquired through a plan, Collecting and reinvesting cash dividends, and Keeping individual records and providing detailed statements of accounts. Priortax Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your IRA are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. Priortax Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. Priortax They are not subject to the 2% limit. Priortax Report these items on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14. Priortax List of Deductions Amortizable premium on taxable bonds. Priortax Casualty and theft losses from income-producing property. Priortax Federal estate tax on income in respect of a decedent. Priortax Gambling losses up to the amount of gambling winnings. Priortax Impairment-related work expenses of persons with disabilities. Priortax Loss from other activities from Schedule K-1 (Form 1065-B), box 2. Priortax Losses from Ponzi-type investment schemes. Priortax Repayments of more than $3,000 under a claim of right. Priortax Unrecovered investment in an annuity. Priortax Amortizable Premium on Taxable Bonds In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. Priortax You can elect to amortize the premium on taxable bonds. Priortax The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. Priortax Pre-1998 election to amortize bond premium. Priortax   Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988. Priortax Bonds acquired after October 22, 1986, and before 1988. Priortax   The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you chose to treat it as an offset to interest income on the bond. Priortax Bonds acquired before October 23, 1986. Priortax   The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2% limit. Priortax Deduction for excess premium. Priortax   On certain bonds (such as bonds that pay a variable rate of interest or that provide for an interest-free period), the amount of bond premium allocable to a period may exceed the amount of stated interest allocable to the period. Priortax If this occurs, treat the excess as a miscellaneous itemized deduction that is not subject to the 2% limit. Priortax However, the amount deductible is limited to the amount by which your total interest inclusions on the bond in prior periods exceed the total amount you treated as a bond premium deduction on the bond in prior periods. Priortax If any of the excess bond premium cannot be deducted because of the limit, this amount is carried forward to the next period and is treated as bond premium allocable to that period. Priortax    Pre-1998 choice to amortize bond premium. Priortax If you made the choice to amortize the premium on taxable bonds before 1998, you can deduct the bond premium amortization that is more than your interest income only for bonds acquired during 1998 and later years. Priortax More information. Priortax    For more information on bond premium, see Bond Premium Amortization in chapter 3 of Publication 550. Priortax Casualty and Theft Losses of Income-Producing Property You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). Priortax First report the loss in Section B of Form 4684. Priortax You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Priortax To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Priortax For more information on casualty and theft losses, see Publication 547. Priortax Federal Estate Tax on Income in Respect of a Decedent You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. Priortax Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. Priortax See Publication 559 for information about figuring the amount of this deduction. Priortax Gambling Losses Up to the Amount of Gambling Winnings You must report the full amount of your gambling winnings for the year on Form 1040, line 21. Priortax You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. Priortax You cannot deduct gambling losses that are more than your winnings. Priortax Generally, nonresident aliens cannot deduct gambling losses on Schedule A (Form 1040NR). Priortax You cannot reduce your gambling winnings by your gambling losses and report the difference. Priortax You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Priortax Therefore, your records should show your winnings separately from your losses. Priortax Diary of winnings and losses. Priortax You must keep an accurate diary or similar record of your losses and winnings. Priortax Your diary should contain at least the following information. Priortax The date and type of your specific wager or wagering activity. Priortax The name and address or location of the gambling establishment. Priortax The names of other persons present with you at the gambling establishment. Priortax The amount(s) you won or lost. Priortax Proof of winnings and losses. Priortax   In addition to your diary, you should also have other documentation. Priortax You can generally prove your winnings and losses through Form W-2G, Certain Gambling Winnings, Form 5754, Statement by Person(s) Receiving Gambling Winnings, wagering tickets, canceled checks, substitute checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment. Priortax   For specific wagering transactions, you can use the following items to support your winnings and losses. Priortax    These recordkeeping suggestions are intended as general guidelines to help you establish your winnings and losses. Priortax They are not all-inclusive. Priortax Your tax liability depends on your particular facts and circumstances. Priortax Keno. Priortax   Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records. Priortax Slot machines. Priortax   A record of the machine number and all winnings by date and time the machine was played. Priortax Table games (twenty-one (blackjack), craps, poker, baccarat, roulette, wheel of fortune, etc. Priortax ). Priortax   The number of the table at which you were playing. Priortax Casino credit card data indicating whether the credit was issued in the pit or at the cashier's cage. Priortax Bingo. Priortax   A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets. Priortax Supplemental records include any receipts from the casino, parlor, etc. Priortax Racing (horse, harness, dog, etc. Priortax ). Priortax   A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Priortax Supplemental records include unredeemed tickets and payment records from the racetrack. Priortax Lotteries. Priortax   A record of ticket purchases, dates, winnings, and losses. Priortax Supplemental records include unredeemed tickets, payment slips, and winnings statements. Priortax Impairment-Related Work Expenses If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses. Priortax Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and other expenses in connection with your place of work that are necessary for you to be able to work. Priortax Example. Priortax You are blind. Priortax You must use a reader to do your work. Priortax You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. Priortax The reader's services are only for your work. Priortax You can deduct your expenses for the reader as impairment-related work expenses. Priortax Self-employed. Priortax   If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. Priortax See Impairment-related work expenses. Priortax , later under How To Report. Priortax Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14 (only if effectively connected with a U. Priortax S. Priortax trade or business). Priortax It is not subject to the passive activity limitations. Priortax Officials Paid on a Fee Basis If you are a fee-basis official, you can claim your expenses in performing services in that job as an adjustment to income rather than as a miscellaneous itemized deduction. Priortax See Publication 463 for more information. Priortax Performing Artists If you are a qualified performing artist, you can deduct your employee business expenses as an adjustment to income rather than as a miscellaneous itemized deduction. Priortax If you are an employee, complete Form 2106 or Form 2106-EZ. Priortax See Publication 463 for more information. Priortax Losses From Ponzi-type Investment Schemes These losses are deductible as theft losses of income-producing property on your tax return for the year the loss was discovered. Priortax You figure the deductible loss in Section B of Form 4684. Priortax However, if you qualify to use Revenue Procedure 2009-20 (as modified by Revenue Procedure 2011-58) and you choose to follow the procedures in the guidance, complete Section C of Form 4684 before completing Section B. Priortax Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Priortax You do not need to complete Appendix A. Priortax See the Form 4684 instructions and Publication 547, Casualties, Disasters, and Thefts, for more information. Priortax Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid, or take a credit against your tax. Priortax See Repayments in Publication 525 for more information. Priortax Unrecovered Investment in Annuity A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. Priortax If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. Priortax See Publication 575, Pension and Annuity Income, for more information about the tax treatment of pensions and annuities. Priortax Nondeductible Expenses You cannot deduct the following expenses. Priortax List of Nondeductible Expenses Adoption expenses. Priortax Broker's commissions. Priortax Burial or funeral expenses, including the cost of a cemetery lot. Priortax Campaign expenses. Priortax Capital expenses. Priortax Check-writing fees. Priortax Club dues. Priortax Commuting expenses. Priortax Fees and licenses, such as car licenses, marriage licenses, and dog tags. Priortax Fines and penalties, such as parking tickets. Priortax Health spa expenses. Priortax Hobby losses—but see Hobby Expenses, earlier. Priortax Home repairs, insurance, and rent. Priortax Home security system. Priortax Illegal bribes and kickbacks—see Bribes and kickbacks in chapter 11 of Publication 535. Priortax Investment-related seminars. Priortax Life insurance premiums paid by the insured. Priortax Lobbying expenses. Priortax Losses from the sale of your home, furniture, personal car, etc. Priortax Lost or misplaced cash or property. Priortax Lunches with co-workers. Priortax Meals while working late. Priortax Medical expenses as business expenses other than medical examinations required by your employer. Priortax Personal disability insurance premiums. Priortax Personal legal expenses. Priortax Personal, living, or family expenses. Priortax Political contributions. Priortax Professional accreditation fees. Priortax Professional reputation, expenses to improve. Priortax Relief fund contributions. Priortax Residential telephone line. Priortax Stockholders' meeting, expenses of attending. Priortax Tax-exempt income, expenses of earning or collecting. Priortax The value of wages never received or lost vacation time. Priortax Travel expenses for another individual. Priortax Voluntary unemployment benefit fund contributions. Priortax Wristwatches. Priortax Adoption Expenses You cannot deduct the expenses of adopting a child but you may be able to take a credit for those expenses. Priortax For details, see Form 8839, Qualified Adoption Expenses. Priortax Commissions Commissions paid on the purchase of securities are not deductible, either as business or nonbusiness expenses. Priortax Instead, these fees must be added to the taxpayer's cost of the securities. Priortax Commissions paid on the sale are deductible as business expenses only by dealers. Priortax Campaign Expenses You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. Priortax These include qualification and registration fees for primary elections. Priortax Legal fees. Priortax   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. Priortax Capital Expenses You cannot currently deduct amounts paid to buy property that has a useful life substantially beyond the tax year or amounts paid to increase the value or prolong the life of property. Priortax If you use such property in your work, you may be able to take a depreciation deduction. Priortax See Publication 946. Priortax If the property is a car used in your work, also see Publication 463. Priortax Check-Writing Fees on Personal Account If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest. Priortax Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. Priortax This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. Priortax You cannot deduct dues paid to an organization if one of its main purposes is to: Conduct entertainment activities for members or their guests, or Provide members or their guests with access to entertainment facilities. Priortax Dues paid to airline, hotel, and luncheon clubs are not deductible. Priortax Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). Priortax If you haul tools, instruments, or other items in your car to and from work, you can deduct only the additional cost of hauling the items, such as the rent on a trailer to carry the items. Priortax Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. Priortax This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). Priortax Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. Priortax Health Spa Expenses You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer. Priortax Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. Priortax However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. Priortax See Home Office under Unreimbursed Employee Expenses, earlier, and Publication 587. Priortax Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. Priortax Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. Priortax You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. Priortax See Publication 504, Divorced or Separated Individuals, for information on alimony. Priortax Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. Priortax These include expenses to: Influence legislation, Participate, or intervene, in any political campaign for, or against, any candidate for public office, Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials. Priortax Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. Priortax Covered executive branch official. Priortax   A covered executive branch official, for the purpose of (4) above, is any of the following officials. Priortax The President. Priortax The Vice President. Priortax Any officer or employee of the White House Office of the Executive Office of the President, and the two most senior level officers of each of the other agencies in the Executive Office. Priortax Any individual serving in a position in Level I of the Executive Schedule under section 5312 of Title 5, United States Code, any other individual designated by the President as having Cabinet-level status, and any immediate deputy of one of these individuals. Priortax Dues used for lobbying. Priortax   If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. Priortax Exceptions. Priortax   You can deduct certain lobbying expenses if they are ordinary and necessary expenses of carrying on your trade or business. Priortax You can deduct expenses for attempting to influence the legislation of any local council or similar governing body (local legislation). Priortax An Indian tribal government is considered a local council or similar governing body. Priortax You can deduct in-house expenses for influencing legislation or communicating directly with a covered executive branch official if the expenses for the tax year are not more than $2,000 (not counting overhead expenses). Priortax If you are a professional lobbyist, you can deduct the expenses you incur in the trade or business of lobbying on behalf of another person. Priortax Payments by the other person to you for lobbying activities cannot be deducted. Priortax Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. Priortax However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. Priortax See Publication 547. Priortax Example. Priortax A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Priortax The diamond falls from the ring and is never found. Priortax The loss of the diamond is a casualty. Priortax Lunches With Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. Priortax See Publication 463 for information on deductible expenses while traveling away from home. Priortax Meals While Working Late You cannot deduct the cost of meals while working late. Priortax However, you may be able to claim a deduction if the cost of the meals is a deductible entertainment expense, or if you are traveling away from home. Priortax See Publication 463 for information on deductible entertainment expenses and expenses while traveling away from home. Priortax Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. Priortax Custody of children. Priortax Breach of promise to marry suit. Priortax Civil or criminal charges resulting from a personal relationship. Priortax Damages for personal injury (except certain whistleblower claims and unlawful discrimination claims). Priortax For more information about unlawful discrimination claims, see Deductions Subject to the 2% Limit, earlier. Priortax Preparation of a title (or defense or perfection of a title). Priortax Preparation of a will. Priortax Property claims or property settlement in a divorce. Priortax You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. Priortax Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Priortax Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. Priortax Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. Priortax Accounting certificate fees paid for the initial right to practice accounting. Priortax Bar exam fees and incidental expenses in securing initial admission to the bar. Priortax Medical and dental license fees paid to get initial licensing. Priortax Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. Priortax Relief Fund Contributions You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job. Priortax Residential Telephone Service You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business. Priortax Stockholders' Meetings You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. Priortax You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. Priortax Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. Priortax You cannot deduct interest on a debt incurred or continued to buy or carry tax-exempt securities. Priortax If you have expenses to p