Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Filing Taxes As A Student

Free Tax Services Online2011 Tax Forms 1040Amend Federal Tax Return Free1040 Form 20121040 Tax Forms 201110ez1040nr 2012Free Tax Filing 2011 H&r BlockMilitary H&r BlockIrs AmendmentFree H&r Block TaxFree Online Tax Filing 2012Pa 1040xState Income Tax Questions1040ez State Tax FormFile Free State Tax1040x 20131040x AmendedFree Tax Preparation SoftwareState EfileHow Much Does H And R Block Charge For TaxesIrs EfileFiling Ez Form OnlineHow Do I Ammend A Tax Return1040ez1040 Tax Forms For 2011Form 1040 2012Irs OrgWww H & R BlockWhere Can I File My Federal And State Taxes For Free1040ez Form OnlineAmend A Tax Return 2010Free EfileIncome Tax Return 1040ezHandr Block2010 Tax FormsFree Federal Tax Filing2011 Amended Tax Return FormFree Tax Amendment1040ez 2011 Tax Form

Filing Taxes As A Student

Filing taxes as a student 5. Filing taxes as a student   Business Income Table of Contents Introduction Kinds of IncomeBartering for Property or Services Real Estate Rents Personal Property Rents Interest and Dividend Income Canceled Debt Other Income Items That Are Not IncomeAmount you can exclude. Filing taxes as a student Short-term lease. Filing taxes as a student Retail space. Filing taxes as a student Qualified long-term real property. Filing taxes as a student Guidelines for Selected Occupations Accounting for Your Income Introduction This chapter primarily explains business income and how to account for it on your tax return, what items are not considered income, and gives guidelines for selected occupations. Filing taxes as a student If there is a connection between any income you receive and your business, the income is business income. Filing taxes as a student A connection exists if it is clear that the payment of income would not have been made if you did not have the business. Filing taxes as a student You can have business income even if you are not involved in the activity on a regular full-time basis. Filing taxes as a student Income from work you do on the side in addition to your regular job can be business income. Filing taxes as a student You report most business income, such as income from selling your products or services, on Schedule C or C-EZ. Filing taxes as a student But you report the income from the sale of business assets, such as land and office buildings, on other forms instead of Schedule C or C-EZ. Filing taxes as a student For information on selling business assets, see chapter 3. Filing taxes as a student Nonemployee compensation. Filing taxes as a student Business income includes amounts you received in your business that were properly shown on Forms 1099-MISC. Filing taxes as a student This includes amounts reported as nonemployee compensation in box 7 of the form. Filing taxes as a student You can find more information in the instructions on the back of the Form 1099-MISC you received. Filing taxes as a student Kinds of Income You must report on your tax return all income you receive from your business unless it is excluded by law. Filing taxes as a student In most cases, your business income will be in the form of cash, checks, and credit card charges. Filing taxes as a student But business income can be in other forms, such as property or services. Filing taxes as a student These and other types of income are explained next. Filing taxes as a student If you are a U. Filing taxes as a student S. Filing taxes as a student citizen who has business income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt from tax under U. Filing taxes as a student S. Filing taxes as a student law. Filing taxes as a student If you live outside the United States, you may be able to exclude part or all of your foreign-source business income. Filing taxes as a student For details, see Publication 54, Tax Guide for U. Filing taxes as a student S. Filing taxes as a student Citizens and Resident Aliens Abroad. Filing taxes as a student Bartering for Property or Services Bartering is an exchange of property or services. Filing taxes as a student You must include in your gross receipts, at the time received, the fair market value of property or services you receive in exchange for something else. Filing taxes as a student If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as the fair market value unless the value can be shown to be otherwise. Filing taxes as a student Example 1. Filing taxes as a student You are a self-employed lawyer. Filing taxes as a student You perform legal services for a client, a small corporation. Filing taxes as a student In payment for your services, you receive shares of stock in the corporation. Filing taxes as a student You must include the fair market value of the shares in income. Filing taxes as a student Example 2. Filing taxes as a student You are an artist and create a work of art to compensate your landlord for the rent-free use of your apartment. Filing taxes as a student You must include the fair rental value of the apartment in your gross receipts. Filing taxes as a student Your landlord must include the fair market value of the work of art in his or her rental income. Filing taxes as a student Example 3. Filing taxes as a student You are a self-employed accountant. Filing taxes as a student Both you and a house painter are members of a barter club, an organization that each year gives its members a directory of members and the services each member provides. Filing taxes as a student Members get in touch with other members directly and bargain for the value of the services to be performed. Filing taxes as a student In return for accounting services you provided for the house painter's business, the house painter painted your home. Filing taxes as a student You must include in gross receipts the fair market value of the services you received from the house painter. Filing taxes as a student The house painter must include the fair market value of your accounting services in his or her gross receipts. Filing taxes as a student Example 4. Filing taxes as a student You are a member of a barter club that uses credit units to credit or debit members' accounts for goods or services provided or received. Filing taxes as a student As soon as units are credited to your account, you can use them to buy goods or services or sell or transfer the units to other members. Filing taxes as a student You must include the value of credit units you received in your gross receipts for the tax year in which the units are credited to your account. Filing taxes as a student The dollar value of units received for services by an employee of the club, who can use the units in the same manner as other members, must be included in the employee's gross income for the tax year in which received. Filing taxes as a student It is wages subject to social security and Medicare taxes (FICA), federal unemployment taxes (FUTA), and income tax withholding. Filing taxes as a student See Publication 15 (Circular E), Employer's Tax Guide. Filing taxes as a student Example 5. Filing taxes as a student You operate a plumbing business and use the cash method of accounting. Filing taxes as a student You join a barter club and agree to provide plumbing services to any member for a specified number of hours. Filing taxes as a student Each member has access to a directory that lists the members of the club and the services available. Filing taxes as a student Members contact each other directly and request services to be performed. Filing taxes as a student You are not required to provide services unless requested by another member, but you can use as many of the offered services as you wish without paying a fee. Filing taxes as a student You must include the fair market value of any services you receive from club members in your gross receipts when you receive them even if you have not provided any services to club members. Filing taxes as a student Information returns. Filing taxes as a student   If you are involved in a bartering transaction, you may have to file either of the following forms. Filing taxes as a student Form 1099-B, Proceeds From Broker and Barter Exchange Transactions. Filing taxes as a student Form 1099-MISC, Miscellaneous Income. Filing taxes as a student For information about these forms, see the General Instructions for Certain Information Returns. Filing taxes as a student Real Estate Rents If you are a real estate dealer who receives income from renting real property or an owner of a hotel, motel, etc. Filing taxes as a student , who provides services (maid services, etc. Filing taxes as a student ) for guests, report the rental income and expenses on Schedule C or C-EZ. Filing taxes as a student If you are not a real estate dealer or the kind of owner described in the preceding sentence, report the rental income and expenses on Schedule E. Filing taxes as a student For more information, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes). Filing taxes as a student Real estate dealer. Filing taxes as a student   You are a real estate dealer if you are engaged in the business of selling real estate to customers with the purpose of making a profit from those sales. Filing taxes as a student Rent you receive from real estate held for sale to customers is subject to SE tax. Filing taxes as a student However, rent you receive from real estate held for speculation or investment is not subject to SE tax. Filing taxes as a student Trailer park owner. Filing taxes as a student   Rental income from a trailer park is subject to SE tax if you are a self-employed trailer park owner who provides trailer lots and facilities and substantial services for the convenience of your tenants. Filing taxes as a student    You generally are considered to provide substantial services for tenants if they are primarily for the tenants' convenience and normally are not provided to maintain the lots in a condition for occupancy. Filing taxes as a student Services are substantial if the compensation for the services makes up a material part of the tenants' rental payments. Filing taxes as a student   Examples of services that are not normally provided for the tenants' convenience include supervising and maintaining a recreational hall provided by the park, distributing a monthly newsletter to tenants, operating a laundry facility, and helping tenants buy or sell their trailers. Filing taxes as a student   Examples of services that are normally provided to maintain the lots in a condition for tenant occupancy include city sewerage, electrical connections, and roadways. Filing taxes as a student Hotels, boarding houses, and apartments. Filing taxes as a student   Rental income you receive for the use or occupancy of hotels, boarding houses, or apartment houses is subject to SE tax if you provide services for the occupants. Filing taxes as a student   Generally, you are considered to provide services for the occupants if the services are primarily for their convenience and are not services normally provided with the rental of rooms for occupancy only. Filing taxes as a student An example of a service that is not normally provided for the convenience of the occupants is maid service. Filing taxes as a student However, providing heat and light, cleaning stairways and lobbies, and collecting trash are services normally provided for the occupants' convenience. Filing taxes as a student Prepaid rent. Filing taxes as a student   Advance payments received under a lease that does not put any restriction on their use or enjoyment are income in the year you receive them. Filing taxes as a student This is true no matter what accounting method or period you use. Filing taxes as a student Lease bonus. Filing taxes as a student   A bonus you receive from a lessee for granting a lease is an addition to the rent. Filing taxes as a student Include it in your gross receipts in the year received. Filing taxes as a student Lease cancellation payments. Filing taxes as a student   Report payments you receive from your lessee for canceling a lease in your gross receipts in the year received. Filing taxes as a student Payments to third parties. Filing taxes as a student   If your lessee makes payments to someone else under an agreement to pay your debts or obligations, include the payments in your gross receipts when the lessee makes the payments. Filing taxes as a student A common example of this kind of income is a lessee's payment of your property taxes on leased real property. Filing taxes as a student Settlement payments. Filing taxes as a student   Payments you receive in settlement of a lessee's obligation to restore the leased property to its original condition are income in the amount that the payments exceed the adjusted basis of the leasehold improvements destroyed, damaged, removed, or disconnected by the lessee. Filing taxes as a student Personal Property Rents If you are in the business of renting personal property (equipment, vehicles, formal wear, etc. Filing taxes as a student ), include the rental amount you receive in your gross receipts on Schedule C or C-EZ. Filing taxes as a student Prepaid rent and other payments described in the preceding Real Estate Rents discussion can also be received for renting personal property. Filing taxes as a student If you receive any of those payments, include them in your gross receipts as explained in that discussion. Filing taxes as a student Interest and Dividend Income Interest and dividends may be considered business income. Filing taxes as a student Interest. Filing taxes as a student   Interest received on notes receivable that you have accepted in the ordinary course of business is business income. Filing taxes as a student Interest received on loans is business income if you are in the business of lending money. Filing taxes as a student Uncollectible loans. Filing taxes as a student   If a loan payable to you becomes uncollectible during the tax year and you use an accrual method of accounting, you must include in gross income interest accrued up to the time the loan became uncollectible. Filing taxes as a student If the accrued interest later becomes uncollectible, you may be able to take a bad debt deduction. Filing taxes as a student See Bad Debts in chapter 8. Filing taxes as a student Unstated interest. Filing taxes as a student   If little or no interest is charged on an installment sale, you may have to treat a part of each payment as unstated interest. Filing taxes as a student See Unstated Interest and Original Issue Discount (OID) in Publication 537, Installment Sales. Filing taxes as a student Dividends. Filing taxes as a student   Generally, dividends are business income to dealers in securities. Filing taxes as a student For most sole proprietors and statutory employees, however, dividends are nonbusiness income. Filing taxes as a student If you hold stock as a personal investment separately from your business activity, the dividends from the stock are nonbusiness income. Filing taxes as a student   If you receive dividends from business insurance premiums you deducted in an earlier year, you must report all or part of the dividend as business income on your return. Filing taxes as a student To find out how much you have to report, see   Recovery of items previously deducted under Other Income, later. Filing taxes as a student Canceled Debt The following explains the general rule for including canceled debt in income and the exceptions to the general rule. Filing taxes as a student General Rule Generally, if your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in your gross income for tax purposes. Filing taxes as a student Report the canceled amount on line 6 of Schedule C if you incurred the debt in your business. Filing taxes as a student If the debt is a nonbusiness debt, report the canceled amount on line 21 of Form 1040. Filing taxes as a student Exceptions The following discussion covers some exceptions to the general rule for canceled debt. Filing taxes as a student Price reduced after purchase. Filing taxes as a student   If you owe a debt to the seller for property you bought and the seller reduces the amount you owe, you generally do not have income from the reduction. Filing taxes as a student Unless you are bankrupt or insolvent, treat the amount of the reduction as a purchase price adjustment and reduce your basis in the property. Filing taxes as a student Deductible debt. Filing taxes as a student   You do not realize income from a canceled debt to the extent the payment of the debt would have led to a deduction. Filing taxes as a student Example. Filing taxes as a student You get accounting services for your business on credit. Filing taxes as a student Later, you have trouble paying your business debts, but you are not bankrupt or insolvent. Filing taxes as a student Your accountant forgives part of the amount you owe for the accounting services. Filing taxes as a student How you treat the canceled debt depends on your method of accounting. Filing taxes as a student Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. Filing taxes as a student Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. Filing taxes as a student   For information on the cash and accrual methods of accounting, see chapter 2. Filing taxes as a student Exclusions Do not include canceled debt in income in the following situations. Filing taxes as a student However, you may be required to file Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. Filing taxes as a student For more information, see Form 982. Filing taxes as a student The cancellation takes place in a bankruptcy case under title 11 of the U. Filing taxes as a student S. Filing taxes as a student Code (relating to bankruptcy). Filing taxes as a student See Publication 908, Bankruptcy Tax Guide. Filing taxes as a student The cancellation takes place when you are insolvent. Filing taxes as a student You can exclude the canceled debt to the extent you are insolvent. Filing taxes as a student See Publication 908. Filing taxes as a student The canceled debt is a qualified farm debt owed to a qualified person. Filing taxes as a student See chapter 3 in Publication 225, Farmer's Tax Guide. Filing taxes as a student The canceled debt is a qualified real property business debt. Filing taxes as a student This situation is explained later. Filing taxes as a student The canceled debt is qualified principal residence indebtedness which is discharged after 2006. Filing taxes as a student See Form 982. Filing taxes as a student If a canceled debt is excluded from income because it takes place in a bankruptcy case, the exclusions in situations 2 through 5 do not apply. Filing taxes as a student If it takes place when you are insolvent, the exclusions in situations 3 and 4 do not apply to the extent you are insolvent. Filing taxes as a student Debt. Filing taxes as a student   For purposes of this discussion, debt includes any debt for which you are liable or which attaches to property you hold. Filing taxes as a student Qualified real property business debt. Filing taxes as a student   You can elect to exclude (up to certain limits) the cancellation of qualified real property business debt. Filing taxes as a student If you make the election, you must reduce the basis of your depreciable real property by the amount excluded. Filing taxes as a student Make this reduction at the beginning of your tax year following the tax year in which the cancellation occurs. Filing taxes as a student However, if you dispose of the property before that time, you must reduce its basis immediately before the disposition. Filing taxes as a student Cancellation of qualified real property business debt. Filing taxes as a student   Qualified real property business debt is debt (other than qualified farm debt) that meets all the following conditions. Filing taxes as a student It was incurred or assumed in connection with real property used in a trade or business. Filing taxes as a student It was secured by such real property. Filing taxes as a student It was incurred or assumed at either of the following times. Filing taxes as a student Before January 1, 1993. Filing taxes as a student After December 31, 1992, if incurred or assumed to acquire, construct, or substantially improve the real property. Filing taxes as a student It is debt to which you choose to apply these rules. Filing taxes as a student   Qualified real property business debt includes refinancing of debt described in (3) earlier, but only to the extent it does not exceed the debt being refinanced. Filing taxes as a student   You cannot exclude more than either of the following amounts. Filing taxes as a student The excess (if any) of: The outstanding principal of qualified real property business debt (immediately before the cancellation), over The fair market value (immediately before the cancellation) of the business real property that is security for the debt, reduced by the outstanding principal amount of any other qualified real property business debt secured by this property immediately before the cancellation. Filing taxes as a student The total adjusted bases of depreciable real property held by you immediately before the cancellation. Filing taxes as a student These adjusted bases are determined after any basis reduction due to a cancellation in bankruptcy, insolvency, or of qualified farm debt. Filing taxes as a student Do not take into account depreciable real property acquired in contemplation of the cancellation. Filing taxes as a student Election. Filing taxes as a student   To make this election, complete Form 982 and attach it to your income tax return for the tax year in which the cancellation occurs. Filing taxes as a student You must file your return by the due date (including extensions). Filing taxes as a student If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Filing taxes as a student For more information, see When To File in the form instructions. Filing taxes as a student Other Income The following discussion explains how to treat other types of business income you may receive. Filing taxes as a student Restricted property. Filing taxes as a student   Restricted property is property that has certain restrictions that affect its value. Filing taxes as a student If you receive restricted stock or other property for services performed, the fair market value of the property in excess of your cost is included in your income on Schedule C or C-EZ when the restriction is lifted. Filing taxes as a student However, you can choose to be taxed in the year you receive the property. Filing taxes as a student For more information on including restricted property in income, see Publication 525, Taxable and Nontaxable Income. Filing taxes as a student Gains and losses. Filing taxes as a student   Do not report on Schedule C or C-EZ a gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers. Filing taxes as a student Instead, you must report these gains and losses on other forms. Filing taxes as a student For more information, see chapter 3. Filing taxes as a student Promissory notes. Filing taxes as a student   Report promissory notes and other evidences of debt issued to you in a sale or exchange of property that is stock in trade or held primarily for sale to customers on Schedule C or C-EZ. Filing taxes as a student In general, you report them at their stated principal amount (minus any unstated interest) when you receive them. Filing taxes as a student Lost income payments. Filing taxes as a student   If you reduce or stop your business activities, report on Schedule C or C-EZ any payment you receive for the lost income of your business from insurance or other sources. Filing taxes as a student Report it on Schedule C or C-EZ even if your business is inactive when you receive the payment. Filing taxes as a student Damages. Filing taxes as a student   You must include in gross income compensation you receive during the tax year as a result of any of the following injuries connected with your business. Filing taxes as a student Patent infringement. Filing taxes as a student Breach of contract or fiduciary duty. Filing taxes as a student Antitrust injury. Filing taxes as a student Economic injury. Filing taxes as a student   You may be entitled to a deduction against the income if it compensates you for actual economic injury. Filing taxes as a student Your deduction is the smaller of the following amounts. Filing taxes as a student The amount you receive or accrue for damages in the tax year reduced by the amount you pay or incur in the tax year to recover that amount. Filing taxes as a student Your loss from the injury that you have not yet deducted. Filing taxes as a student Punitive damages. Filing taxes as a student   You must also include punitive damages in income. Filing taxes as a student Kickbacks. Filing taxes as a student   If you receive any kickbacks, include them in your income on Schedule C or C-EZ. Filing taxes as a student However, do not include them if you properly treat them as a reduction of a related expense item, a capital expenditure, or cost of goods sold. Filing taxes as a student Recovery of items previously deducted. Filing taxes as a student   If you recover a bad debt or any other item deducted in a previous year, include the recovery in income on Schedule C or C-EZ. Filing taxes as a student However, if all or part of the deduction in earlier years did not reduce your tax, you can exclude the part that did not reduce your tax. Filing taxes as a student If you exclude part of the recovery from income, you must include with your return a computation showing how you figured the exclusion. Filing taxes as a student Example. Filing taxes as a student Joe Smith, a sole proprietor, had gross income of $8,000, a bad debt deduction of $300, and other allowable deductions of $7,700. Filing taxes as a student He also had 2 personal exemptions for a total of $7,800. Filing taxes as a student He would not pay income tax even if he did not deduct the bad debt. Filing taxes as a student Therefore, he will not report as income any part of the $300 he may recover in any future year. Filing taxes as a student Exception for depreciation. Filing taxes as a student   This rule does not apply to depreciation. Filing taxes as a student You recover depreciation using the rules explained next. Filing taxes as a student Recapture of depreciation. Filing taxes as a student   In the following situations, you have to recapture the depreciation deduction. Filing taxes as a student This means you include in income part or all of the depreciation you deducted in previous years. Filing taxes as a student Listed property. Filing taxes as a student   If your business use of listed property (explained in chapter 8 under Depreciation ) falls to 50% or less in a tax year after the tax year you placed the property in service, you may have to recapture part of the depreciation deduction. Filing taxes as a student You do this by including in income on Schedule C part of the depreciation you deducted in previous years. Filing taxes as a student Use Part IV of Form 4797, Sales of Business Property, to figure the amount to include on Schedule C. Filing taxes as a student For more information, see What is the Business-Use Requirement? in chapter 5 of Publication 946, How To Depreciate Property. Filing taxes as a student That chapter explains how to determine whether property is used more than 50% in your business. Filing taxes as a student Section 179 property. Filing taxes as a student   If you take a section 179 deduction (explained in chapter 8 under Depreciation ) for an asset and before the end of the asset's recovery period the percentage of business use drops to 50% or less, you must recapture part of the section 179 deduction. Filing taxes as a student You do this by including in income on Schedule C part of the deduction you took. Filing taxes as a student Use Part IV of Form 4797 to figure the amount to include on Schedule C. Filing taxes as a student See chapter 2 in Publication 946 to find out when you recapture the deduction. Filing taxes as a student Sale or exchange of depreciable property. Filing taxes as a student   If you sell or exchange depreciable property at a gain, you may have to treat all or part of the gain due to depreciation as ordinary income. Filing taxes as a student You figure the income due to depreciation recapture in Part III of Form 4797. Filing taxes as a student For more information, see chapter 4 in Publication 544, Sales and Other Dispositions of Assets. Filing taxes as a student Items That Are Not Income In some cases the property or money you receive is not income. Filing taxes as a student Appreciation. Filing taxes as a student   Increases in value of your property are not income until you realize the increases through a sale or other taxable disposition. Filing taxes as a student Consignments. Filing taxes as a student   Consignments of merchandise to others to sell for you are not sales. Filing taxes as a student The title of merchandise remains with you, the consignor, even after the consignee possesses the merchandise. Filing taxes as a student Therefore, if you ship goods on consignment, you have no profit or loss until the consignee sells the merchandise. Filing taxes as a student Merchandise you have shipped out on consignment is included in your inventory until it is sold. Filing taxes as a student   Do not include merchandise you receive on consignment in your inventory. Filing taxes as a student Include your profit or commission on merchandise consigned to you in your income when you sell the merchandise or when you receive your profit or commission, depending upon the method of accounting you use. Filing taxes as a student Construction allowances. Filing taxes as a student   If you enter into a lease after August 5, 1997, you can exclude from income the construction allowance you receive (in cash or as a rent reduction) from your landlord if you receive it under both the following conditions. Filing taxes as a student Under a short-term lease of retail space. Filing taxes as a student For the purpose of constructing or improving qualified long-term real property for use in your business at that retail space. Filing taxes as a student Amount you can exclude. Filing taxes as a student   You can exclude the construction allowance to the extent it does not exceed the amount you spent for construction or improvements. Filing taxes as a student Short-term lease. Filing taxes as a student   A short-term lease is a lease (or other agreement for occupancy or use) of retail space for 15 years or less. Filing taxes as a student The following rules apply in determining whether the lease is for 15 years or less. Filing taxes as a student Take into account options to renew when figuring whether the lease is for 15 years or less. Filing taxes as a student But do not take into account any option to renew at fair market value determined at the time of renewal. Filing taxes as a student Two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar retail space are treated as one lease. Filing taxes as a student Retail space. Filing taxes as a student   Retail space is real property leased, occupied, or otherwise used by you as a tenant in your business of selling tangible personal property or services to the general public. Filing taxes as a student Qualified long-term real property. Filing taxes as a student   Qualified long-term real property is nonresidential real property that is part of, or otherwise present at, your retail space and that reverts to the landlord when the lease ends. Filing taxes as a student Exchange of like-kind property. Filing taxes as a student   If you exchange your business property or property you hold for investment solely for property of a like kind to be used in your business or to be held for investment, no gain or loss is recognized. Filing taxes as a student This means that the gain is not taxable and the loss is not deductible. Filing taxes as a student A common type of nontaxable exchange is the trade-in of a business automobile for another business automobile. Filing taxes as a student For more information, see Form 8824. Filing taxes as a student Leasehold improvements. Filing taxes as a student   If a tenant erects buildings or makes improvements to your property, the increase in the value of the property due to the improvements is not income to you. Filing taxes as a student However, if the facts indicate that the improvements are a payment of rent to you, then the increase in value would be income. Filing taxes as a student Loans. Filing taxes as a student   Money borrowed through a bona fide loan is not income. Filing taxes as a student Sales tax. Filing taxes as a student   State and local sales taxes imposed on the buyer, which you were required to collect and pay over to state or local governments, are not income. Filing taxes as a student Guidelines for Selected Occupations This section provides information to determine whether your earnings should be reported on Schedule C (Form 1040) or C-EZ (Form 1040). Filing taxes as a student Direct seller. Filing taxes as a student   You must report all income you receive as a direct seller on Schedule C or C-EZ. Filing taxes as a student This includes any of the following. Filing taxes as a student Income from sales—payments you receive from customers for products they buy from you. Filing taxes as a student Commissions, bonuses, or percentages you receive for sales and the sales of others who work under you. Filing taxes as a student Prizes, awards, and gifts you receive from your selling business. Filing taxes as a student You must report this income regardless of whether it is reported to you on an information return. Filing taxes as a student   You are a direct seller if you meet all the following conditions. Filing taxes as a student You are engaged in one of the following trades or businesses. Filing taxes as a student Selling or soliciting the sale of consumer products either in a home or other place that is not a permanent retail establishment, or to any buyer on a buy-sell basis or a deposit-commission basis for resale in a home or other place of business that is not a permanent retail establishment. Filing taxes as a student Delivering or distributing newspapers or shopping news (including any services directly related to that trade or business). Filing taxes as a student Substantially all your pay (whether paid in cash or not) for services described above is directly related to sales or other output (including performance of services) rather than to the number of hours worked. Filing taxes as a student Your services are performed under a written contract between you and the person for whom you perform the services, and the contract provides that you will not be treated as an employee for federal tax purposes. Filing taxes as a student Executor or administrator. Filing taxes as a student   If you administer a deceased person's estate, your fees are reported on Schedule C or C-EZ if you are one of the following: A professional fiduciary. Filing taxes as a student A nonprofessional fiduciary (personal representative) and both of the following apply. Filing taxes as a student The estate includes an active trade or business in which you actively participate. Filing taxes as a student Your fees are related to the operation of that trade or business. Filing taxes as a student A nonprofessional fiduciary of a single estate that requires extensive managerial activities on your part for a long period of time, provided these activities are enough to be considered a trade or business. Filing taxes as a student    If the fees do not meet the above requirements, report them on line 21 of Form 1040. Filing taxes as a student Fishing crew member. Filing taxes as a student    If you are a member of the crew that catches fish or other water life, your earnings are reported on Schedule C or C-EZ if you meet all the requirements shown in chapter 10 under Fishing crew member . Filing taxes as a student Insurance agent, former. Filing taxes as a student   Termination payments you receive as a former self-employed insurance agent from an insurance company because of services you performed for that company are not reported on Schedule C or C-EZ if all the following conditions are met. Filing taxes as a student You received payments after your agreement to perform services for the company ended. Filing taxes as a student You did not perform any services for the company after your service agreement ended and before the end of the year in which you received the payment. Filing taxes as a student You entered into a covenant not to compete against the company for at least a 1-year period beginning on the date your service agreement ended. Filing taxes as a student The amount of the payments depended primarily on policies sold by you or credited to your account during the last year of your service agreement or the extent to which those policies remain in force for some period after your service agreement ended, or both. Filing taxes as a student The amount of the payment did not depend to any extent on length of service or overall earnings from services performed for the company (regardless of whether eligibility for the payments depended on length of service). Filing taxes as a student Insurance agent, retired. Filing taxes as a student   Income paid by an insurance company to a retired self-employed insurance agent based on a percentage of commissions received before retirement is reported on Schedule C or C-EZ. Filing taxes as a student Also, renewal commissions and deferred commissions for sales made before retirement are generally reported on Schedule C or C-EZ. Filing taxes as a student   However, renewal commissions paid to the survivor of an insurance agent are not reported on Schedule C or C-EZ. Filing taxes as a student Newspaper carrier or distributor. Filing taxes as a student   You are a direct seller and your earnings are reported on Schedule C or C-EZ if all the following conditions apply. Filing taxes as a student You are in the business of delivering or distributing newspapers or shopping news (including directly related services such as soliciting customers and collecting receipts). Filing taxes as a student Substantially all your pay for these services directly relates to your sales or other output rather than to the number of hours you work. Filing taxes as a student You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. Filing taxes as a student   This rule applies whether or not you hire others to help you make deliveries. Filing taxes as a student It also applies whether you buy the papers from the publisher or are paid based on the number of papers you deliver. Filing taxes as a student Newspaper or magazine vendor. Filing taxes as a student   If you are 18 or older and you sell newspapers or magazines, your earnings are reported on Schedule C or C-EZ if all the following conditions apply. Filing taxes as a student You sell newspapers or magazines to ultimate consumers. Filing taxes as a student You sell them at a fixed price. Filing taxes as a student Your earnings are based on the difference between the sales price and your cost of goods sold. Filing taxes as a student   This rule applies whether or not you are guaranteed a minimum amount of earnings. Filing taxes as a student It also applies whether or not you receive credit for unsold newspapers or magazines you return to your supplier. Filing taxes as a student Notary public. Filing taxes as a student   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ. Filing taxes as a student These payments are not subject to self-employment tax (see the instructions for Schedule SE (Form 1040)). Filing taxes as a student Public official. Filing taxes as a student   Public officials generally do not report what they earn for serving in public office on Schedule C or C-EZ. Filing taxes as a student This rule applies to payments received by an elected tax collector from state funds on the basis of a fixed percentage of the taxes collected. Filing taxes as a student Public office includes any elective or appointive office of the United States or its possessions, the District of Columbia, a state or its political subdivisions, or a wholly owned instrumentality of any of these. Filing taxes as a student   Public officials of state or local governments report their fees on Schedule C or C-EZ if they are paid solely on a fee basis and if their services are eligible for, but not covered by, social security under a federal-state agreement. Filing taxes as a student Real estate agent or direct seller. Filing taxes as a student   If you are a licensed real estate agent or a direct seller, your earnings are reported on Schedule C or C-EZ if both the following apply. Filing taxes as a student Substantially all your pay for services as a real estate agent or direct seller directly relates to your sales or other output rather than to the number of hours you work. Filing taxes as a student You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes. Filing taxes as a student Securities dealer. Filing taxes as a student   If you are a dealer in options or commodities, your gains and losses from dealing or trading in section 1256 contracts (regulated futures contracts, foreign currency contracts, nonequity options, dealer equity options, and dealer securities futures contracts) or property related to those contracts (such as stock used to hedge options) are reported on Schedule C or C-EZ. Filing taxes as a student For more information, see sections 1256 and 1402(i). Filing taxes as a student Securities trader. Filing taxes as a student   You are a trader in securities if you are engaged in the business of buying and selling securities for your own account. Filing taxes as a student As a trader in securities, your gain or loss from the disposition of securities is not reported on Schedule C or C-EZ. Filing taxes as a student However, see Securities dealer , earlier, for an exception that applies to section 1256 contracts. Filing taxes as a student For more information about securities traders, see Publication 550, Investment Income and Expenses. Filing taxes as a student Accounting for Your Income Accounting for your income for income tax purposes differs at times from accounting for financial purposes. Filing taxes as a student This section discusses some of the more common differences that may affect business transactions. Filing taxes as a student Figure your business income on the basis of a tax year and according to your regular method of accounting (see chapter 2). Filing taxes as a student If the sale of a product is an income-producing factor in your business, you usually have to use inventories to clearly show your income. Filing taxes as a student Dealers in real estate are not allowed to use inventories. Filing taxes as a student For more information on inventories, see chapter 2. Filing taxes as a student Income paid to a third party. Filing taxes as a student   All income you earn is taxable to you. Filing taxes as a student You cannot avoid tax by having the income paid to a third party. Filing taxes as a student Example. Filing taxes as a student You rent out your property and the rental agreement directs the lessee to pay the rent to your son. Filing taxes as a student The amount paid to your son is gross income to you. Filing taxes as a student Cash discounts. Filing taxes as a student   These are amounts the seller permits you to deduct from the invoice price for prompt payment. Filing taxes as a student For income tax purposes, you can use either of the following two methods to account for cash discounts. Filing taxes as a student Deduct the cash discount from purchases (see Line 36, Purchases Less Cost of Items Withdrawn for Personal Use in chapter 6). Filing taxes as a student Credit the cash discount to a discount income account. Filing taxes as a student You must use the chosen method every year for all your purchase discounts. Filing taxes as a student   If you use the second method, the credit balance in the account at the end of your tax year is business income. Filing taxes as a student Under this method, you do not reduce the cost of goods sold by the cash discounts you received. Filing taxes as a student When valuing your closing inventory, you cannot reduce the invoice price of merchandise on hand at the close of the tax year by the average or estimated discounts received on the merchandise. Filing taxes as a student Trade discounts. Filing taxes as a student   These are reductions from list or catalog prices and usually are not written into the invoice or charged to the customer. Filing taxes as a student Do not enter these discounts on your books of account. Filing taxes as a student Instead, use only the net amount as the cost of the merchandise purchased. Filing taxes as a student For more information, see Trade discounts in chapter 6. Filing taxes as a student Payment placed in escrow. Filing taxes as a student   If the buyer of your property places part or all of the purchase price in escrow, you do not include any part of it in gross sales until you actually or constructively receive it. Filing taxes as a student However, upon completion of the terms of the contract and the escrow agreement, you will have taxable income, even if you do not accept the money until the next year. Filing taxes as a student Sales returns and allowances. Filing taxes as a student   Credits you allow customers for returned merchandise and any other allowances you make on sales are deductions from gross sales in figuring net sales. Filing taxes as a student Advance payments. Filing taxes as a student   Special rules dealing with an accrual method of accounting for payments received in advance are discussed in chapter 2 under Accrual Method. Filing taxes as a student Insurance proceeds. Filing taxes as a student   If you receive insurance or another type of reimbursement for a casualty or theft loss, you must subtract it from the loss when you figure your deduction. Filing taxes as a student You cannot deduct the reimbursed part of a casualty or theft loss. Filing taxes as a student   For information on casualty or theft losses, see Publication 547, Casualties, Disasters, and Thefts. Filing taxes as a student Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Can I Claim My Personal and/or Spousal Exemption?

This application determines whether you can claim your own exemption or your spouse’s. To determine if you can claim an exemption for someone else as a dependent, go to the topic for “Who Can I Claim as a Dependent?

Information You Will Need:

  • Your and your spouse's age
  • Your and your spouse’s gross income amounts

Estimated Completion Time: 8 minutes. However: 5 minutes of inactivity will end the interview and you will be forced to start over.

Begin

Page Last Reviewed or Updated: 14-Feb-2014

The Filing Taxes As A Student

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