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Filing Taxes For Students

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Filing Taxes For Students

Filing taxes for students Index A Abandonment of home, Abandonment. Filing taxes for students Absence, temporary, Temporary absence. Filing taxes for students Abstract fees, Settlement fees or closing costs. Filing taxes for students Address, change of, Reminders Adjusted basis, Adjusted Basis, Adjusted Basis Definition of, Determining Basis Worksheet 1 to figure, Determining Basis, Worksheet 1. Filing taxes for students Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 1. Filing taxes for students Adjusted Basis of Home Sold—Illustrated Example 3 for Emily White, Worksheet 1 Instructions. Filing taxes for students Adjusted Basis of Home Sold Adoption Adjusted basis of home for credit claimed, Decreases to Basis Advertising fees, Selling expenses. Filing taxes for students Amount realized, Amount Realized Appraisal fees, Settlement fees or closing costs. Filing taxes for students Architect's fees, Construction. Filing taxes for students Armed forces Ownership and use tests, Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Filing taxes for students Assistance (see Tax help) B Back interest, Settlement fees or closing costs. Filing taxes for students Basis Adjusted basis (see Adjusted basis) Determination of, Determining Basis, Adjusted Basis Other than cost, Basis Other Than Cost Building permit fees, Construction. Filing taxes for students Business use of home, Business Use or Rental of Home, Use test met for business part (with no business use in year of sale). Filing taxes for students C Casualties Amounts spent after to restore damaged property, Increases to Basis Deductible casualty losses, Decreases to Basis Disaster as cause of, Specific event safe harbors. Filing taxes for students Insurance payments for casualty losses, Decreases to Basis Change of address, Reminders Closing costs, Settlement fees or closing costs. Filing taxes for students Commissions, Selling expenses. Filing taxes for students , Settlement fees or closing costs. Filing taxes for students Community property Basis determination, Community property. Filing taxes for students Condemnation Gain exclusion, Home destroyed or condemned. Filing taxes for students Ownership and use test when previous home condemned, Previous home destroyed or condemned. Filing taxes for students Condominiums As main home, Main Home Basis determination, Condominium. Filing taxes for students Construction costs, Construction. Filing taxes for students Built by you, Built by you. Filing taxes for students Cooperative apartments As main home, Main Home Basis determination, Cooperative apartment. Filing taxes for students Ownership and use tests, Cooperative apartment. Filing taxes for students Cost as basis, Cost As Basis Credit reports Cost of obtaining, Settlement fees or closing costs. Filing taxes for students D Date of sale, Date of sale. Filing taxes for students Death Sale due to, Specific event safe harbors. Filing taxes for students Spouse's death before sale, ownership and use tests, Sale of main home by surviving spouse. Filing taxes for students Decreases to basis, Decreases to Basis Depreciation After May 6, 1997, Depreciation after May 6, 1997. Filing taxes for students Home used for business or rental purposes, Decreases to Basis Destroyed homes Gain exclusion, Home destroyed or condemned. Filing taxes for students Ownership and use test when previous home destroyed, Previous home destroyed or condemned. Filing taxes for students Disabilities, individuals with Ownership and use test, Exception for individuals with a disability. Filing taxes for students Disasters, Specific event safe harbors. Filing taxes for students Discharge of qualified principal residence indebtedness, Adjusted Basis Divorce Home received from spouse, Home received from spouse. Filing taxes for students Home transferred to spouse, Transfer to spouse. Filing taxes for students Ownership and use tests, Home transferred from spouse. Filing taxes for students Sale due to, Specific event safe harbors. Filing taxes for students Transfers after July 18, 1984, Transfers after July 18, 1984. Filing taxes for students Transfers before July 19, 1984, Transfers before July 19, 1984. Filing taxes for students Use of home after divorce, Use of home after divorce. Filing taxes for students Doctor's recommendation for sale, Doctor's recommendation safe harbor. Filing taxes for students E Easements, Decreases to Basis Employee of the intelligence community, Employee of the intelligence community. Filing taxes for students Employment Change in place of employment, Change in Place of Employment Payment by employer, when job transfer involved, Payment by employer. Filing taxes for students Energy Conservation subsidies, Decreases to Basis Credit, Decreases to Basis Exclusion of gain, Excluding the Gain, Nonqualified Use Reduced maximum exclusion, Reduced Maximum Exclusion Expatriates, Expatriates. Filing taxes for students F Federal mortgage subsidies Recapture of, Recapturing (Paying Back) a Federal Mortgage Subsidy Figuring gain or loss, Figuring Gain or Loss, More information. Filing taxes for students Fire insurance premiums, Settlement fees or closing costs. Filing taxes for students Foreclosure, Foreclosure or repossession. Filing taxes for students Foreign Service, Foreign Service member. Filing taxes for students Ownership and use tests, Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Filing taxes for students Form 1040 Reporting sale of home, Reporting the Sale Seller-financed mortgages, Seller-financed mortgage. Filing taxes for students Form 1040, Schedule A Real estate taxes, Real estate taxes. Filing taxes for students Form 1040, Schedule D Reporting sale of home, Reporting the Sale Form 1099-S Proceeds from real estate transactions, Date of sale. Filing taxes for students , Form 1099-S. Filing taxes for students , Form 1099-S. Filing taxes for students Form 2119 Sale of home, Adjusted Basis Form 6252 Installment sale income, Installment sale. Filing taxes for students Form 8828 Recapture tax, How to figure and report the recapture. Filing taxes for students Form 8960 Net Investment Income Tax, Net Investment Income Tax (NIIT). Filing taxes for students NIIT, Net Investment Income Tax (NIIT). Filing taxes for students Form 982 Discharge of indebtedness, Adjusted Basis Free tax services, Free help with your tax return. Filing taxes for students Future developments, Future Developments G Gain or loss Basis determination, Determining Basis, Adjusted Basis Exclusion of gain, Excluding the Gain Exclusion of gain, nonqualified use, Nonqualified Use Gain on sale, Gain on sale. Filing taxes for students Loss on sale, Loss on sale. Filing taxes for students Postponed from sale of previous home before May 7, 1997, Decreases to Basis Worksheet 2 to figure, Worksheet 2. Filing taxes for students Taxable Gain on Sale of Home—Completed Example 1 for Amy, Worksheet 1. Filing taxes for students Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 2. Filing taxes for students Taxable Gain on Sale of Home—Illustrated Example 2 for Peter and Betty Clark, Worksheet 2. Filing taxes for students Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White, Worksheet 2. Filing taxes for students Taxable Gain on Sale of Home Gifts Home received as, Home received as gift. Filing taxes for students H Health Sale of home due to, Health Help (see Tax help) Homebuyer credit Recapture, Recapture of the post-2008 first-time homebuyer credit. Filing taxes for students Houseboats As main home, Main Home I Important reminders Change of address, Reminders Home sold with undeducted points, Reminders Improvements Adjusted basis determination, Improvements. Filing taxes for students Charges for, Settlement fees or closing costs. Filing taxes for students Receipts and other records, Adjusted Basis Useful life of more than 1 year, Increases to Basis Increases to basis, Increases to Basis Individual taxpayer identification numbers (ITINs), Individual taxpayer identification number (ITIN). Filing taxes for students Inheritance Home received as, Home acquired from a decedent who died before or after 2010. Filing taxes for students Installment sales, Installment sale. Filing taxes for students Involuntary conversion, Specific event safe harbors. Filing taxes for students ITINs (Individual taxpayer identification numbers), Individual taxpayer identification number (ITIN). Filing taxes for students J Joint owners not married, Joint owners not married. Filing taxes for students Joint returns, Jointly owned home. Filing taxes for students Ownership and use tests, Married Persons L Land Sale of land on which home located, Land. Filing taxes for students Sale of vacant land, Vacant land. Filing taxes for students Legal fees, Selling expenses. Filing taxes for students , Settlement fees or closing costs. Filing taxes for students , Construction. Filing taxes for students Legal separation Sale due to, Specific event safe harbors. Filing taxes for students Like-kind exchange, Sale of home acquired in a like-kind exchange. Filing taxes for students Living expenses, Reasonable basic living expenses. Filing taxes for students Loan assumption fees, Settlement fees or closing costs. Filing taxes for students Loan placement fees, Selling expenses. Filing taxes for students Loss (see Gain or loss) M Main home Defined, Main Home Factors used to determine, Factors used to determine main home. Filing taxes for students Property used partly as, Property used partly as your main home. Filing taxes for students , Property Used Partly for Business or Rental Married taxpayers (see Joint returns) Maximum exclusion, Maximum Exclusion Reduced, Reduced Maximum Exclusion Military (see Armed forces) Missing children, photographs of, Reminders Mobile homes As main home, Main Home More than one home, More than one home. Filing taxes for students Mortgage fees, Settlement fees or closing costs. Filing taxes for students Mortgage insurance premiums, Settlement fees or closing costs. Filing taxes for students Mortgage subsidies Recapturing (paying back) federal mortgage subsidy, Recapturing (Paying Back) a Federal Mortgage Subsidy Mortgages, seller-financed, Seller-financed mortgage. Filing taxes for students Moving expense, Settlement fees or closing costs. Filing taxes for students Multiple births Sale due to, Specific event safe harbors. Filing taxes for students N Nonqualified use, Nonqualified Use Nonresident aliens Spouse as, transfer of home to, Exception. Filing taxes for students O Option to buy home, Option to buy. Filing taxes for students Ownership and use tests, Ownership and Use Tests, Ownership and use tests met at different times. Filing taxes for students P Partly used for business, Property Used Partly for Business or Rental Personal property Selling price of home not to include, Personal property. Filing taxes for students Points, Selling expenses. Filing taxes for students Home sold with undeducted points, Reminders Seller-paid, Seller-paid points. Filing taxes for students Publications (see Tax help) R Real estate taxes, Settlement fees or closing costs. Filing taxes for students , Real estate taxes. Filing taxes for students Deducting in year of sale, Deducting Taxes in the Year of Sale Recapture of federal mortgage subsidy, Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of first-time homebuyer credit, Recapture of First-Time Homebuyer Credit Recording fees, Settlement fees or closing costs. Filing taxes for students Recordkeeping, Adjusted Basis Reduced maximum exclusion, Reduced Maximum Exclusion Worksheet 3, Worksheet 3. Filing taxes for students Reduced Maximum Exclusion Refinancing, Settlement fees or closing costs. Filing taxes for students Relatives Sale of home to, Exception for sales to related persons. Filing taxes for students Remainder interest Sale of, Sale of remainder interest. Filing taxes for students Remodeling, Improvements. Filing taxes for students , Exception. Filing taxes for students (see also Improvements) Rental of home, Business Use or Rental of Home, Use test met for business part (with no business use in year of sale). Filing taxes for students Before closing, by buyer, Settlement fees or closing costs. Filing taxes for students Partial use, Property Used Partly for Business or Rental Repairs, Settlement fees or closing costs. Filing taxes for students , Improvements. Filing taxes for students , Repairs. Filing taxes for students (see also Improvements) Reporting the sale, Reporting the Sale, Worksheet 2. Filing taxes for students Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White Repossession, Foreclosure or repossession. Filing taxes for students Right-of-ways, Decreases to Basis S Safe harbors Distance safe harbor, Distance safe harbor. Filing taxes for students Doctor's recommendation for sale, Doctor's recommendation safe harbor. Filing taxes for students Unforeseeable events, Specific event safe harbors. Filing taxes for students Sales commissions, Selling expenses. Filing taxes for students , Settlement fees or closing costs. Filing taxes for students Sales to related persons, Exception for sales to related persons. Filing taxes for students Self-employed persons Change in status causing inability to pay basic expenses, Specific event safe harbors. Filing taxes for students Seller-financed mortgages, Seller-financed mortgage. Filing taxes for students Seller-paid points, Seller-paid points. Filing taxes for students Selling expenses, Selling expenses. Filing taxes for students Selling price, Selling Price Separate returns, Separate returns. Filing taxes for students Settlement fees, Settlement fees or closing costs. Filing taxes for students Spouse Death of (see Surviving spouse) Divorce, transfers subsequent to (see Divorce) Survey fees, Settlement fees or closing costs. Filing taxes for students Surviving spouse Basis determination, Surviving spouse. Filing taxes for students Ownership and use tests, Sale of main home by surviving spouse. Filing taxes for students T Tax help, How To Get Tax Help Temporary absence, Temporary absence. Filing taxes for students Temporary housing, Temporary housing. Filing taxes for students Title insurance, Settlement fees or closing costs. Filing taxes for students Title search fees, Settlement fees or closing costs. Filing taxes for students Trading homes, Trading (exchanging) homes. Filing taxes for students , Home received as trade. Filing taxes for students Transfer taxes, Settlement fees or closing costs. Filing taxes for students , Transfer taxes. Filing taxes for students Transfer to spouse, Transfer to spouse. Filing taxes for students After July 18, 1984, Transfers after July 18, 1984. Filing taxes for students Before July 19, 1984, Transfers before July 19, 1984. Filing taxes for students TTY/TDD information, How To Get Tax Help U Unemployment, Specific event safe harbors. Filing taxes for students Unforeseen circumstances, Unforeseen Circumstances Uniformed services (see Armed forces) Use tests, Ownership and Use Tests, Ownership and use tests met at different times. Filing taxes for students Utilities Charges for installing, Settlement fees or closing costs. Filing taxes for students Charges related to occupancy of house before closing, Settlement fees or closing costs. Filing taxes for students Energy conservation subsidy, Decreases to Basis Meter and connection charges for construction, Construction. Filing taxes for students V Vacant land Sale of, Vacant land. Filing taxes for students W Worksheets, Worksheets. Filing taxes for students Adjusted basis (Worksheet 1), Determining Basis, Worksheet 1. Filing taxes for students Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 1. Filing taxes for students Adjusted Basis of Home Sold—Illustrated Example 3 for Emily White, Worksheet 1 Instructions. Filing taxes for students Adjusted Basis of Home Sold Gain (or loss), exclusion, and taxable gain (Worksheet 2), Worksheet 2. Filing taxes for students Taxable Gain on Sale of Home—Completed Example 1 for Amy, Worksheet 1. Filing taxes for students Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 2. Filing taxes for students Taxable Gain on Sale of Home—Illustrated Example 2 for Peter and Betty Clark, Worksheet 2. Filing taxes for students Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White, Worksheet 2. Filing taxes for students Taxable Gain on Sale of Home Recordkeeping and, Adjusted Basis Reduced maximum exclusion (Worksheet 3), Worksheet 3. Filing taxes for students Reduced Maximum Exclusion Prev  Up     Home   More Online Publications
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Credits & Deductions For Businesses

Alternative Motor Vehicle Credit
The Alternative Fuel Motor Vehicle Credit was enacted by the Energy Policy Act of 2005 and includes separate credits for four distinct categories of vehicles: Hybrid vehicles, Fuel Cell vehicles, Qualified Alternative Fuel Motor vehicles (QAFMV) and Advanced Lean Burn Technology vehicles. The amount of the potential credit varies by type of vehicle and which of the four credits applies.

Manufacturers' Energy Efficient Appliance Credit
Act Section 305 - Modifications of Energy Efficient Appliance Credit for Appliances Produced After 2007

Plug-In Electric Drive Vehicle Credit (IRC 30D)
Plug-In Electric Drive Vehicle Credit (IRC 30D) - Internal Revenue Code Section 30D provides a credit for Qualified Plug-in Electric Drive Motor Vehicles including passenger vehicles and light trucks.

Research Credit
Guidelines and audit technique guide are provided for field examiners on the examination of Research Credit cases.

Deducting Business Expenses
Find out what qualifies as a deductible business expense, including depreciation.

Abusive Tax Shelters and Transactions
The Internal Revenue Service has a comprehensive strategy in place to combat abusive tax shelters and transactions. This strategy includes guidance on abusive transactions, regulations governing tax shelters, a hotline for taxpayers to use to report abusive technical transactions, and enforcement activity against abusive tax shelter promoters and investors.

Page Last Reviewed or Updated: 18-Feb-2014

The Filing Taxes For Students

Filing taxes for students 11. Filing taxes for students   Other Expenses Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Reimbursement of Travel, Meals, and EntertainmentReimbursements Miscellaneous ExpensesMeaning of generally enforced. Filing taxes for students Kickbacks. Filing taxes for students Form 1099-MISC. Filing taxes for students Exception. Filing taxes for students Tax preparation fees. Filing taxes for students Covered executive branch official. Filing taxes for students Exceptions to denial of deduction. Filing taxes for students Indirect political contributions. Filing taxes for students Type of deduction. Filing taxes for students Repayment—$3,000 or less. Filing taxes for students Repayment—over $3,000. Filing taxes for students Method 1. Filing taxes for students Method 2. Filing taxes for students Repayment does not apply. Filing taxes for students Year of deduction (or credit). Filing taxes for students Telephone. Filing taxes for students What's New Standard mileage rate. Filing taxes for students  Beginning in 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for business use is 56. Filing taxes for students 5 cents per mile. Filing taxes for students For more information, see Car and truck expenses under Miscellaneous Expenses. Filing taxes for students Introduction This chapter covers business expenses that may not have been explained to you, as a business owner, in previous chapters of this publication. Filing taxes for students Topics - This chapter discusses: Travel, meals, and entertainment Bribes and kickbacks Charitable contributions Education expenses Lobbying expenses Penalties and fines Repayments (claim of right) Other miscellaneous expenses Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 463 Travel, Entertainment, Gift, and Car Expenses 526 Charitable Contributions 529 Miscellaneous Deductions 544 Sales and Other Dispositions of Assets 970 Tax Benefits for Education 1542 Per Diem Rates See chapter 12 for information about getting publications and forms. Filing taxes for students Reimbursement of Travel, Meals, and Entertainment The following discussion explains how to handle any reimbursements or allowances you may provide to your employees under a reimbursement or allowance arrangement for travel, meals, and entertainment expenses. Filing taxes for students If you are self-employed and report your income and expenses on Schedule C or C-EZ (Form 1040), see Publication 463. Filing taxes for students To be deductible for tax purposes, expenses incurred for travel, meals, and entertainment must be ordinary and necessary expenses incurred while carrying on your trade or business. Filing taxes for students Generally, you also must show that entertainment expenses (including meals) are directly related to, or associated with, the conduct of your trade or business. Filing taxes for students For more information on travel, meals, and entertainment, including deductibility, see Publication 463. Filing taxes for students Reimbursements A “reimbursement or allowance arrangement” provides for payment of advances, reimbursements, and allowances for travel, meals, and entertainment expenses incurred by your employees during the ordinary course of business. Filing taxes for students If the expenses are substantiated, you can deduct the allowable amount on your tax return. Filing taxes for students Because of differences between accounting methods and tax law, the amount you can deduct for tax purposes may not be the same as the amount you deduct on your business books and records. Filing taxes for students For example, you can deduct 100% of the cost of meals on your business books and records. Filing taxes for students However, only 50% of these costs are allowed by law as a tax deduction. Filing taxes for students How you deduct a business expense under a reimbursement or allowance arrangement depends on whether you have: An accountable plan, or A nonaccountable plan. Filing taxes for students If you reimburse these expenses under an accountable plan, deduct them as travel, meals, or entertainment expenses. Filing taxes for students If you reimburse these expenses under a nonaccountable plan, report the reimbursements as wages on Form W-2, Wage and Tax Statement, and deduct them as wages on the appropriate line of your tax return. Filing taxes for students If you make a single payment to your employees and it includes both wages and an expense reimbursement, you must specify the amount of the reimbursement and report it accordingly. Filing taxes for students See Table 11-1 , Reporting Reimbursements. Filing taxes for students Accountable Plans An accountable plan requires your employees to meet all of the following requirements. Filing taxes for students Each employee must: Have paid or incurred deductible expenses while performing services as your employee, Adequately account to you for these expenses within a reasonable period of time, and Return any excess reimbursement or allowance within a reasonable period of time. Filing taxes for students An arrangement under which you advance money to employees is treated as meeting (3) above only if the following requirements are also met. Filing taxes for students The advance is reasonably calculated not to exceed the amount of anticipated expenses. Filing taxes for students You make the advance within a reasonable period of time of your employee paying or incurring the expense. Filing taxes for students If any expenses reimbursed under this arrangement are not substantiated, or an excess reimbursement is not returned within a reasonable period of time by an employee, you cannot treat these expenses as reimbursed under an accountable plan. Filing taxes for students Instead, treat the reimbursed expenses as paid under a nonaccountable plan, discussed later. Filing taxes for students Adequate accounting. Filing taxes for students   Your employees must adequately account to you for their travel, meals, and entertainment expenses. Filing taxes for students They must give you documentary evidence of their travel, mileage, and other employee business expenses. Filing taxes for students This evidence should include items such as receipts, along with either a statement of expenses, an account book, a day-planner, or similar record in which the employee entered each expense at or near the time the expense was incurred. Filing taxes for students Excess reimbursement or allowance. Filing taxes for students   An excess reimbursement or allowance is any amount you pay to an employee that is more than the business-related expenses for which the employee adequately accounted. Filing taxes for students The employee must return any excess reimbursement or other expense allowance to you within a reasonable period of time. Filing taxes for students Reasonable period of time. Filing taxes for students   A reasonable period of time depends on the facts and circumstances. Filing taxes for students Generally, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. Filing taxes for students You give an advance within 30 days of the time the employee pays or incurs the expense. Filing taxes for students Your employees adequately account for their expenses within 60 days after the expenses were paid or incurred. Filing taxes for students Your employees return any excess reimbursement within 120 days after the expenses were paid or incurred. Filing taxes for students You give a periodic statement (at least quarterly) to your employees that asks them to either return or adequately account for outstanding advances and they comply within 120 days of the date of the statement. Filing taxes for students How to deduct. Filing taxes for students   You can claim a deduction for travel, meals, and entertainment expenses if you reimburse your employees for these expenses under an accountable plan. Filing taxes for students Generally, the amount you can deduct for meals and entertainment is subject to a 50% limit, discussed later. Filing taxes for students If you are a sole proprietor, or are filing as a single member limited liability company, deduct the travel reimbursement on line 24a and the deductible part of the meals and entertainment reimbursement on line 24b, Schedule C (Form 1040) or line 2, Schedule C-EZ (Form 1040). Filing taxes for students   If you are filing an income tax return for a corporation, include the reimbursement on the Other deductions line of Form 1120, U. Filing taxes for students S. Filing taxes for students Corporation Income Tax Return. Filing taxes for students If you are filing any other business income tax return, such as a partnership or S corporation return, deduct the reimbursement on the appropriate line of the return as provided in the instructions for that return. Filing taxes for students Table 11-1. Filing taxes for students Reporting Reimbursements IF the type of reimbursement (or other expense allowance) arrangement is under THEN the employer reports on Form W-2 An accountable plan with: Actual expense reimbursement:  Adequate accounting made and excess returned No amount. Filing taxes for students Actual expense reimbursement:  Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. Filing taxes for students Per diem or mileage allowance up to the federal rate:  Adequate accounting made and excess returned No amount. Filing taxes for students Per diem or mileage allowance up to the federal rate:  Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. Filing taxes for students The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Filing taxes for students Per diem or mileage allowance exceeds the federal rate:  Adequate accounting made up to the federal rate only and excess not returned The excess amount as wages in box 1. Filing taxes for students The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Filing taxes for students A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan The entire amount as wages in box 1. Filing taxes for students No reimbursement plan The entire amount as wages in box 1. Filing taxes for students Per Diem and Car Allowances You can reimburse your employees under an accountable plan based on travel days, miles, or some other fixed allowance. Filing taxes for students In these cases, your employee is considered to have accounted to you for the amount of the expense that does not exceed the rates established by the federal government. Filing taxes for students Your employee must actually substantiate to you the other elements of the expense, such as time, place, and business purpose. Filing taxes for students Federal rate. Filing taxes for students   The federal rate can be figured using any one of the following methods. Filing taxes for students For car expenses: The standard mileage rate. Filing taxes for students A fixed and variable rate (FAVR). Filing taxes for students For per diem amounts: The regular federal per diem rate. Filing taxes for students The standard meal allowance. Filing taxes for students The high-low rate. Filing taxes for students Car allowance. Filing taxes for students   Your employee is considered to have accounted to you for car expenses that do not exceed the standard mileage rate. Filing taxes for students Beginning in 2013, the standard business mileage rate is 56. Filing taxes for students 5 cents per mile. Filing taxes for students   You can choose to reimburse your employees using a fixed and variable rate (FAVR) allowance. Filing taxes for students This is an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your employees' variable operating costs (such as gas, oil, etc. Filing taxes for students ) plus a flat amount to cover your employees' fixed costs (such as depreciation, insurance, etc. Filing taxes for students ). Filing taxes for students For information on using a FAVR allowance, see Revenue Procedure 2010-51, available at www. Filing taxes for students irs. Filing taxes for students gov/irb/2010-51_IRB/ar14. Filing taxes for students html and Notice 2012-72, available at www. Filing taxes for students irs. Filing taxes for students gov/irb/2012-50_IRB/ar10. Filing taxes for students html. Filing taxes for students Per diem allowance. Filing taxes for students   If your employee actually substantiates to you the other elements (discussed earlier) of the expenses reimbursed using the per diem allowance, how you report and deduct the allowance depends on whether the allowance is for lodging and meal expenses or for meal expenses only and whether the allowance is more than the federal rate. Filing taxes for students Regular federal per diem rate. Filing taxes for students   The regular federal per diem rate is the highest amount the federal government will pay to its employees while away from home on travel. Filing taxes for students It has two components: Lodging expense, and Meal and incidental expense (M&IE). Filing taxes for students The rates are different for different locations. Filing taxes for students Publication 1542 lists the rates in the continental United States. Filing taxes for students Standard meal allowance. Filing taxes for students   The federal rate for meal and incidental expenses (M&IE) is the standard meal allowance. Filing taxes for students You can pay only an M&IE allowance to employees who travel away from home if: You pay the employee for actual expenses for lodging based on receipts submitted to you, You provide for the lodging, You pay for the actual expense of the lodging directly to the provider, You do not have a reasonable belief that lodging expenses were incurred by the employee, or The allowance is computed on a basis similar to that used in computing the employee's wages (that is, number of hours worked or miles traveled). Filing taxes for students Internet access. Filing taxes for students    Per diem rates are available on the Internet. Filing taxes for students You can access per diem rates at www. Filing taxes for students gsa. Filing taxes for students gov/perdiemrates. Filing taxes for students High-low method. Filing taxes for students   This is a simplified method of computing the federal per diem rate for travel within the continental United States. Filing taxes for students It eliminates the need to keep a current list of the per diem rate for each city. Filing taxes for students   Under the high-low method, the per diem amount for travel during January through September of 2013 is $242 ($65 for M&IE) for certain high-cost locations. Filing taxes for students All other areas have a per diem amount of $163 ($52 for M&IE). Filing taxes for students The high-cost locations eligible for the higher per diem amount under the high-low method are listed in Publication 1542. Filing taxes for students   Effective October 1, 2013, the per diem rate for high-cost locations increased to $251 ($65 for M&IE). Filing taxes for students The rate for all other locations increased to $170 ($52 for M&IE). Filing taxes for students For October, November, and December 2013, you can either continue to use the rates described in the preceding paragraph or change to the new rates. Filing taxes for students However, you must use the same rate for all employees reimbursed under the high-low method. Filing taxes for students   For more information about the high-low method, see Notice 2013-65, available at www. Filing taxes for students irs. Filing taxes for students gov/irb/2013-44_IRB/ar13. Filing taxes for students html. Filing taxes for students See Publication 1542 (available on the Internet at IRS. Filing taxes for students gov) for the current per diem rates for all locations. Filing taxes for students Reporting per diem and car allowances. Filing taxes for students   The following discussion explains how to report per diem and car allowances. Filing taxes for students The manner in which you report them depends on how the allowance compares to the federal rate. Filing taxes for students See Table 11-1. Filing taxes for students Allowance less than or equal to the federal rate. Filing taxes for students   If your allowance for the employee is less than or equal to the appropriate federal rate, that allowance is not included as part of the employee's pay in box 1 of the employee's Form W-2. Filing taxes for students Deduct the allowance as travel expenses (including meals that may be subject to the 50% limit, discussed later). Filing taxes for students See How to deduct under Accountable Plans, earlier. Filing taxes for students Allowance more than the federal rate. Filing taxes for students   If your employee's allowance is more than the appropriate federal rate, you must report the allowance as two separate items. Filing taxes for students   Include the allowance amount up to the federal rate in box 12 (code L) of the employee's Form W-2. Filing taxes for students Deduct it as travel expenses (as explained above). Filing taxes for students This part of the allowance is treated as reimbursed under an accountable plan. Filing taxes for students   Include the amount that is more than the federal rate in box 1 (and in boxes 3 and 5 if they apply) of the employee's Form W-2. Filing taxes for students Deduct it as wages subject to income tax withholding, social security, Medicare, and federal unemployment taxes. Filing taxes for students This part of the allowance is treated as reimbursed under a nonaccountable plan as explained later under Nonaccountable Plans. Filing taxes for students Meals and Entertainment Under an accountable plan, you can generally deduct only 50% of any otherwise deductible business-related meal and entertainment expenses you reimburse your employees. Filing taxes for students The deduction limit applies even if you reimburse them for 100% of the expenses. Filing taxes for students Application of the 50% limit. Filing taxes for students   The 50% deduction limit applies to reimbursements you make to your employees for expenses they incur for meals while traveling away from home on business and for entertaining business customers at your place of business, a restaurant, or another location. Filing taxes for students It applies to expenses incurred at a business convention or reception, business meeting, or business luncheon at a club. Filing taxes for students The deduction limit may also apply to meals you furnish on your premises to your employees. Filing taxes for students Related expenses. Filing taxes for students   Taxes and tips relating to a meal or entertainment activity you reimburse to your employee under an accountable plan are included in the amount subject to the 50% limit. Filing taxes for students Reimbursements you make for expenses, such as cover charges for admission to a nightclub, rent paid for a room to hold a dinner or cocktail party, or the amount you pay for parking at a sports arena, are all subject to the 50% limit. Filing taxes for students However, the cost of transportation to and from an otherwise allowable business meal or a business-related entertainment activity is not subject to the 50% limit. Filing taxes for students Amount subject to 50% limit. Filing taxes for students   If you provide your employees with a per diem allowance only for meal and incidental expenses, the amount treated as an expense for food and beverages is the lesser of the following. Filing taxes for students The per diem allowance. Filing taxes for students The federal rate for M&IE. Filing taxes for students   If you provide your employees with a per diem allowance that covers lodging, meals, and incidental expenses, you must treat an amount equal to the federal M&IE rate for the area of travel as an expense for food and beverages. Filing taxes for students If the per diem allowance you provide is less than the federal per diem rate for the area of travel, you can treat 40% of the per diem allowance as the amount for food and beverages. Filing taxes for students Meal expenses when subject to “hours of service” limits. Filing taxes for students   You can deduct 80% of the cost of reimbursed meals your employees consume while away from their tax home on business during, or incident to, any period subject to the Department of Transportation's “hours of service” limits. Filing taxes for students   See Publication 463 for a detailed discussion of individuals subject to the Department of Transportation's “hours of service” limits. Filing taxes for students De minimis (minimal) fringe benefit. Filing taxes for students   The 50% limit does not apply to an expense for food or beverage that is excluded from the gross income of an employee because it is a de minimis fringe benefit. Filing taxes for students See Publication 15-B for additional information on de minimis fringe benefits. Filing taxes for students Company cafeteria or executive dining room. Filing taxes for students   The cost of food and beverages you provide primarily to your employees on your business premises is deductible. Filing taxes for students This includes the cost of maintaining the facilities for providing the food and beverages. Filing taxes for students These expenses are subject to the 50% limit unless they qualify as a de minimis fringe benefit, as just discussed, or unless they are compensation to your employees (explained later). Filing taxes for students Employee activities. Filing taxes for students   The expense of providing recreational, social, or similar activities (including the use of a facility) for your employees is deductible and is not subject to the 50% limit. Filing taxes for students The benefit must be primarily for your employees who are not highly compensated. Filing taxes for students   For this purpose, a highly compensated employee is an employee who meets either of the following requirements. Filing taxes for students Owned a 10% or more interest in the business during the year or the preceding year. Filing taxes for students An employee is treated as owning any interest owned by his or her brother, sister, spouse, ancestors, and lineal descendants. Filing taxes for students Received more than $115,000 in pay for the preceding year. Filing taxes for students You can choose to include only employees who were also in the top 20% of employees when ranked by pay for the preceding year. Filing taxes for students   For example, the expenses for food, beverages, and entertainment for a company-wide picnic are not subject to the 50% limit. Filing taxes for students Meals or entertainment treated as compensation. Filing taxes for students   The 50% limit does not apply to either of the following. Filing taxes for students Expenses for meals or entertainment that you treat as: Compensation to an employee who was the recipient of the meals or entertainment, and Wages subject to withholding of federal income tax. Filing taxes for students Expenses for meals or entertainment if: A recipient of the meals or entertainment who is not your employee has to include the expenses in gross income as compensation for services or as a prize or award, and You include that amount on a Form 1099 issued to the recipient, if a Form 1099 is required. Filing taxes for students Sales of meals or entertainment. Filing taxes for students   You can deduct the cost of meals or entertainment (including the use of facilities) you sell to the public. Filing taxes for students For example, if you run a nightclub, your expense for the entertainment you furnish to your customers, such as a floor show, is a business expense that is fully deductible. Filing taxes for students The 50% limit does not apply to this expense. Filing taxes for students Providing meals or entertainment to general public to promote goodwill. Filing taxes for students   You can deduct the cost of providing meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. Filing taxes for students The 50% limit does not apply to this expense. Filing taxes for students Director, stockholder, or employee meetings. Filing taxes for students   You can deduct entertainment expenses directly related to business meetings of your employees, partners, stockholders, agents, or directors. Filing taxes for students You can provide some minor social activities, but the main purpose of the meeting must be your company's business. Filing taxes for students These expenses are subject to the 50% limit. Filing taxes for students Trade association meetings. Filing taxes for students   You can deduct expenses directly related to and necessary for attending business meetings or conventions of certain tax-exempt organizations. Filing taxes for students These organizations include business leagues, chambers of commerce, real estate boards, and trade and professional associations. Filing taxes for students Nonaccountable Plans A nonaccountable plan is an arrangement that does not meet the requirements for an accountable plan. Filing taxes for students All amounts paid, or treated as paid, under a nonaccountable plan are reported as wages on Form W-2. Filing taxes for students The payments are subject to income tax withholding, social security, Medicare, and federal unemployment taxes. Filing taxes for students You can deduct the reimbursement as compensation or wages only to the extent it meets the deductibility tests for employees' pay in chapter 2. Filing taxes for students Deduct the allowable amount as compensation or wages on the appropriate line of your income tax return, as provided in its instructions. Filing taxes for students Miscellaneous Expenses In addition to travel, meal, and entertainment expenses, there are other expenses you can deduct. Filing taxes for students Advertising expenses. Filing taxes for students   You generally can deduct reasonable advertising expenses that are directly related to your business activities. Filing taxes for students Generally, you cannot deduct amounts paid to influence legislation (i. Filing taxes for students e. Filing taxes for students , lobbying). Filing taxes for students See Lobbying expenses , later. Filing taxes for students   You can usually deduct as a business expense the cost of institutional or goodwill advertising to keep your name before the public if it relates to business you reasonably expect to gain in the future. Filing taxes for students For example, the cost of advertising that encourages people to contribute to the Red Cross, to buy U. Filing taxes for students S. Filing taxes for students Savings Bonds, or to participate in similar causes is usually deductible. Filing taxes for students Anticipated liabilities. Filing taxes for students   Anticipated liabilities or reserves for anticipated liabilities are not deductible. Filing taxes for students For example, assume you sold 1-year TV service contracts this year totaling $50,000. Filing taxes for students From experience, you know you will have expenses of about $15,000 in the coming year for these contracts. Filing taxes for students You cannot deduct any of the $15,000 this year by charging expenses to a reserve or liability account. Filing taxes for students You can deduct your expenses only when you actually pay or accrue them, depending on your accounting method. Filing taxes for students Bribes and kickbacks. Filing taxes for students   Engaging in the payment of bribes or kickbacks is a serious criminal matter. Filing taxes for students Such activity could result in criminal prosecution. Filing taxes for students Any payments that appear to have been made, either directly or indirectly, to an official or employee of any government or an agency or instrumentality of any government are not deductible for tax purposes and are in violation of the law. Filing taxes for students   Payments paid directly or indirectly to a person in violation of any federal or state law (but only if that state law is generally enforced, defined below) that provides for a criminal penalty or for the loss of a license or privilege to engage in a trade or business are also not allowed as a deduction for tax purposes. Filing taxes for students Meaning of “generally enforced. Filing taxes for students ”   A state law is considered generally enforced unless it is never enforced or enforced only for infamous persons or persons whose violations are extraordinarily flagrant. Filing taxes for students For example, a state law is generally enforced unless proper reporting of a violation of the law results in enforcement only under unusual circumstances. Filing taxes for students Kickbacks. Filing taxes for students   A kickback is a payment for referring a client, patient, or customer. Filing taxes for students The common kickback situation occurs when money or property is given to someone as payment for influencing a third party to purchase from, use the services of, or otherwise deal with the person who pays the kickback. Filing taxes for students In many cases, the person whose business is being sought or enjoyed by the person who pays the kickback is not aware of the payment. Filing taxes for students   For example, the Yard Corporation is in the business of repairing ships. Filing taxes for students It returns 10% of the repair bills as kickbacks to the captains and chief officers of the vessels it repairs. Filing taxes for students Although this practice is considered an ordinary and necessary expense of getting business, it is clearly a violation of a state law that is generally enforced. Filing taxes for students These expenditures are not deductible for tax purposes, whether or not the owners of the shipyard are subsequently prosecuted. Filing taxes for students Form 1099-MISC. Filing taxes for students   It does not matter whether any kickbacks paid during the tax year are deductible on your income tax return in regards to information reporting. Filing taxes for students See Form 1099-MISC for more information. Filing taxes for students Car and truck expenses. Filing taxes for students   The costs of operating a car, truck, or other vehicle in your business are deductible. Filing taxes for students For more information on how to figure your deduction, see Publication 463. Filing taxes for students Charitable contributions. Filing taxes for students   Cash payments to an organization, charitable or otherwise, may be deductible as business expenses if the payments are not charitable contributions or gifts and are directly related to your business. Filing taxes for students If the payments are charitable contributions or gifts, you cannot deduct them as business expenses. Filing taxes for students However, corporations (other than S corporations) can deduct charitable contributions on their income tax returns, subject to limitations. Filing taxes for students See the Instructions for Form 1120 for more information. Filing taxes for students Sole proprietors, partners in a partnership, or shareholders in an S corporation may be able to deduct charitable contributions made by their business on Schedule A (Form 1040). Filing taxes for students Example. Filing taxes for students You paid $15 to a local church for a half-page ad in a program for a concert it is sponsoring. Filing taxes for students The purpose of the ad was to encourage readers to buy your products. Filing taxes for students Your payment is not a charitable contribution. Filing taxes for students You can deduct it as an advertising expense. Filing taxes for students Example. Filing taxes for students You made a $100,000 donation to a committee organized by the local Chamber of Commerce to bring a convention to your city, intended to increase business activity, including yours. Filing taxes for students Your payment is not a charitable contribution. Filing taxes for students You can deduct it as a business expense. Filing taxes for students See Publication 526 for a discussion of donated inventory, including capital gain property. Filing taxes for students Club dues and membership fees. Filing taxes for students   Generally, you cannot deduct amounts paid or incurred for membership in any club organized for business, pleasure, recreation, or any other social purpose. Filing taxes for students This includes country clubs, golf and athletic clubs, hotel clubs, sporting clubs, airline clubs, and clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. Filing taxes for students Exception. Filing taxes for students   The following organizations are not treated as clubs organized for business, pleasure, recreation, or other social purpose unless one of the main purposes is to conduct entertainment activities for members or their guests or to provide members or their guests with access to entertainment facilities. Filing taxes for students Boards of trade. Filing taxes for students Business leagues. Filing taxes for students Chambers of commerce. Filing taxes for students Civic or public service organizations. Filing taxes for students Professional organizations such as bar associations and medical associations. Filing taxes for students Real estate boards. Filing taxes for students Trade associations. Filing taxes for students Credit card convenience fees. Filing taxes for students   Credit card companies charge a fee to businesses who accept their cards. Filing taxes for students This fee when paid or incurred by the business can be deducted as a business expense. Filing taxes for students Damages recovered. Filing taxes for students   Special rules apply to compensation you receive for damages sustained as a result of patent infringement, breach of contract or fiduciary duty, or antitrust violations. Filing taxes for students You must include this compensation in your income. Filing taxes for students However, you may be able to take a special deduction. Filing taxes for students The deduction applies only to amounts recovered for actual economic injury, not any additional amount. Filing taxes for students The deduction is the smaller of the following. Filing taxes for students The amount you received or accrued for damages in the tax year reduced by the amount you paid or incurred in the year to recover that amount. Filing taxes for students Your losses from the injury you have not deducted. Filing taxes for students Demolition expenses or losses. Filing taxes for students   Amounts paid or incurred to demolish a structure are not deductible. Filing taxes for students These amounts are added to the basis of the land where the demolished structure was located. Filing taxes for students Any loss for the remaining undepreciated basis of a demolished structure would not be recognized until the property is disposed of. Filing taxes for students Education expenses. Filing taxes for students   Ordinary and necessary expenses paid for the cost of the education and training of your employees are deductible. Filing taxes for students See Education Expenses in chapter 2. Filing taxes for students   You can also deduct the cost of your own education (including certain related travel) related to your trade or business. Filing taxes for students You must be able to show the education maintains or improves skills required in your trade or business, or that it is required by law or regulations, for keeping your license to practice, status, or job. Filing taxes for students For example, an attorney can deduct the cost of attending Continuing Legal Education (CLE) classes that are required by the state bar association to maintain his or her license to practice law. Filing taxes for students   Education expenses you incur to meet the minimum requirements of your present trade or business, or those that qualify you for a new trade or business, are not deductible. Filing taxes for students This is true even if the education maintains or improves skills presently required in your business. Filing taxes for students For more information on education expenses, see Publication 970. Filing taxes for students Franchise, trademark, trade name. Filing taxes for students   If you buy a franchise, trademark, or trade name, you can deduct the amount you pay or incur as a business expense only if your payments are part of a series of payments that are: Contingent on productivity, use, or disposition of the item, Payable at least annually for the entire term of the transfer agreement, and Substantially equal in amount (or payable under a fixed formula). Filing taxes for students   When determining the term of the transfer agreement, include all renewal options and any other period for which you and the transferrer reasonably expect the agreement to be renewed. Filing taxes for students   A franchise includes an agreement that gives one of the parties to the agreement the right to distribute, sell, or provide goods, services, or facilities within a specified area. Filing taxes for students Impairment-related expenses. Filing taxes for students   If you are disabled, you can deduct expenses necessary for you to be able to work (impairment-related expenses) as a business expense, rather than as a medical expense. Filing taxes for students   You are disabled if you have either of the following. Filing taxes for students A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed. Filing taxes for students A physical or mental impairment that substantially limits one or more of your major life activities. Filing taxes for students   The expense qualifies as a business expense if all the following apply. Filing taxes for students Your work clearly requires the expense for you to satisfactorily perform that work. Filing taxes for students The goods or services purchased are clearly not needed or used, other than incidentally, in your personal activities. Filing taxes for students Their treatment is not specifically provided for under other tax law provisions. Filing taxes for students Example. Filing taxes for students You are blind. Filing taxes for students You must use a reader to do your work, both at and away from your place of work. Filing taxes for students The reader's services are only for your work. Filing taxes for students You can deduct your expenses for the reader as a business expense. Filing taxes for students Internet-related expenses. Filing taxes for students   Generally, you can deduct internet-related expenses including domain registrations fees and webmaster consulting costs. Filing taxes for students If you are starting a business you may have to amortize these expenses as start-up costs. Filing taxes for students For more information about amortizing start-up and organizational costs, see chapter 8. Filing taxes for students Interview expense allowances. Filing taxes for students   Reimbursements you make to job candidates for transportation or other expenses related to interviews for possible employment are not wages. Filing taxes for students You can deduct the reimbursements as a business expense. Filing taxes for students However, expenses for food, beverages, and entertainment are subject to the 50% limit discussed earlier under Meals and Entertainment. Filing taxes for students Legal and professional fees. Filing taxes for students   Fees charged by accountants and attorneys that are ordinary and necessary expenses directly related to operating your business are deductible as business expenses. Filing taxes for students However, usually legal fees you pay to acquire business assets are not deductible. Filing taxes for students These costs are added to the basis of the property. Filing taxes for students   Fees that include payments for work of a personal nature (such as drafting a will, or damages arising from a personal injury) are not allowed as a business deduction on Schedule C or C-EZ. Filing taxes for students If the invoice includes both business and personal charges, compute the business portion as follows: multiply the total amount of the bill by a fraction, the numerator of which is the amount attributable to business matters, the denominator of which is the total amount paid. Filing taxes for students The result is the portion of the invoice attributable to business expenses. Filing taxes for students The portion attributable to personal matters is the difference between the total amount and the business portion (computed above). Filing taxes for students   Legal fees relating to personal tax advice may be deductible on Schedule A (Form 1040), if you itemize deductions. Filing taxes for students However, the deduction is subject to the 2% limitation on miscellaneous itemized deductions. Filing taxes for students See Publication 529, Miscellaneous Deductions. Filing taxes for students Tax preparation fees. Filing taxes for students   The cost of hiring a tax professional, such as a C. Filing taxes for students P. Filing taxes for students A. Filing taxes for students , to prepare that part of your tax return relating to your business as a sole proprietor is deductible on Schedule C or Schedule C-EZ. Filing taxes for students Any remaining cost may be deductible on Schedule A (Form 1040) if you itemize deductions. Filing taxes for students   You can also claim a business deduction for amounts paid or incurred in resolving asserted tax deficiencies for your business operated as a sole proprietor. Filing taxes for students Licenses and regulatory fees. Filing taxes for students   Licenses and regulatory fees for your trade or business paid annually to state or local governments generally are deductible. Filing taxes for students Some licenses and fees may have to be amortized. Filing taxes for students See chapter 8 for more information. Filing taxes for students Lobbying expenses. Filing taxes for students   Generally, lobbying expenses are not deductible. Filing taxes for students Lobbying expenses include amounts paid or incurred for any of the following activities. Filing taxes for students Influencing legislation. Filing taxes for students Participating in or intervening in any political campaign for, or against, any candidate for public office. Filing taxes for students Attempting to influence the general public, or segments of the public, about elections, legislative matters, or referendums. Filing taxes for students Communicating directly with covered executive branch officials (defined later) in any attempt to influence the official actions or positions of those officials. Filing taxes for students Researching, preparing, planning, or coordinating any of the preceding activities. Filing taxes for students   Your expenses for influencing legislation and communicating directly with a covered executive branch official include a portion of your labor costs and general and administrative costs of your business. Filing taxes for students For information on making this allocation, see section 1. Filing taxes for students 162-28 of the regulations. Filing taxes for students   You cannot claim a charitable or business expense deduction for amounts paid to an organization if both of the following apply. Filing taxes for students The organization conducts lobbying activities on matters of direct financial interest to your business. Filing taxes for students A principal purpose of your contribution is to avoid the rules discussed earlier that prohibit a business deduction for lobbying expenses. Filing taxes for students   If a tax-exempt organization, other than a section 501(c)(3) organization, provides you with a notice on the part of dues that is allocable to nondeductible lobbying and political expenses, you cannot deduct that part of the dues. Filing taxes for students Covered executive branch official. Filing taxes for students   For purposes of this discussion, a covered executive branch official is any of the following. Filing taxes for students The President. Filing taxes for students The Vice President. Filing taxes for students Any officer or employee of the White House Office of the Executive Office of the President and the two most senior level officers of each of the other agencies in the Executive Office. Filing taxes for students Any individual who: Is serving in a position in Level I of the Executive Schedule under section 5312 of title 5, United States Code, Has been designated by the President as having Cabinet-level status, or Is an immediate deputy of an individual listed in item (a) or (b). Filing taxes for students Exceptions to denial of deduction. Filing taxes for students   The general denial of the deduction does not apply to the following. Filing taxes for students Expenses of appearing before, or communicating with, any committee or member of any local council or similar governing body concerning its legislation (local legislation) if the legislation is of direct interest to you or to you and an organization of which you are a member. Filing taxes for students An Indian tribal government is treated as a local council or similar governing body. Filing taxes for students Any in-house expenses for influencing legislation and communicating directly with a covered executive branch official if those expenses for the tax year do not exceed $2,000 (excluding overhead expenses). Filing taxes for students Expenses incurred by taxpayers engaged in the trade or business of lobbying (professional lobbyists) on behalf of another person (but does apply to payments by the other person to the lobbyist for lobbying activities). Filing taxes for students Moving machinery. Filing taxes for students   Generally, the cost of moving machinery from one city to another is a deductible expense. Filing taxes for students So is the cost of moving machinery from one plant to another, or from one part of your plant to another. Filing taxes for students You can deduct the cost of installing the machinery in the new location. Filing taxes for students However, you must capitalize the costs of installing or moving newly purchased machinery. Filing taxes for students Outplacement services. Filing taxes for students   The costs of outplacement services you provide to your employees to help them find new employment, such as career counseling, résumé assistance, skills assessment, etc. Filing taxes for students are deductible. Filing taxes for students   The costs of outplacement services may cover more than one deduction category. Filing taxes for students For example, deduct as a utilities expense the cost of telephone calls made under this service and deduct as rental expense the cost of renting machinery and equipment for this service. Filing taxes for students   For information on whether the value of outplacement services is includable in your employees' income, see Publication 15-B. Filing taxes for students Penalties and fines. Filing taxes for students   Penalties paid for late performance or nonperformance of a contract are generally deductible. Filing taxes for students For instance, you own and operate a construction company. Filing taxes for students Under a contract, you are to finish construction of a building by a certain date. Filing taxes for students Due to construction delays, the building is not completed and ready for occupancy on the date stipulated in the contract. Filing taxes for students You are now required to pay an additional amount for each day that completion is delayed beyond the completion date stipulated in the contract. Filing taxes for students These additional costs are deductible business expenses. Filing taxes for students   On the other hand, penalties or fines paid to any government agency or instrumentality because of a violation of any law are not deductible. Filing taxes for students These fines or penalties include the following amounts. Filing taxes for students Paid because of a conviction for a crime or after a plea of guilty or no contest in a criminal proceeding. Filing taxes for students Paid as a penalty imposed by federal, state, or local law in a civil action, including certain additions to tax and additional amounts and assessable penalties imposed by the Internal Revenue Code. Filing taxes for students Paid in settlement of actual or possible liability for a fine or penalty, whether civil or criminal. Filing taxes for students Forfeited as collateral posted for a proceeding that could result in a fine or penalty. Filing taxes for students   Examples of nondeductible penalties and fines include the following. Filing taxes for students Fines for violating city housing codes. Filing taxes for students Fines paid by truckers for violating state maximum highway weight laws. Filing taxes for students Fines for violating air quality laws. Filing taxes for students Civil penalties for violating federal laws regarding mining safety standards and discharges into navigable waters. Filing taxes for students   A fine or penalty does not include any of the following. Filing taxes for students Legal fees and related expenses to defend yourself in a prosecution or civil action for a violation of the law imposing the fine or civil penalty. Filing taxes for students Court costs or stenographic and printing charges. Filing taxes for students Compensatory damages paid to a government. Filing taxes for students Political contributions. Filing taxes for students   Contributions or gifts paid to political parties or candidates are not deductible. Filing taxes for students In addition, expenses paid or incurred to take part in any political campaign of a candidate for public office are not deductible. Filing taxes for students Indirect political contributions. Filing taxes for students   You cannot deduct indirect political contributions and costs of taking part in political activities as business expenses. Filing taxes for students Examples of nondeductible expenses include the following. Filing taxes for students Advertising in a convention program of a political party, or in any other publication if any of the proceeds from the publication are for, or intended for, the use of a political party or candidate. Filing taxes for students Admission to a dinner or program (including, but not limited to, galas, dances, film presentations, parties, and sporting events) if any of the proceeds from the function are for, or intended for, the use of a political party or candidate. Filing taxes for students Admission to an inaugural ball, gala, parade, concert, or similar event if identified with a political party or candidate. Filing taxes for students Repairs. Filing taxes for students   The cost of repairing or improving property used in your trade or business is either a deductible or capital expense. Filing taxes for students Routine maintenance that keeps your property in a normal efficient operating condition, but that does not materially increase the value or substantially prolong the useful life of the property, is deductible in the year that it is incurred. Filing taxes for students Otherwise, the cost must be capitalized and depreciated. Filing taxes for students See Form 4562 and its instructions for how to compute and claim the depreciation deduction. Filing taxes for students   The cost of repairs includes the costs of labor, supplies, and certain other items. Filing taxes for students The value of your own labor is not deductible. Filing taxes for students Examples of repairs include: Reconditioning floors (but not replacement), Repainting the interior and exterior walls of a building, Cleaning and repairing roofs and gutters, and Fixing plumbing leaks (but not replacement of fixtures). Filing taxes for students Repayments. Filing taxes for students   If you had to repay an amount you included in your income in an earlier year, you may be able to deduct the amount repaid for the year in which you repaid it. Filing taxes for students Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. Filing taxes for students Type of deduction. Filing taxes for students   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. Filing taxes for students For instance, if you repay an amount you previously reported as a capital gain, deduct the repayment as a capital loss on Form 8949. Filing taxes for students If you reported it as self-employment income, deduct it as a business deduction on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). Filing taxes for students   If you reported the amount as wages, unemployment compensation, or other nonbusiness ordinary income, enter it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is subject to the 2% limitation. Filing taxes for students However, if the repayment is over $3,000 and Method 1 (discussed later) applies, deduct it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is not subject to the 2% limitation. Filing taxes for students Repayment—$3,000 or less. Filing taxes for students   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Filing taxes for students Repayment—over $3,000. Filing taxes for students   If the amount you repaid was more than $3,000, you can deduct the repayment, as described earlier. Filing taxes for students However, you can instead choose to take a tax credit for the year of repayment if you included the income under a “claim of right. Filing taxes for students ” This means that at the time you included the income, it appeared that you had an unrestricted right to it. Filing taxes for students If you qualify for this choice, figure your tax under both methods and use the method that results in less tax. Filing taxes for students Method 1. Filing taxes for students   Figure your tax for 2013 claiming a deduction for the repaid amount. Filing taxes for students Method 2. Filing taxes for students   Figure your tax for 2013 claiming a credit for the repaid amount. Filing taxes for students Follow these steps. Filing taxes for students Figure your tax for 2013 without deducting the repaid amount. Filing taxes for students Refigure your tax from the earlier year without including in income the amount you repaid in 2013. Filing taxes for students Subtract the tax in (2) from the tax shown on your return for the earlier year. Filing taxes for students This is the amount of your credit. Filing taxes for students Subtract the answer in (3) from the tax for 2013 figured without the deduction (step 1). Filing taxes for students   If Method 1 results in less tax, deduct the amount repaid as discussed earlier under Type of deduction. Filing taxes for students   If Method 2 results in less tax, claim the credit on line 71 of Form 1040, and write “I. Filing taxes for students R. Filing taxes for students C. Filing taxes for students 1341” next to line 71. Filing taxes for students Example. Filing taxes for students For 2012, you filed a return and reported your income on the cash method. Filing taxes for students In 2013, you repaid $5,000 included in your 2012 gross income under a claim of right. Filing taxes for students Your filing status in 2013 and 2012 is single. Filing taxes for students Your income and tax for both years are as follows:   2012  With Income 2012  Without Income Taxable Income $15,000 $10,000 Tax $ 1,819 $ 1,069   2013  Without Deduction 2013  With Deduction Taxable Income $49,950 $44,950 Tax $8,423 $7,173 Your tax under Method 1 is $7,173. Filing taxes for students Your tax under Method 2 is $7,673, figured as follows: Tax previously determined for 2012 $ 1,819 Less: Tax as refigured − 1,069 Decrease in 2012 tax $ 750 Regular tax liability for 2013 $8,423 Less: Decrease in 2012 tax − 750 Refigured tax for 2013 $ 7,673 Because you pay less tax under Method 1, you should take a deduction for the repayment in 2013. Filing taxes for students Repayment does not apply. Filing taxes for students   This discussion does not apply to the following. Filing taxes for students Deductions for bad debts. Filing taxes for students Deductions from sales to customers, such as returns and allowances, and similar items. Filing taxes for students Deductions for legal and other expenses of contesting the repayment. Filing taxes for students Year of deduction (or credit). Filing taxes for students   If you use the cash method of accounting, you can take the deduction (or credit, if applicable) for the tax year in which you actually make the repayment. Filing taxes for students If you use any other accounting method, you can deduct the repayment or claim a credit for it only for the tax year in which it is a proper deduction under your accounting method. Filing taxes for students For example, if you use the accrual method, you are entitled to the deduction or credit in the tax year in which the obligation for the repayment accrues. Filing taxes for students Subscriptions. Filing taxes for students   Subscriptions to professional, technical, and trade journals that deal with your business field are deductible. Filing taxes for students Supplies and materials. Filing taxes for students   Unless you have deducted the cost in any earlier year, you generally can deduct the cost of materials and supplies actually consumed and used during the tax year. Filing taxes for students   If you keep incidental materials and supplies on hand, you can deduct the cost of the incidental materials and supplies you bought during the tax year if all the following requirements are met. Filing taxes for students You do not keep a record of when they are used. Filing taxes for students You do not take an inventory of the amount on hand at the beginning and end of the tax year. Filing taxes for students This method does not distort your income. Filing taxes for students   You can also deduct the cost of books, professional instruments, equipment, etc. Filing taxes for students , if you normally use them within a year. Filing taxes for students However, if the usefulness of these items extends substantially beyond the year they are placed in service, you generally must recover their costs through depreciation. Filing taxes for students For more information regarding depreciation see Publication 946, How To Depreciate Property. Filing taxes for students Utilities. Filing taxes for students   Business expenses for heat, lights, power, telephone service, and water and sewerage are deductible. Filing taxes for students However, any part due to personal use is not deductible. Filing taxes for students Telephone. Filing taxes for students   You cannot deduct the cost of basic local telephone service (including any taxes) for the first telephone line you have in your home, even if you have an office in your home. Filing taxes for students However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. Filing taxes for students Prev  Up  Next   Home   More Online Publications