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Filling 1040x W Form 8863

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Filling 1040x W Form 8863

Filling 1040x w form 8863 10. Filling 1040x w form 8863   Business Bad Debts Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Definition of Business Bad DebtAccrual method. Filling 1040x w form 8863 Cash method. Filling 1040x w form 8863 Debt acquired from a decedent. Filling 1040x w form 8863 Liquidation. Filling 1040x w form 8863 Types of Business Bad Debts When a Debt Becomes Worthless How To Claim a Business Bad DebtSpecific Charge-Off Method Nonaccrual-Experience Method Recovery of a Bad DebtNet operating loss (NOL) carryover. Filling 1040x w form 8863 Introduction You have a bad debt if you cannot collect money owed to you. Filling 1040x w form 8863 A bad debt is either a business bad debt or a nonbusiness bad debt. Filling 1040x w form 8863 This chapter discusses only business bad debts. Filling 1040x w form 8863 Generally, a business bad debt is one that comes from operating your trade or business. Filling 1040x w form 8863 You can deduct business bad debts on Schedule C (Form 1040) or your applicable business income tax return. Filling 1040x w form 8863 All other bad debts are nonbusiness bad debts and are deductible only as short-term capital losses. Filling 1040x w form 8863 For more information on nonbusiness bad debts, see Publication 550. Filling 1040x w form 8863 Topics - This chapter discusses: Definition of business bad debt When a debt becomes worthless How to claim a business bad debt Recovery of a bad debt Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 556 Examination of Returns, Appeal Rights, and Claims for Refund Form (and Instructions) Schedule C (Form 1040) Profit or Loss From Business 1040X Amended U. Filling 1040x w form 8863 S. Filling 1040x w form 8863 Individual Income Tax Return 1045 Application for Tentative Refund 1139 Corporation Application for Tentative Refund 3115 Application for Change in Accounting Method See chapter 12 for information about getting publications and forms. Filling 1040x w form 8863 Definition of Business Bad Debt A business bad debt is a loss from the worthlessness of a debt that was either: Created or acquired in your trade or business, or Closely related to your trade or business when it became partly or totally worthless. Filling 1040x w form 8863 A debt is closely related to your trade or business if your primary motive for incurring the debt is business related. Filling 1040x w form 8863 Bad debts of a corporation (other than an S corporation) are always business bad debts. Filling 1040x w form 8863 Credit sales. Filling 1040x w form 8863   Business bad debts are mainly the result of credit sales to customers. Filling 1040x w form 8863 Goods that have been sold, but not yet paid for, and services that have been performed, but not yet paid for, are recorded in your books as either accounts receivable or notes receivable. Filling 1040x w form 8863 After a reasonable period of time, if you have tried to collect the amount due, but are unable to do so, the uncollectible part becomes a business bad debt. Filling 1040x w form 8863   Accounts or notes receivable valued at fair market value (FMV) when received are deductible only at that value, even though the FMV may be less than the face value. Filling 1040x w form 8863 If you purchased an account receivable for less than its face value, and the receivable subsequently becomes worthless, the most you are allowed to deduct is the amount you paid to acquire it. Filling 1040x w form 8863    You can claim a business bad debt deduction only if the amount owed to you was previously included in gross income. Filling 1040x w form 8863 This applies to amounts owed to you from all sources of taxable income, including sales, services, rents, and interest. Filling 1040x w form 8863 Accrual method. Filling 1040x w form 8863   If you use the accrual method of accounting, you generally report income as you earn it. Filling 1040x w form 8863 You can only claim a bad debt deduction for an uncollectible receivable if you have previously included the uncollectible amount in income. Filling 1040x w form 8863   If you qualify, you can use the nonaccrual-experience method of accounting discussed later. Filling 1040x w form 8863 Under this method, you do not have to accrue income that, based on your experience, you do not expect to collect. Filling 1040x w form 8863 Cash method. Filling 1040x w form 8863   If you use the cash method of accounting, you generally report income when you receive payment. Filling 1040x w form 8863 You cannot claim a bad debt deduction for amounts owed to you because you never included those amounts in income. Filling 1040x w form 8863 For example, a cash basis architect cannot claim a bad debt deduction if a client fails to pay the bill because the architect's fee was never included in income. Filling 1040x w form 8863 Debts from a former business. Filling 1040x w form 8863   If you sell your business but retain its receivables, these debts are business debts because they arose out of your trade or business. Filling 1040x w form 8863 If any of these receivables subsequently become worthless, the loss is still a business bad debt. Filling 1040x w form 8863 Debt acquired from a decedent. Filling 1040x w form 8863   The character of a loss from debts of a business acquired from a decedent is determined in the same way as debts acquired on the purchase of a business. Filling 1040x w form 8863 The executor of the decedent's estate treats any loss from the debts as a business bad debt if the debts were closely related to the decedent's trade or business when they became worthless. Filling 1040x w form 8863 Otherwise, a loss from these debts becomes a nonbusiness bad debt for the decedent's estate. Filling 1040x w form 8863 Liquidation. Filling 1040x w form 8863   If you liquidate your business and some of the accounts receivable that you retain become worthless, they become business bad debts. Filling 1040x w form 8863 Types of Business Bad Debts Business bad debts may result from the following. Filling 1040x w form 8863 Loans to clients and suppliers. Filling 1040x w form 8863   If you loan money to a client, supplier, employee, or distributor for a business reason and you are unable to collect the loan after attempting to do so, you have a business bad debt. Filling 1040x w form 8863 Debts owed by political parties. Filling 1040x w form 8863   If a political party (or other organization that accepts contributions or spends money to influence elections) owes you money and the debt becomes worthless, you can claim a bad debt deduction only if all of the following requirements are met. Filling 1040x w form 8863 You use the accrual method of accounting. Filling 1040x w form 8863 The debt arose from the sale of goods or services in the ordinary course of your trade or business. Filling 1040x w form 8863 More than 30% of your receivables accrued in the year of the sale were from sales to political parties. Filling 1040x w form 8863 You made substantial and continuing efforts to collect on the debt. Filling 1040x w form 8863 Loan or capital contribution. Filling 1040x w form 8863   You cannot claim a bad debt deduction for a loan you made to a corporation if, based on the facts and circumstances, the loan is actually a contribution to capital. Filling 1040x w form 8863 Debts of an insolvent partner. Filling 1040x w form 8863   If your business partnership breaks up and one of your former partners becomes insolvent, you may have to pay more than your pro rata share of the partnership's debts. Filling 1040x w form 8863 If you pay any part of the insolvent partner's share of the debts, you can claim a bad debt deduction for the amount you paid that is attributable to the insolvent partner's share. Filling 1040x w form 8863 Business loan guarantee. Filling 1040x w form 8863   If you guarantee a debt that subsequently becomes worthless, the debt can qualify as a business bad debt if all the following requirements are met. Filling 1040x w form 8863 You made the guarantee in the course of your trade or business. Filling 1040x w form 8863 You have a legal duty to pay the debt. Filling 1040x w form 8863 You made the guarantee before the debt became worthless. Filling 1040x w form 8863 You meet this requirement if you reasonably expected you would not have to pay the debt without full reimbursement from the borrower. Filling 1040x w form 8863 You received reasonable consideration for making the guarantee. Filling 1040x w form 8863 You meet this requirement if you made the guarantee in accord with normal business practice or for a good faith business purpose. Filling 1040x w form 8863 Example. Filling 1040x w form 8863 Jane Zayne owns the Zayne Dress Company. Filling 1040x w form 8863 She guaranteed payment of a $20,000 note for Elegant Fashions, a dress outlet. Filling 1040x w form 8863 Elegant Fashions is one of Zayne's largest clients. Filling 1040x w form 8863 Elegant Fashions later defaulted on the loan. Filling 1040x w form 8863 As a result, Ms. Filling 1040x w form 8863 Zayne paid the remaining balance of the loan in full to the bank. Filling 1040x w form 8863 She can claim a business bad debt deduction only for the amount she paid, since her guarantee was made in the course of her trade or business for a good faith business purpose. Filling 1040x w form 8863 She was motivated by the desire to retain one of her better clients and keep a sales outlet. Filling 1040x w form 8863 Deductible in the year paid. Filling 1040x w form 8863   If you make a payment on a loan you guaranteed, you can deduct it in the year paid, unless you have rights against the borrower. Filling 1040x w form 8863 Rights against a borrower. Filling 1040x w form 8863   When you make payment on a loan you guaranteed, you may have the right to take the place of the lender. Filling 1040x w form 8863 The debt is then owed to you. Filling 1040x w form 8863 If you have this right, or some other right to demand payment from the borrower, you cannot claim a bad debt deduction until these rights become partly or totally worthless. Filling 1040x w form 8863 Joint debtor. Filling 1040x w form 8863   If two or more debtors jointly owe you money, your inability to collect from one does not enable you to deduct a proportionate amount as a bad debt. Filling 1040x w form 8863 Sale of mortgaged property. Filling 1040x w form 8863   If mortgaged or pledged property is sold for less than the debt, the unpaid, uncollectible balance of the debt is a bad debt. Filling 1040x w form 8863 When a Debt Becomes Worthless A debt becomes worthless when there is no longer any chance the amount owed will be paid. Filling 1040x w form 8863 This may occur when the debt is due or prior to that date. Filling 1040x w form 8863 To demonstrate worthlessness, you must only show that you have taken reasonable steps to collect the debt but were unable to do so. Filling 1040x w form 8863 It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. Filling 1040x w form 8863 Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. Filling 1040x w form 8863 Property received for debt. Filling 1040x w form 8863   If you receive property in partial settlement of a debt, reduce the debt by the property's FMV, which becomes the property's basis. Filling 1040x w form 8863 You can deduct the remaining debt as a bad debt if and when it becomes worthless. Filling 1040x w form 8863   If you later sell the property for more than its basis, any gain on the sale is due to the appreciation of the property. Filling 1040x w form 8863 It is not a recovery of a bad debt. Filling 1040x w form 8863 For information on the sale of an asset, see Publication 544. Filling 1040x w form 8863 How To Claim a Business Bad Debt There are two methods to claim a business bad debt. Filling 1040x w form 8863 The specific charge-off method. Filling 1040x w form 8863 The nonaccrual-experience method. Filling 1040x w form 8863 Generally, you must use the specific charge-off method. Filling 1040x w form 8863 However, you may use the nonaccrual-experience method if you meet the requirements discussed later under Nonaccrual-Experience Method . Filling 1040x w form 8863 Specific Charge-Off Method If you use the specific charge-off method, you can deduct specific business bad debts that become either partly or totally worthless during the tax year. Filling 1040x w form 8863 However, with respect to partly worthless bad debts, your deduction is limited to the amount you charged off on your books during the year. Filling 1040x w form 8863 Partly worthless debts. Filling 1040x w form 8863   You can deduct specific bad debts that become partly uncollectible during the tax year. Filling 1040x w form 8863 Your tax deduction is limited to the amount you charge off on your books during the year. Filling 1040x w form 8863 You do not have to charge off and deduct your partly worthless debts annually. Filling 1040x w form 8863 You can delay the charge off until a later year. Filling 1040x w form 8863 However, you cannot deduct any part of a debt after the year it becomes totally worthless. Filling 1040x w form 8863 Significantly modified debt. Filling 1040x w form 8863   An exception to the charge-off rule exists for debt which has been significantly modified and on which the holder recognized gain. Filling 1040x w form 8863 For more information, see Regulations section 1. Filling 1040x w form 8863 166-3(a)(3). Filling 1040x w form 8863 Deduction disallowed. Filling 1040x w form 8863   Generally, you can claim a partial bad debt deduction only in the year you make the charge-off on your books. Filling 1040x w form 8863 If, under audit, the IRS does not allow your deduction and the debt becomes partly worthless in a later tax year, you can deduct the amount you charged off in that year plus the disallowed amount charged off in the earlier year. Filling 1040x w form 8863 The charge-off in the earlier year, unless reversed on your books, fulfills the charge-off requirement for the later year. Filling 1040x w form 8863 Totally worthless debts. Filling 1040x w form 8863   If a debt becomes totally worthless in the current tax year, you can deduct the entire amount, less any amount deducted in an earlier tax year when the debt was only partly worthless. Filling 1040x w form 8863   You do not have to make an actual charge-off on your books to claim a bad debt deduction for a totally worthless debt. Filling 1040x w form 8863 However, you may want to do so. Filling 1040x w form 8863 If you do not and the IRS later rules the debt is only partly worthless, you will not be allowed a deduction for the debt in that tax year because a deduction of a partly worthless bad debt is limited to the amount actually charged off. Filling 1040x w form 8863 See Partly worthless debts, earlier. Filling 1040x w form 8863 Filing a claim for refund. Filling 1040x w form 8863   If you did not deduct a bad debt on your original return for the year it became worthless, you can file a claim for a credit or refund. Filling 1040x w form 8863 If the bad debt was totally worthless, you must file the claim by the later of the following dates. Filling 1040x w form 8863 7 years from the date your original return was due (not including extensions). Filling 1040x w form 8863 2 years from the date you paid the tax. Filling 1040x w form 8863   If the claim is for a partly worthless bad debt, you must file the claim by the later of the following dates. Filling 1040x w form 8863 3 years from the date you filed your original return. Filling 1040x w form 8863 2 years from the date you paid the tax. Filling 1040x w form 8863 You may have longer to file the claim if you were unable to manage your financial affairs due to a physical or mental impairment. Filling 1040x w form 8863 Such an impairment requires proof of existence. Filling 1040x w form 8863   For details and more information about filing a claim, see Publication 556. Filling 1040x w form 8863 Use one of the following forms to file a claim. Filling 1040x w form 8863 For more information, see the instructions for the applicable form. Filling 1040x w form 8863 Table 10-1. Filling 1040x w form 8863 Forms Used To File a Claim IF you filed as a. Filling 1040x w form 8863 . Filling 1040x w form 8863 . Filling 1040x w form 8863 THEN file. Filling 1040x w form 8863 . Filling 1040x w form 8863 . Filling 1040x w form 8863 Sole proprietor or farmer Form 1040X Corporation Form 1120X S corporation Form 1120S and check box H(4) Partnership Form 1065X if filing on paper or  Form 1065 and check box G(5) if filing electronically Nonaccrual-Experience Method If you use an accrual method of accounting and qualify under the rules explained in this section, you can use the nonaccrual-experience method for bad debts. Filling 1040x w form 8863 Under this method, you do not accrue service related income you expect to be uncollectible. Filling 1040x w form 8863 Because the expected uncollectible amounts are not included in income, these amounts are not later deducted from income. Filling 1040x w form 8863 Generally, you can use the nonaccrual-experience method for accounts receivable for services you performed only if: The services are provided in the fields of accounting, actuarial science, architecture, consulting, engineering, health, law, or the performing arts, or You meet the $5 million gross receipts test for all prior years. Filling 1040x w form 8863 Service related income. Filling 1040x w form 8863   You can use the nonaccrual-experience method only for amounts earned by performing services. Filling 1040x w form 8863 You cannot use this method for amounts owed to you from activities such as lending money, selling goods, or acquiring receivables or other rights to receive payment. Filling 1040x w form 8863 Gross receipts test. Filling 1040x w form 8863   To find out if you meet the $5 million gross receipts test for all prior years, you must figure the average annual gross receipts for each prior year. Filling 1040x w form 8863 If your average annual gross receipts for any year exceeds $5 million, you cannot use the non-accural experience method. Filling 1040x w form 8863   The average annual gross receipts for any year is the average of gross receipts from the year in question and the 2 previous years. Filling 1040x w form 8863 For example, if you were figuring the average annual gross receipts for 2013, you would average your gross receipts for 2011, 2012, and 2013. Filling 1040x w form 8863 Interest or penalty charged. Filling 1040x w form 8863   Generally, you cannot use the nonaccrual-experience method for amounts due on which you charge interest or a late payment penalty. Filling 1040x w form 8863 However, do not treat a discount offered for early payment as the charging of interest or a penalty if both the following apply. Filling 1040x w form 8863 You otherwise accrue the full amount due as gross income at the time you provide the services. Filling 1040x w form 8863 You treat the discount allowed for early payment as an adjustment to gross income in the year of payment. Filling 1040x w form 8863 Change in accounting method. Filling 1040x w form 8863   Generally, you must obtain consent to change to a nonaccrual-experience method (other than one of the safe harbor methods) or to change from one method to another. Filling 1040x w form 8863 See Form 3115 and the Instructions for Form 3115 for more information. Filling 1040x w form 8863 Recovery of a Bad Debt If you claim a deduction for a bad debt on your income tax return and later recover (collect) all or part of it, you may have to include all or part of the recovery in gross income. Filling 1040x w form 8863 The amount you include is limited to the amount you actually deducted. Filling 1040x w form 8863 However, you can exclude the amount deducted that did not reduce your tax. Filling 1040x w form 8863 Report the recovery as “Other income” on the appropriate business form or schedule. Filling 1040x w form 8863 See Recoveries in Publication 525 for more information. Filling 1040x w form 8863 Net operating loss (NOL) carryover. Filling 1040x w form 8863   If a bad debt deduction increases an NOL carryover that has not expired before the beginning of the tax year in which the recovery takes place, you treat the deduction as having reduced your tax. Filling 1040x w form 8863 A bad debt deduction that contributes to a NOL helps lower taxes in the year to which you carry the NOL. Filling 1040x w form 8863 For more information about NOLs, see Publication 536. Filling 1040x w form 8863 Also, see the Instructions for Form 1045, and the Instructions for Form 1139. Filling 1040x w form 8863 Prev  Up  Next   Home   More Online Publications
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The Filling 1040x W Form 8863

Filling 1040x w form 8863 26. Filling 1040x w form 8863   Car Expenses and Other Employee Business Expenses Table of Contents What's New Introduction Useful Items - You may want to see: Travel ExpensesTraveling Away From Home Tax Home Temporary Assignment or Job What Travel Expenses Are Deductible? Travel in the United States Travel Outside the United States Conventions Entertainment Expenses50% Limit What Entertainment Expenses Are Deductible? What Entertainment Expenses Are Not Deductible? Gift Expenses Transportation ExpensesArmed Forces reservists. Filling 1040x w form 8863 Parking fees. Filling 1040x w form 8863 Advertising display on car. Filling 1040x w form 8863 Car pools. Filling 1040x w form 8863 Hauling tools or instruments. Filling 1040x w form 8863 Union members' trips from a union hall. Filling 1040x w form 8863 Car Expenses RecordkeepingHow To Prove Expenses How Long To Keep Records and Receipts How To ReportGifts. Filling 1040x w form 8863 Statutory employees. Filling 1040x w form 8863 Reimbursements Completing Forms 2106 and 2106-EZ Special Rules What's New Standard mileage rate. Filling 1040x w form 8863  For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. Filling 1040x w form 8863 Car expenses and use of the standard mileage rate are explained under Transportation Expenses , later. Filling 1040x w form 8863 Depreciation limits on cars, trucks, and vans. Filling 1040x w form 8863  For 2013, the first-year limit on the total section 179 deduction, special depreciation allowance, and depreciation deduction for cars remains at $11,160 ($3,160 if you elect not to claim the special depreciation allowance). Filling 1040x w form 8863 For trucks and vans the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). Filling 1040x w form 8863 For more information, see Depreciation limits in Publication 463. Filling 1040x w form 8863 Introduction You may be able to deduct the ordinary and necessary business-related expenses you have for: Travel, Entertainment, Gifts, or Transportation. Filling 1040x w form 8863 An ordinary expense is one that is common and accepted in your trade or business. Filling 1040x w form 8863 A necessary expense is one that is helpful and appropriate for your business. Filling 1040x w form 8863 An expense does not have to be required to be considered necessary. Filling 1040x w form 8863 This chapter explains the following. Filling 1040x w form 8863 What expenses are deductible. Filling 1040x w form 8863 How to report your expenses on your return. Filling 1040x w form 8863 What records you need to prove your expenses. Filling 1040x w form 8863 How to treat any expense reimbursements you may receive. Filling 1040x w form 8863 Who does not need to use this chapter. Filling 1040x w form 8863   If you are an employee, you will not need to read this chapter if all of the following are true. Filling 1040x w form 8863 You fully accounted to your employer for your work-related expenses. Filling 1040x w form 8863 You received full reimbursement for your expenses. Filling 1040x w form 8863 Your employer required you to return any excess reimbursement and you did so. Filling 1040x w form 8863 There is no amount shown with a code “L” in box 12 of your Form W-2, Wage and Tax Statement. Filling 1040x w form 8863 If you meet all of these conditions, there is no need to show the expenses or the reimbursements on your return. Filling 1040x w form 8863 See Reimbursements , later, if you would like more information on reimbursements and accounting to your employer. Filling 1040x w form 8863    If you meet these conditions and your employer included reimbursements on your Form W-2 in error, ask your employer for a corrected Form W-2. Filling 1040x w form 8863 Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule C (Form 1040) Profit or Loss From Business Schedule C-EZ (Form 1040) Net Profit From Business Schedule F (Form 1040) Profit or Loss From Farming Form 2106 Employee Business Expenses Form 2106-EZ Unreimbursed Employee Business Expenses Travel Expenses If you temporarily travel away from your tax home, you can use this section to determine if you have deductible travel expenses. Filling 1040x w form 8863 This section discusses: Traveling away from home, Tax home, Temporary assignment or job, and What travel expenses are deductible. Filling 1040x w form 8863 It also discusses the standard meal allowance, rules for travel inside and outside the United States, and deductible convention expenses. Filling 1040x w form 8863 Travel expenses defined. Filling 1040x w form 8863   For tax purposes, travel expenses are the ordinary and necessary expenses (defined earlier) of traveling away from home for your business, profession, or job. Filling 1040x w form 8863   You will find examples of deductible travel expenses in Table 26-1 . Filling 1040x w form 8863 Traveling Away From Home You are traveling away from home if: Your duties require you to be away from the general area of your tax home (defined later) substantially longer than an ordinary day's work, and You need to sleep or rest to meet the demands of your work while away from home. Filling 1040x w form 8863 This rest requirement is not satisfied by merely napping in your car. Filling 1040x w form 8863 You do not have to be away from your tax home for a whole day or from dusk to dawn as long as your relief from duty is long enough to get necessary sleep or rest. Filling 1040x w form 8863 Example 1. Filling 1040x w form 8863 You are a railroad conductor. Filling 1040x w form 8863 You leave your home terminal on a regularly scheduled round-trip run between two cities and return home 16 hours later. Filling 1040x w form 8863 During the run, you have 6 hours off at your turnaround point where you eat two meals and rent a hotel room to get necessary sleep before starting the return trip. Filling 1040x w form 8863 You are considered to be away from home. Filling 1040x w form 8863 Example 2. Filling 1040x w form 8863 You are a truck driver. Filling 1040x w form 8863 You leave your terminal and return to it later the same day. Filling 1040x w form 8863 You get an hour off at your turnaround point to eat. Filling 1040x w form 8863 Because you are not off to get necessary sleep and the brief time off is not an adequate rest period, you are not traveling away from home. Filling 1040x w form 8863 Members of the Armed Forces. Filling 1040x w form 8863   If you are a member of the U. Filling 1040x w form 8863 S. Filling 1040x w form 8863 Armed Forces on a permanent duty assignment overseas, you are not traveling away from home. Filling 1040x w form 8863 You cannot deduct your expenses for meals and lodging. Filling 1040x w form 8863 You cannot deduct these expenses even if you have to maintain a home in the United States for your family members who are not allowed to accompany you overseas. Filling 1040x w form 8863 If you are transferred from one permanent duty station to another, you may have deductible moving expenses, which are explained in Publication 521, Moving Expenses. Filling 1040x w form 8863    A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a tax home aboard ship for travel expense purposes. Filling 1040x w form 8863 Tax Home To determine whether you are traveling away from home, you must first determine the location of your tax home. Filling 1040x w form 8863 Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. Filling 1040x w form 8863 It includes the entire city or general area in which your business or work is located. Filling 1040x w form 8863 If you have more than one regular place of business, your tax home is your main place of business. Filling 1040x w form 8863 See Main place of business or work , later. Filling 1040x w form 8863 If you do not have a regular or a main place of business because of the nature of your work, then your tax home may be the place where you regularly live. Filling 1040x w form 8863 See No main place of business or work , later. Filling 1040x w form 8863 If you do not have a regular or a main place of business or post of duty and there is no place where you regularly live, you are considered an itinerant (a transient) and your tax home is wherever you work. Filling 1040x w form 8863 As an itinerant, you cannot claim a travel expense deduction because you are never considered to be traveling away from home. Filling 1040x w form 8863 Main place of business or work. Filling 1040x w form 8863   If you have more than one place of business or work, consider the following when determining which one is your main place of business or work. Filling 1040x w form 8863 The total time you ordinarily spend in each place. Filling 1040x w form 8863 The level of your business activity in each place. Filling 1040x w form 8863 Whether your income from each place is significant or insignificant. Filling 1040x w form 8863 Example. Filling 1040x w form 8863 You live in Cincinnati where you have a seasonal job for 8 months each year and earn $40,000. Filling 1040x w form 8863 You work the other 4 months in Miami, also at a seasonal job, and earn $15,000. Filling 1040x w form 8863 Cincinnati is your main place of work because you spend most of your time there and earn most of your income there. Filling 1040x w form 8863 No main place of business or work. Filling 1040x w form 8863   You may have a tax home even if you do not have a regular or main place of business or work. Filling 1040x w form 8863 Your tax home may be the home where you regularly live. Filling 1040x w form 8863 Factors used to determine tax home. Filling 1040x w form 8863   If you do not have a regular or main place of business or work, use the following three factors to determine where your tax home is. Filling 1040x w form 8863 You perform part of your business in the area of your main home and use that home for lodging while doing business in the area. Filling 1040x w form 8863 You have living expenses at your main home that you duplicate because your business requires you to be away from that home. Filling 1040x w form 8863 You have not abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging. Filling 1040x w form 8863   If you satisfy all three factors, your tax home is the home where you regularly live. Filling 1040x w form 8863 If you satisfy only two factors, you may have a tax home depending on all the facts and circumstances. Filling 1040x w form 8863 If you satisfy only one factor, you are an itinerant; your tax home is wherever you work and you cannot deduct travel expenses. Filling 1040x w form 8863 Example. Filling 1040x w form 8863 You are single and live in Boston in an apartment you rent. Filling 1040x w form 8863 You have worked for your employer in Boston for a number of years. Filling 1040x w form 8863 Your employer enrolls you in a 12-month executive training program. Filling 1040x w form 8863 You do not expect to return to work in Boston after you complete your training. Filling 1040x w form 8863 During your training, you do not do any work in Boston. Filling 1040x w form 8863 Instead, you receive classroom and on-the-job training throughout the United States. Filling 1040x w form 8863 You keep your apartment in Boston and return to it frequently. Filling 1040x w form 8863 You use your apartment to conduct your personal business. Filling 1040x w form 8863 You also keep up your community contacts in Boston. Filling 1040x w form 8863 When you complete your training, you are transferred to Los Angeles. Filling 1040x w form 8863 You do not satisfy factor (1) because you did not work in Boston. Filling 1040x w form 8863 You satisfy factor (2) because you had duplicate living expenses. Filling 1040x w form 8863 You also satisfy factor (3) because you did not abandon your apartment in Boston as your main home, you kept your community contacts, and you frequently returned to live in your apartment. Filling 1040x w form 8863 Therefore, you have a tax home in Boston. Filling 1040x w form 8863 Tax home different from family home. Filling 1040x w form 8863   If you (and your family) do not live at your tax home (defined earlier), you cannot deduct the cost of traveling between your tax home and your family home. Filling 1040x w form 8863 You also cannot deduct the cost of meals and lodging while at your tax home. Filling 1040x w form 8863 See Example 1 . Filling 1040x w form 8863   If you are working temporarily in the same city where you and your family live, you may be considered as traveling away from home. Filling 1040x w form 8863 See Example 2 . Filling 1040x w form 8863 Example 1. Filling 1040x w form 8863 You are a truck driver and you and your family live in Tucson. Filling 1040x w form 8863 You are employed by a trucking firm that has its terminal in Phoenix. Filling 1040x w form 8863 At the end of your long runs, you return to your home terminal in Phoenix and spend one night there before returning home. Filling 1040x w form 8863 You cannot deduct any expenses you have for meals and lodging in Phoenix or the cost of traveling from Phoenix to Tucson. Filling 1040x w form 8863 This is because Phoenix is your tax home. Filling 1040x w form 8863 Example 2. Filling 1040x w form 8863 Your family home is in Pittsburgh, where you work 12 weeks a year. Filling 1040x w form 8863 The rest of the year you work for the same employer in Baltimore. Filling 1040x w form 8863 In Baltimore, you eat in restaurants and sleep in a rooming house. Filling 1040x w form 8863 Your salary is the same whether you are in Pittsburgh or Baltimore. Filling 1040x w form 8863 Because you spend most of your working time and earn most of your salary in Baltimore, that city is your tax home. Filling 1040x w form 8863 You cannot deduct any expenses you have for meals and lodging there. Filling 1040x w form 8863 However, when you return to work in Pittsburgh, you are away from your tax home even though you stay at your family home. Filling 1040x w form 8863 You can deduct the cost of your round trip between Baltimore and Pittsburgh. Filling 1040x w form 8863 You can also deduct your part of your family's living expenses for meals and lodging while you are living and working in Pittsburgh. Filling 1040x w form 8863 Temporary Assignment or Job You may regularly work at your tax home and also work at another location. Filling 1040x w form 8863 It may not be practical to return to your tax home from this other location at the end of each work day. Filling 1040x w form 8863 Temporary assignment vs. Filling 1040x w form 8863 indefinite assignment. Filling 1040x w form 8863   If your assignment or job away from your main place of work is temporary, your tax home does not change. Filling 1040x w form 8863 You are considered to be away from home for the whole period you are away from your main place of work. Filling 1040x w form 8863 You can deduct your travel expenses if they otherwise qualify for deduction. Filling 1040x w form 8863 Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less. Filling 1040x w form 8863   However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax home and you cannot deduct your travel expenses while there. Filling 1040x w form 8863 An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than 1 year, whether or not it actually lasts for more than 1 year. Filling 1040x w form 8863   If your assignment is indefinite, you must include in your income any amounts you receive from your employer for living expenses, even if they are called travel allowances and you account to your employer for them. Filling 1040x w form 8863 You may be able to deduct the cost of relocating to your new tax home as a moving expense. Filling 1040x w form 8863 See Publication 521 for more information. Filling 1040x w form 8863 Exception for federal crime investigations or prosecutions. Filling 1040x w form 8863   If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the 1-year rule. Filling 1040x w form 8863 This means you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year, provided you meet the other requirements for deductibility. Filling 1040x w form 8863   For you to qualify, the Attorney General (or his or her designee) must certify that you are traveling: For the federal government, In a temporary duty status, and To investigate or prosecute, or provide support services for the investigation or prosecution of a federal crime. Filling 1040x w form 8863 Determining temporary or indefinite. Filling 1040x w form 8863   You must determine whether your assignment is temporary or indefinite when you start work. Filling 1040x w form 8863 If you expect an assignment or job to last for 1 year or less, it is temporary unless there are facts and circumstances that indicate otherwise. Filling 1040x w form 8863 An assignment or job that is initially temporary may become indefinite due to changed circumstances. Filling 1040x w form 8863 A series of assignments to the same location, all for short periods but that together cover a long period, may be considered an indefinite assignment. Filling 1040x w form 8863 Going home on days off. Filling 1040x w form 8863   If you go back to your tax home from a temporary assignment on your days off, you are not considered away from home while you are in your hometown. Filling 1040x w form 8863 You cannot deduct the cost of your meals and lodging there. Filling 1040x w form 8863 However, you can deduct your travel expenses, including meals and lodging, while traveling between your temporary place of work and your tax home. Filling 1040x w form 8863 You can claim these expenses up to the amount it would have cost you to stay at your temporary place of work. Filling 1040x w form 8863   If you keep your hotel room during your visit home, you can deduct the cost of your hotel room. Filling 1040x w form 8863 In addition, you can deduct your expenses of returning home up to the amount you would have spent for meals had you stayed at your temporary place of work. Filling 1040x w form 8863 Probationary work period. Filling 1040x w form 8863   If you take a job that requires you to move, with the understanding that you will keep the job if your work is satisfactory during a probationary period, the job is indefinite. Filling 1040x w form 8863 You cannot deduct any of your expenses for meals and lodging during the probationary period. Filling 1040x w form 8863 What Travel Expenses Are Deductible? Once you have determined that you are traveling away from your tax home, you can determine what travel expenses are deductible. Filling 1040x w form 8863 You can deduct ordinary and necessary expenses you have when you travel away from home on business. Filling 1040x w form 8863 The type of expense you can deduct depends on the facts and your circumstances. Filling 1040x w form 8863 Table 26-1 summarizes travel expenses you may be able to deduct. Filling 1040x w form 8863 You may have other deductible travel expenses that are not covered there, depending on the facts and your circumstances. Filling 1040x w form 8863 When you travel away from home on business, you should keep records of all the expenses you have and any advances you receive from your employer. Filling 1040x w form 8863 You can use a log, diary, notebook, or any other written record to keep track of your expenses. Filling 1040x w form 8863 The types of expenses you need to record, along with supporting documentation, are described in Table 26-2 , later. Filling 1040x w form 8863 Separating costs. Filling 1040x w form 8863   If you have one expense that includes the costs of meals, entertainment, and other services (such as lodging or transportation), you must allocate that expense between the cost of meals and entertainment and the cost of other services. Filling 1040x w form 8863 You must have a reasonable basis for making this allocation. Filling 1040x w form 8863 For example, you must allocate your expenses if a hotel includes one or more meals in its room charge. Filling 1040x w form 8863 Travel expenses for another individual. Filling 1040x w form 8863   If a spouse, dependent, or other individual goes with you (or your employee) on a business trip or to a business convention, you generally cannot deduct his or her travel expenses. Filling 1040x w form 8863 Employee. Filling 1040x w form 8863   You can deduct the travel expenses of someone who goes with you if that person: Is your employee, Has a bona fide business purpose for the travel, and Would otherwise be allowed to deduct the travel expenses. Filling 1040x w form 8863 Business associate. Filling 1040x w form 8863   If a business associate travels with you and meets the conditions in (2) and (3) above, you can deduct the travel expenses you have for that person. Filling 1040x w form 8863 A business associate is someone with whom you could reasonably expect to engage or deal in the active conduct of your business. Filling 1040x w form 8863 A business associate can be a current or prospective (likely to become) customer, client, supplier, employee, agent, partner, or professional advisor. Filling 1040x w form 8863 Bona fide business purpose. Filling 1040x w form 8863   A bona fide business purpose exists if you can prove a real business purpose for the individual's presence. Filling 1040x w form 8863 Incidental services, such as typing notes or assisting in entertaining customers, are not enough to make the expenses deductible. Filling 1040x w form 8863 Example. Filling 1040x w form 8863 Jerry drives to Chicago on business and takes his wife, Linda, with him. Filling 1040x w form 8863 Linda is not Jerry's employee. Filling 1040x w form 8863 Linda occasionally types notes, performs similar services, and accompanies Jerry to luncheons and dinners. Filling 1040x w form 8863 The performance of these services does not establish that her presence on the trip is necessary to the conduct of Jerry's business. Filling 1040x w form 8863 Her expenses are not deductible. Filling 1040x w form 8863 Jerry pays $199 a day for a double room. Filling 1040x w form 8863 A single room costs $149 a day. Filling 1040x w form 8863 He can deduct the total cost of driving his car to and from Chicago, but only $149 a day for his hotel room. Filling 1040x w form 8863 If he uses public transportation, he can deduct only his fare. Filling 1040x w form 8863 Table 26-1. Filling 1040x w form 8863 Travel Expenses You Can Deduct This chart summarizes expenses you can deduct when you travel away from home for business purposes. Filling 1040x w form 8863 IF you have expenses for. Filling 1040x w form 8863 . Filling 1040x w form 8863 . Filling 1040x w form 8863 THEN you can deduct the cost of. Filling 1040x w form 8863 . Filling 1040x w form 8863 . Filling 1040x w form 8863 transportation travel by airplane, train, bus, or car between your home and your business destination. Filling 1040x w form 8863 If you were provided with a ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero. Filling 1040x w form 8863 If you travel by ship, see Luxury Water Travel and Cruise ships (under Conventions) in Publication 463 for additional rules and limits. Filling 1040x w form 8863 taxi, commuter bus, and airport limousine fares for these and other types of transportation that take you between: The airport or station and your hotel, and The hotel and the work location of your customers or clients, your business meeting place, or your temporary work location. Filling 1040x w form 8863 baggage and shipping sending baggage and sample or display material between your regular and temporary work locations. Filling 1040x w form 8863 car operating and maintaining your car when traveling away from home on business. Filling 1040x w form 8863 You can deduct actual expenses or the standard mileage rate as well as business-related tolls and parking. Filling 1040x w form 8863 If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses. Filling 1040x w form 8863 lodging and meals your lodging and meals if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. Filling 1040x w form 8863 Meals include amounts spent for food, beverages, taxes, and related tips. Filling 1040x w form 8863 See Meals and Incidental Expenses for additional rules and limits. Filling 1040x w form 8863 cleaning dry cleaning and laundry. Filling 1040x w form 8863 telephone business calls while on your business trip. Filling 1040x w form 8863 This includes business communication by fax machine or other communication devices. Filling 1040x w form 8863 tips tips you pay for any expenses in this chart. Filling 1040x w form 8863 other other similar ordinary and necessary expenses related to your business travel. Filling 1040x w form 8863 These expenses might include transportation to or from a business meal, public stenographer's fees, computer rental fees, and operating and maintaining a house trailer. Filling 1040x w form 8863 Meals and Incidental Expenses You can deduct the cost of meals in either of the following situations. Filling 1040x w form 8863 It is necessary for you to stop for substantial sleep or rest to properly perform your duties while traveling away from home on business. Filling 1040x w form 8863 The meal is business-related entertainment. Filling 1040x w form 8863 Business-related entertainment is discussed under Entertainment Expenses , later. Filling 1040x w form 8863 The following discussion deals only with meals (and incidental expenses) that are not business-related entertainment. Filling 1040x w form 8863 Lavish or extravagant. Filling 1040x w form 8863   You cannot deduct expenses for meals that are lavish or extravagant. Filling 1040x w form 8863 An expense is not considered lavish or extravagant if it is reasonable based on the facts and circumstances. Filling 1040x w form 8863 Expenses will not be disallowed merely because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. Filling 1040x w form 8863 50% limit on meals. Filling 1040x w form 8863   You can figure your meal expenses using either of the following methods. Filling 1040x w form 8863 Actual cost. Filling 1040x w form 8863 The standard meal allowance. Filling 1040x w form 8863 Both of these methods are explained below. Filling 1040x w form 8863 But, regardless of the method you use, you generally can deduct only 50% of the unreimbursed cost of your meals. Filling 1040x w form 8863   If you are reimbursed for the cost of your meals, how you apply the 50% limit depends on whether your employer's reimbursement plan was accountable or nonaccountable. Filling 1040x w form 8863 If you are not reimbursed, the 50% limit applies whether the unreimbursed meal expense is for business travel or business entertainment. Filling 1040x w form 8863 The 50% limit is explained later under Entertainment Expenses . Filling 1040x w form 8863 Accountable and nonaccountable plans are discussed later under Reimbursements . Filling 1040x w form 8863 Actual cost. Filling 1040x w form 8863   You can use the actual cost of your meals to figure the amount of your expense before reimbursement and application of the 50% deduction limit. Filling 1040x w form 8863 If you use this method, you must keep records of your actual cost. Filling 1040x w form 8863 Standard meal allowance. Filling 1040x w form 8863   Generally, you can use the “standard meal allowance” method as an alternative to the actual cost method. Filling 1040x w form 8863 It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of your actual costs. Filling 1040x w form 8863 The set amount varies depending on where and when you travel. Filling 1040x w form 8863 In this chapter, “standard meal allowance” refers to the federal rate for M&IE, discussed later under Amount of standard meal allowance . Filling 1040x w form 8863 If you use the standard meal allowance, you still must keep records to prove the time, place, and business purpose of your travel. Filling 1040x w form 8863 See Recordkeeping , later. Filling 1040x w form 8863 Incidental expenses. Filling 1040x w form 8863   The term “incidental expenses” means fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. Filling 1040x w form 8863 Incidental expenses do not include expenses for laundry, cleaning and pressing of clothing, lodging taxes, costs of telegrams or telephone calls, transportation between places of lodging or business and places where meals are taken, or the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings. Filling 1040x w form 8863 Incidental expenses only method. Filling 1040x w form 8863   You can use an optional method (instead of actual cost) for deducting incidental expenses only. Filling 1040x w form 8863 The amount of the deduction is $5 a day. Filling 1040x w form 8863 You can use this method only if you did not pay or incur any meal expenses. Filling 1040x w form 8863 You cannot use this method on any day that you use the standard meal allowance. Filling 1040x w form 8863    Federal employees should refer to the Federal Travel Regulations at  www. Filling 1040x w form 8863 gsa. Filling 1040x w form 8863 gov. Filling 1040x w form 8863 Find “What GSA Offers” and click on “Regulations: FMR, FTR, & FAR” for Federal Travel Regulation (FTR) for changes affecting claims for reimbursement. Filling 1040x w form 8863 50% limit may apply. Filling 1040x w form 8863   If you use the standard meal allowance method for meal expenses and you are not reimbursed or you are reimbursed under a nonaccountable plan, you can generally deduct only 50% of the standard meal allowance. Filling 1040x w form 8863 If you are reimbursed under an accountable plan and you are deducting amounts that are more than your reimbursements, you can deduct only 50% of the excess amount. Filling 1040x w form 8863 The 50% limit is explained later under Entertainment Expenses . Filling 1040x w form 8863 Accountable and nonaccountable plans are discussed later under Reimbursements . Filling 1040x w form 8863 There is no optional standard lodging amount similar to the standard meal allowance. Filling 1040x w form 8863 Your allowable lodging expense deduction is your actual cost. Filling 1040x w form 8863 Who can use the standard meal allowance. Filling 1040x w form 8863   You can use the standard meal allowance whether you are an employee or self-employed, and whether or not you are reimbursed for your traveling expenses. Filling 1040x w form 8863   Use of the standard meal allowance for other travel. Filling 1040x w form 8863    You can use the standard meal allowance to figure your meal expenses when you travel in connection with investment and other income-producing property. Filling 1040x w form 8863 You can also use it to figure your meal expenses when you travel for qualifying educational purposes. Filling 1040x w form 8863 You cannot use the standard meal allowance to figure the cost of your meals when you travel for medical or charitable purposes. Filling 1040x w form 8863 Amount of standard meal allowance. Filling 1040x w form 8863   The standard meal allowance is the federal M&IE rate. Filling 1040x w form 8863 For travel in 2013, the daily rate for most small localities in the United States is $46. Filling 1040x w form 8863   Most major cities and many other localities in the United States are designated as high-cost areas, qualifying for higher standard meal allowances. Filling 1040x w form 8863 You can find this information (organized by state) on the Internet at www. Filling 1040x w form 8863 gsa. Filling 1040x w form 8863 gov. Filling 1040x w form 8863 Click on “Per Diem Rates,” then select “2013” for the period January 1, 2013 – September 30, 2013, and select “2014” for the period October 1, 2013 – December 31, 2013. Filling 1040x w form 8863 However, you can apply the rates in effect before October 1, 2013, for expenses of all travel within the United States for 2013 instead of the updated rates. Filling 1040x w form 8863 You must consistently use either the rates for the first 9 months for all of 2013 or the updated rates for the period of October 1, 2013, through December 31, 2013. Filling 1040x w form 8863   If you travel to more than one location in one day, use the rate in effect for the area where you stop for sleep or rest. Filling 1040x w form 8863 If you work in the transportation industry, however, see Special rate for transportation workers , later. Filling 1040x w form 8863 Standard meal allowance for areas outside the continental United States. Filling 1040x w form 8863    The standard meal allowance rates above do not apply to travel in Alaska, Hawaii, or any other location outside the continental United States. Filling 1040x w form 8863 The Department of Defense establishes per diem rates for Alaska, Hawaii, Puerto Rico, American Samoa, Guam, Midway, the Northern Mariana Islands, the U. Filling 1040x w form 8863 S. Filling 1040x w form 8863 Virgin Islands, Wake Island, and other non-foreign areas outside the continental United States. Filling 1040x w form 8863 The Department of State establishes per diem rates for all other foreign areas. Filling 1040x w form 8863    You can access per diem rates for non-foreign areas outside the continental United States at: www. Filling 1040x w form 8863 defensetravel. Filling 1040x w form 8863 dod. Filling 1040x w form 8863 mil/site/perdiemCalc. Filling 1040x w form 8863 cfm. Filling 1040x w form 8863 You can access all other foreign per diem rates at www. Filling 1040x w form 8863 state. Filling 1040x w form 8863 gov/travel/. Filling 1040x w form 8863 Click on “Travel Per Diem Allowances for Foreign Areas” under “Foreign Per Diem Rates,” to obtain the latest foreign per diem rates. Filling 1040x w form 8863 Special rate for transportation workers. Filling 1040x w form 8863   You can use a special standard meal allowance if you work in the transportation industry. Filling 1040x w form 8863 You are in the transportation industry if your work: Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and Regularly requires you to travel away from home and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates. Filling 1040x w form 8863 If this applies to you, you can claim a standard daily meal allowance of $59 ($65 for travel outside the continental United States). Filling 1040x w form 8863   Using the special rate for transportation workers eliminates the need for you to determine the standard meal allowance for every area where you stop for sleep or rest. Filling 1040x w form 8863 If you choose to use the special rate for any trip, you must use the special rate (and not use the regular standard meal allowance rates) for all trips you take that year. Filling 1040x w form 8863 Travel for days you depart and return. Filling 1040x w form 8863   For both the day you depart for and the day you return from a business trip, you must prorate the standard meal allowance (figure a reduced amount for each day). Filling 1040x w form 8863 You can do so by one of two methods. Filling 1040x w form 8863 Method 1: You can claim 3/4 of the standard meal allowance. Filling 1040x w form 8863 Method 2: You can prorate using any method that you consistently apply and that is in accordance with reasonable business practice. Filling 1040x w form 8863 Example. Filling 1040x w form 8863 Jen is employed in New Orleans as a convention planner. Filling 1040x w form 8863 In March, her employer sent her on a 3-day trip to Washington, DC, to attend a planning seminar. Filling 1040x w form 8863 She left her home in New Orleans at 10 a. Filling 1040x w form 8863 m. Filling 1040x w form 8863 on Wednesday and arrived in Washington, DC, at 5:30 p. Filling 1040x w form 8863 m. Filling 1040x w form 8863 After spending two nights there, she flew back to New Orleans on Friday and arrived back home at 8:00 p. Filling 1040x w form 8863 m. Filling 1040x w form 8863 Jen's employer gave her a flat amount to cover her expenses and included it with her wages. Filling 1040x w form 8863 Under Method 1, Jen can claim 2½ days of the standard meal allowance for Washington, DC: 3/4 of the daily rate for Wednesday and Friday (the days she departed and returned), and the full daily rate for Thursday. Filling 1040x w form 8863 Under Method 2, Jen could also use any method that she applies consistently and that is in accordance with reasonable business practice. Filling 1040x w form 8863 For example, she could claim 3 days of the standard meal allowance even though a federal employee would have to use Method 1 and be limited to only 2½ days. Filling 1040x w form 8863 Travel in the United States The following discussion applies to travel in the United States. Filling 1040x w form 8863 For this purpose, the United States includes only the 50 states and the District of Columbia. Filling 1040x w form 8863 The treatment of your travel expenses depends on how much of your trip was business related and on how much of your trip occurred within the United States. Filling 1040x w form 8863 See Part of Trip Outside the United States , later. Filling 1040x w form 8863 Trip Primarily for Business You can deduct all your travel expenses if your trip was entirely business related. Filling 1040x w form 8863 If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct your business-related travel expenses. Filling 1040x w form 8863 These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination. Filling 1040x w form 8863 Example. Filling 1040x w form 8863 You work in Atlanta and take a business trip to New Orleans in May. Filling 1040x w form 8863 On your way home, you stop in Mobile to visit your parents. Filling 1040x w form 8863 You spend $1,996 for the 9 days you are away from home for travel, meals, lodging, and other travel expenses. Filling 1040x w form 8863 If you had not stopped in Mobile, you would have been gone only 6 days, and your total cost would have been $1,696. Filling 1040x w form 8863 You can deduct $1,696 for your trip, including the cost of round-trip transportation to and from New Orleans. Filling 1040x w form 8863 The deduction for your meals is subject to the 50% limit on meals mentioned earlier. Filling 1040x w form 8863 Trip Primarily for Personal Reasons If your trip was primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. Filling 1040x w form 8863 However, you can deduct any expenses you have while at your destination that are directly related to your business. Filling 1040x w form 8863 A trip to a resort or on a cruise ship may be a vacation even if the promoter advertises that it is primarily for business. Filling 1040x w form 8863 The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip. Filling 1040x w form 8863 Part of Trip Outside the United States If part of your trip is outside the United States, use the rules described later under Travel Outside the United States for that part of the trip. Filling 1040x w form 8863 For the part of your trip that is inside the United States, use the rules for travel in the United States. Filling 1040x w form 8863 Travel outside the United States does not include travel from one point in the United States to another point in the United States. Filling 1040x w form 8863 The following discussion can help you determine whether your trip was entirely within the United States. Filling 1040x w form 8863 Public transportation. Filling 1040x w form 8863   If you travel by public transportation, any place in the United States where that vehicle makes a scheduled stop is a point in the United States. Filling 1040x w form 8863 Once the vehicle leaves the last scheduled stop in the United States on its way to a point outside the United States, you apply the rules under Travel Outside the United States . Filling 1040x w form 8863 Example. Filling 1040x w form 8863 You fly from New York to Puerto Rico with a scheduled stop in Miami. Filling 1040x w form 8863 You return to New York nonstop. Filling 1040x w form 8863 The flight from New York to Miami is in the United States, so only the flight from Miami to Puerto Rico is outside the United States. Filling 1040x w form 8863 Because there are no scheduled stops between Puerto Rico and New York, all of the return trip is outside the United States. Filling 1040x w form 8863 Private car. Filling 1040x w form 8863   Travel by private car in the United States is travel between points in the United States, even when you are on your way to a destination outside the United States. Filling 1040x w form 8863 Example. Filling 1040x w form 8863 You travel by car from Denver to Mexico City and return. Filling 1040x w form 8863 Your travel from Denver to the border and from the border back to Denver is travel in the United States, and the rules in this section apply. Filling 1040x w form 8863 The rules under Travel Outside the United States apply to your trip from the border to Mexico City and back to the border. Filling 1040x w form 8863 Travel Outside the United States If any part of your business travel is outside the United States, some of your deductions for the cost of getting to and from your destination may be limited. Filling 1040x w form 8863 For this purpose, the United States includes only the 50 states and the District of Columbia. Filling 1040x w form 8863 How much of your travel expenses you can deduct depends in part upon how much of your trip outside the United States was business related. Filling 1040x w form 8863 See chapter 1 of Publication 463 for information on luxury water travel. Filling 1040x w form 8863 Travel Entirely for Business or Considered Entirely for Business You can deduct all your travel expenses of getting to and from your business destination if your trip is entirely for business or considered entirely for business. Filling 1040x w form 8863 Travel entirely for business. Filling 1040x w form 8863   If you travel outside the United States and you spend the entire time on business activities, you can deduct all of your travel expenses. Filling 1040x w form 8863 Travel considered entirely for business. Filling 1040x w form 8863   Even if you did not spend your entire time on business activities, your trip is considered entirely for business if you meet at least one of the following four exceptions. Filling 1040x w form 8863 Exception 1 - No substantial control. Filling 1040x w form 8863   Your trip is considered entirely for business if you did not have substantial control over arranging the trip. Filling 1040x w form 8863 The fact that you control the timing of your trip does not, by itself, mean that you have substantial control over arranging your trip. Filling 1040x w form 8863   You do not have substantial control over your trip if you: Are an employee who was reimbursed or paid a travel expense allowance, Are not related to your employer, and Are not a managing executive. Filling 1040x w form 8863    “Related to your employer” is defined later in this chapter under Per Diem and Car Allowances . Filling 1040x w form 8863   A “managing executive” is an employee who has the authority and responsibility, without being subject to the veto of another, to decide on the need for the business travel. Filling 1040x w form 8863    A self-employed person generally has substantial control over arranging business trips. Filling 1040x w form 8863 Exception 2 - Outside United States no more than a week. Filling 1040x w form 8863   Your trip is considered entirely for business if you were outside the United States for a week or less, combining business and nonbusiness activities. Filling 1040x w form 8863 One week means 7 consecutive days. Filling 1040x w form 8863 In counting the days, do not count the day you leave the United States, but do count the day you return to the United States. Filling 1040x w form 8863 Exception 3 - Less than 25% of time on personal activities. Filling 1040x w form 8863   Your trip is considered entirely for business if: You were outside the United States for more than a week, and You spent less than 25% of the total time you were outside the United States on nonbusiness activities. Filling 1040x w form 8863 For this purpose, count both the day your trip began and the day it ended. Filling 1040x w form 8863 Exception 4 - Vacation not a major consideration. Filling 1040x w form 8863   Your trip is considered entirely for business if you can establish that a personal vacation was not a major consideration, even if you have substantial control over arranging the trip. Filling 1040x w form 8863 Travel Primarily for Business If you travel outside the United States primarily for business but spend some of your time on nonbusiness activities, you generally cannot deduct all of your travel expenses. Filling 1040x w form 8863 You can only deduct the business portion of your cost of getting to and from your destination. Filling 1040x w form 8863 You must allocate the costs between your business and nonbusiness activities to determine your deductible amount. Filling 1040x w form 8863 These travel allocation rules are discussed in chapter 1 of Publication 463. Filling 1040x w form 8863 You do not have to allocate your travel expense deduction if you meet one of the four exceptions listed earlier under Travel considered entirely for business. Filling 1040x w form 8863 In those cases, you can deduct the total cost of getting to and from your destination. Filling 1040x w form 8863 Travel Primarily for Personal Reasons If you travel outside the United States primarily for vacation or for investment purposes, the entire cost of the trip is a nondeductible personal expense. Filling 1040x w form 8863 If you spend some time attending brief professional seminars or a continuing education program, you can deduct your registration fees and other expenses you have that are directly related to your business. Filling 1040x w form 8863 Conventions You can deduct your travel expenses when you attend a convention if you can show that your attendance benefits your trade or business. Filling 1040x w form 8863 You cannot deduct the travel expenses for your family. Filling 1040x w form 8863 If the convention is for investment, political, social, or other purposes unrelated to your trade or business, you cannot deduct the expenses. Filling 1040x w form 8863 Your appointment or election as a delegate does not, in itself, determine whether you can deduct travel expenses. Filling 1040x w form 8863 You can deduct your travel expenses only if your attendance is connected to your own trade or business. Filling 1040x w form 8863 Convention agenda. Filling 1040x w form 8863   The convention agenda or program generally shows the purpose of the convention. Filling 1040x w form 8863 You can show your attendance at the convention benefits your trade or business by comparing the agenda with the official duties and responsibilities of your position. Filling 1040x w form 8863 The agenda does not have to deal specifically with your official duties and responsibilities; it will be enough if the agenda is so related to your position that it shows your attendance was for business purposes. Filling 1040x w form 8863 Conventions held outside the North American area. Filling 1040x w form 8863    See chapter 1 of Publication 463 for information on conventions held outside the North American area. Filling 1040x w form 8863 Entertainment Expenses You may be able to deduct business-related entertainment expenses you have for entertaining a client, customer, or employee. Filling 1040x w form 8863 You can deduct entertainment expenses only if they are both ordinary and necessary (defined earlier in the Introduction ) and meet one of the following tests. Filling 1040x w form 8863 Directly-related test. Filling 1040x w form 8863 Associated test. Filling 1040x w form 8863 Both of these tests are explained in chapter 2 of Publication 463. Filling 1040x w form 8863 The amount you can deduct for entertainment expenses may be limited. Filling 1040x w form 8863 Generally, you can deduct only 50% of your unreimbursed entertainment expenses. Filling 1040x w form 8863 This limit is discussed next. Filling 1040x w form 8863 50% Limit In general, you can deduct only 50% of your business-related meal and entertainment expenses. Filling 1040x w form 8863 (If you are subject to the Department of Transportation's “hours of service” limits, you can deduct 80% of your business-related meal and entertainment expenses. Filling 1040x w form 8863 See Individuals subject to “hours of service” limits , later. Filling 1040x w form 8863 ) The 50% limit applies to employees or their employers, and to self-employed persons (including independent contractors) or their clients, depending on whether the expenses are reimbursed. Filling 1040x w form 8863 Figure 26-A summarizes the general rules explained in this section. Filling 1040x w form 8863 The 50% limit applies to business meals or entertainment expenses you have while: Traveling away from home (whether eating alone or with others) on business, Entertaining customers at your place of business, a restaurant, or other location, or Attending a business convention or reception, business meeting, or business luncheon at a club. Filling 1040x w form 8863 Included expenses. Filling 1040x w form 8863   Expenses subject to the 50% limit include: Taxes and tips relating to a business meal or entertainment activity, Cover charges for admission to a nightclub, Rent paid for a room in which you hold a dinner or cocktail party, and Amounts paid for parking at a sports arena. Filling 1040x w form 8863 However, the cost of transportation to and from a business meal or a business-related entertainment activity is not subject to the 50% limit. Filling 1040x w form 8863 Application of 50% limit. Filling 1040x w form 8863   The 50% limit on meal and entertainment expenses applies if the expense is otherwise deductible and is not covered by one of the exceptions discussed later in this section. Filling 1040x w form 8863   The 50% limit also applies to certain meal and entertainment expenses that are not business related. Filling 1040x w form 8863 It applies to meal and entertainment expenses incurred for the production of income, including rental or royalty income. Filling 1040x w form 8863 It also applies to the cost of meals included in deductible educational expenses. Filling 1040x w form 8863 When to apply the 50% limit. Filling 1040x w form 8863   You apply the 50% limit after determining the amount that would otherwise qualify for a deduction. Filling 1040x w form 8863 You first have to determine the amount of meal and entertainment expenses that would be deductible under the other rules discussed in this chapter. Filling 1040x w form 8863 Example 1. Filling 1040x w form 8863 You spend $200 for a business-related meal. Filling 1040x w form 8863 If $110 of that amount is not allowable because it is lavish and extravagant, the remaining $90 is subject to the 50% limit. Filling 1040x w form 8863 Your deduction cannot be more than $45 (. Filling 1040x w form 8863 50 × $90). Filling 1040x w form 8863 Example 2. Filling 1040x w form 8863 You purchase two tickets to a concert and give them to a client. Filling 1040x w form 8863 You purchased the tickets through a ticket agent. Filling 1040x w form 8863 You paid $200 for the two tickets, which had a face value of $80 each ($160 total). Filling 1040x w form 8863 Your deduction cannot be more than $80 (. Filling 1040x w form 8863 50 × $160). Filling 1040x w form 8863 Exceptions to the 50% Limit Generally, business-related meal and entertainment expenses are subject to the 50% limit. Filling 1040x w form 8863 Figure 26-A can help you determine if the 50% limit applies to you. Filling 1040x w form 8863 Your meal or entertainment expense is not subject to the 50% limit if the expense meets one of the following exceptions. Filling 1040x w form 8863 Employee's reimbursed expenses. Filling 1040x w form 8863   If you are an employee, you are not subject to the 50% limit on expenses for which your employer reimburses you under an accountable plan. Filling 1040x w form 8863 Accountable plans are discussed later under Reimbursements . Filling 1040x w form 8863 Individuals subject to “hours of service” limits. Filling 1040x w form 8863   You can deduct a higher percentage of your meal expenses while traveling away from your tax home if the meals take place during or incident to any period subject to the Department of Transportation's “hours of service” limits. Filling 1040x w form 8863 The percentage is 80%. Filling 1040x w form 8863   Individuals subject to the Department of Transportation's “hours of service” limits include the following persons. Filling 1040x w form 8863 Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations. Filling 1040x w form 8863 Interstate truck operators and bus drivers who are under Department of Transportation regulations. Filling 1040x w form 8863 Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations. Filling 1040x w form 8863 Certain merchant mariners who are under Coast Guard regulations. Filling 1040x w form 8863 Other exceptions. Filling 1040x w form 8863   There are also exceptions for the self-employed, advertising expenses, selling meals or entertainment, and charitable sports events. Filling 1040x w form 8863 These are discussed in Publication 463. Filling 1040x w form 8863 Figure 26-A. Filling 1040x w form 8863 Does the 50% Limit Apply to Your Expenses? There are exceptions to these rules. Filling 1040x w form 8863 See Exceptions to the 50% Limit . Filling 1040x w form 8863 Please click here for the text description of the image. Filling 1040x w form 8863 Entertainment expenses: 50% limit What Entertainment Expenses Are Deductible? This section explains different types of entertainment expenses you may be able to deduct. Filling 1040x w form 8863 Entertainment. Filling 1040x w form 8863    Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. Filling 1040x w form 8863 Examples include entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; or on hunting, fishing, vacation, and similar trips. Filling 1040x w form 8863 A meal as a form of entertainment. Filling 1040x w form 8863   Entertainment includes the cost of a meal you provide to a customer or client, whether the meal is a part of other entertainment or by itself. Filling 1040x w form 8863 A meal expense includes the cost of food, beverages, taxes, and tips for the meal. Filling 1040x w form 8863 To deduct an entertainment-related meal, you or your employee must be present when the food or beverages are provided. Filling 1040x w form 8863 You cannot claim the cost of your meal both as an entertainment expense and as a travel expense. Filling 1040x w form 8863 Separating costs. Filling 1040x w form 8863   If you have one expense that includes the costs of entertainment and other services (such as lodging or transportation), you must allocate that expense between the cost of entertainment and the cost of other services. Filling 1040x w form 8863 You must have a reasonable basis for making this allocation. Filling 1040x w form 8863 For example, you must allocate your expenses if a hotel includes entertainment in its lounge on the same bill with your room charge. Filling 1040x w form 8863 Taking turns paying for meals or entertainment. Filling 1040x w form 8863   If a group of business acquaintances take turns picking up each others' meal or entertainment checks without regard to whether any business purposes are served, no member of the group can deduct any part of the expense. Filling 1040x w form 8863 Lavish or extravagant expenses. Filling 1040x w form 8863   You cannot deduct expenses for entertainment that are lavish or extravagant. Filling 1040x w form 8863 An expense is not considered lavish or extravagant if it is reasonable considering the facts and circumstances. Filling 1040x w form 8863 Expenses will not be disallowed just because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. Filling 1040x w form 8863 Trade association meetings. Filling 1040x w form 8863    You can deduct entertainment expenses that are directly related to, and necessary for, attending business meetings or conventions of certain exempt organizations if the expenses of your attendance are related to your active trade or business. Filling 1040x w form 8863 These organizations include business leagues, chambers of commerce, real estate boards, trade associations, and professional associations. Filling 1040x w form 8863 Entertainment tickets. Filling 1040x w form 8863   Generally, you cannot deduct more than the face value of an entertainment ticket, even if you paid a higher price. Filling 1040x w form 8863 For example, you cannot deduct service fees you pay to ticket agencies or brokers or any amount over the face value of the tickets you pay to scalpers. Filling 1040x w form 8863 What Entertainment Expenses Are Not Deductible? This section explains different types of entertainment expenses you generally may not be able to deduct. Filling 1040x w form 8863 Club dues and membership fees. Filling 1040x w form 8863   You cannot deduct dues (including initiation fees) for membership in any club organized for: Business, Pleasure, Recreation, or Other social purpose. Filling 1040x w form 8863 This rule applies to any membership organization if one of its principal purposes is either: To conduct entertainment activities for members or their guests, or To provide members or their guests with access to entertainment facilities. Filling 1040x w form 8863   The purposes and activities of a club, not its name, will determine whether or not you can deduct the dues. Filling 1040x w form 8863 You cannot deduct dues paid to: Country clubs, Golf and athletic clubs, Airline clubs, Hotel clubs, and Clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. Filling 1040x w form 8863 Entertainment facilities. Filling 1040x w form 8863   Generally, you cannot deduct any expense for the use of an entertainment facility. Filling 1040x w form 8863 This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection. Filling 1040x w form 8863   An entertainment facility is any property you own, rent, or use for entertainment. Filling 1040x w form 8863 Examples include a yacht, hunting lodge, fishing camp, swimming pool, tennis court, bowling alley, car, airplane, apartment, hotel suite, or home in a vacation resort. Filling 1040x w form 8863 Out-of-pocket expenses. Filling 1040x w form 8863   You can deduct out-of-pocket expenses, such as for food and beverages, catering, gas, and fishing bait, that you provided during entertainment at a facility. Filling 1040x w form 8863 These are not expenses for the use of an entertainment facility. Filling 1040x w form 8863 However, these expenses are subject to the directly-related and associated tests and to the 50% Limit discussed earlier. Filling 1040x w form 8863 Additional information. Filling 1040x w form 8863   For more information on entertainment expenses, including discussions of the directly-related and associated tests, see chapter 2 of Publication 463. Filling 1040x w form 8863 Gift Expenses If you give gifts in the course of your trade or business, you can deduct all or part of the cost. Filling 1040x w form 8863 This section explains the limits and rules for deducting the costs of gifts. Filling 1040x w form 8863 $25 limit. Filling 1040x w form 8863   You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. Filling 1040x w form 8863 A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift. Filling 1040x w form 8863   If you give a gift to a member of a customer's family, the gift is generally considered to be an indirect gift to the customer. Filling 1040x w form 8863 This rule does not apply if you have a bona fide, independent business connection with that family member and the gift is not intended for the customer's eventual use or benefit. Filling 1040x w form 8863   If you and your spouse both give gifts, both of you are treated as one taxpayer. Filling 1040x w form 8863 It does not matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient. Filling 1040x w form 8863 If a partnership gives gifts, the partnership and the partners are treated as one taxpayer. Filling 1040x w form 8863 Incidental costs. Filling 1040x w form 8863   Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit. Filling 1040x w form 8863   A cost is incidental only if it does not add substantial value to the gift. Filling 1040x w form 8863 For example, the cost of customary gift wrapping is an incidental cost. Filling 1040x w form 8863 However, the purchase of an ornamental basket for packaging fruit is not an incidental cost if the value of the basket is substantial compared to the value of the fruit. Filling 1040x w form 8863 Exceptions. Filling 1040x w form 8863   The following items are not considered gifts for purposes of the $25 limit. Filling 1040x w form 8863 An item that costs $4 or less and: Has your name clearly and permanently imprinted on the gift, and Is one of a number of identical items you widely distribute. Filling 1040x w form 8863 Examples include pens, desk sets, and plastic bags and cases. Filling 1040x w form 8863 Signs, display racks, or other promotional material to be used on the business premises of the recipient. Filling 1040x w form 8863 Gift or entertainment. Filling 1040x w form 8863   Any item that might be considered either a gift or entertainment generally will be considered entertainment. Filling 1040x w form 8863 However, if you give a customer packaged food or beverages you intend the customer to use at a later date, treat it as a gift. Filling 1040x w form 8863    If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. Filling 1040x w form 8863 You can treat the cost of the tickets as either a gift expense or an entertainment expense, whichever is to your advantage. Filling 1040x w form 8863    If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. Filling 1040x w form 8863 You cannot choose, in this case, to treat the cost of the tickets as a gift expense. Filling 1040x w form 8863 Transportation Expenses This section discusses expenses you can deduct for business transportation when you are not traveling away from home as defined earlier under Travel Expenses . Filling 1040x w form 8863 These expenses include the cost of transportation by air, rail, bus, taxi, etc. Filling 1040x w form 8863 , and the cost of driving and maintaining your car. Filling 1040x w form 8863 Transportation expenses include the ordinary and necessary costs of all of the following. Filling 1040x w form 8863 Getting from one workplace to another in the course of your business or profession when you are traveling within the area of your tax home. Filling 1040x w form 8863 (Tax home is defined earlier under Travel Expenses . Filling 1040x w form 8863 ) Visiting clients or customers. Filling 1040x w form 8863 Going to a business meeting away from your regular workplace. Filling 1040x w form 8863 Getting from your home to a temporary workplace when you have one or more regular places of work. Filling 1040x w form 8863 These temporary workplaces can be either within the area of your tax home or outside that area. Filling 1040x w form 8863 Transportation expenses do not include expenses you have while traveling away from home overnight. Filling 1040x w form 8863 Those expenses are travel expenses, discussed earlier. Filling 1040x w form 8863 However, if you use your car while traveling away from home overnight, use the rules in this section to figure your car expense deduction. Filling 1040x w form 8863 See Car Expenses , later. Filling 1040x w form 8863 Illustration of transportation expenses. Filling 1040x w form 8863    Figure 26-B illustrates the rules for when you can deduct transportation expenses when you have a regular or main job away from your home. Filling 1040x w form 8863 You may want to refer to it when deciding whether you can deduct your transportation expenses. Filling 1040x w form 8863 Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. Filling 1040x w form 8863 However, there are many exceptions for deducting transportation expenses, like whether your work location is temporary (inside or outside the metropolitan area), traveling for same trade or business, or if you have a home office. Filling 1040x w form 8863 Temporary work location. Filling 1040x w form 8863   If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance. Filling 1040x w form 8863   If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise. Filling 1040x w form 8863   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. Filling 1040x w form 8863   If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. Filling 1040x w form 8863 It will not be treated as temporary after the date you determine it will last more than 1 year. Filling 1040x w form 8863   If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. Filling 1040x w form 8863 You may have deductible travel expenses as discussed earlier in this chapter. Filling 1040x w form 8863 No regular place of work. Filling 1040x w form 8863   If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area. Filling 1040x w form 8863   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. Filling 1040x w form 8863   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. Filling 1040x w form 8863 These are nondeductible commuting expenses. Filling 1040x w form 8863 Two places of work. Filling 1040x w form 8863   If you work at two places in one day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. Filling 1040x w form 8863 However, if for some personal reason you do not go directly from one location to the other, you cannot deduct more than the amount it would have cost you to go directly from the first location to the second. Filling 1040x w form 8863   Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. Filling 1040x w form 8863 You cannot deduct them. Filling 1040x w form 8863 Armed Forces reservists. Filling 1040x w form 8863   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. Filling 1040x w form 8863 You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work , earlier. Filling 1040x w form 8863   You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. Filling 1040x w form 8863 In this case, your transportation generally is a nondeductible commuting expense. Filling 1040x w form 8863 However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. Filling 1040x w form 8863   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. Filling 1040x w form 8863   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. Filling 1040x w form 8863 These expenses are discussed earlier under Travel Expenses . Filling 1040x w form 8863   If you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you may be able to deduct some of your reserve-related travel costs as an adjustment to income rather than as an itemized deduction. Filling 1040x w form 8863 See Armed Forces reservists traveling more than 100 miles from home under Special Rules, later. Filling 1040x w form 8863 Commuting expenses. Filling 1040x w form 8863   You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. Filling 1040x w form 8863 These costs are personal commuting expenses. Filling 1040x w form 8863 You cannot deduct commuting expenses no matter how far your home is from your regular place of work. Filling 1040x w form 8863 You cannot deduct commuting expenses even if you work during the commuting trip. Filling 1040x w form 8863 Example. Filling 1040x w form 8863 You sometimes use your cell phone to make business calls while commuting to and from work. Filling 1040x w form 8863 Sometimes business associates ride with you to and from work, and you have a business discussion in the car. Filling 1040x w form 8863 These activities do not change the trip from personal to business. Filling 1040x w form 8863 You cannot deduct your commuting expenses. Filling 1040x w form 8863 Parking fees. Filling 1040x w form 8863   Fees you pay to park your car at your place of business are nondeductible commuting expenses. Filling 1040x w form 8863 You can, however, deduct business-related parking fees when visiting a customer or client. Filling 1040x w form 8863 Advertising display on car. Filling 1040x w form 8863   Putting display material that advertises your business on your car does not change the use of your car from personal use to business use. Filling 1040x w form 8863 If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. Filling 1040x w form 8863 Car pools. Filling 1040x w form 8863   You cannot deduct the cost of using your car in a nonprofit car pool. Filling 1040x w form 8863 Do not include payments you receive from the passengers in your income. Filling 1040x w form 8863 These payments are considered reimbursements of your expenses. Filling 1040x w form 8863 However, if you operate a car pool for a profit, you must include payments from passengers in your income. Filling 1040x w form 8863 You can then deduct your car expenses (using the rules in this chapter). Filling 1040x w form 8863 Hauling tools or instruments. Filling 1040x w form 8863   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. Filling 1040x w form 8863 However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car). Filling 1040x w form 8863 Union members' trips from a union hall. Filling 1040x w form 8863   If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work are nondeductible commuting expenses. Filling 1040x w form 8863 Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. Filling 1040x w form 8863 Office in the home. Filling 1040x w form 8863   If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. Filling 1040x w form 8863 (See chapter 28 for information on determining if your home office qualifies as a principal place of business. Filling 1040x w form 8863 ) Figure 26-B. Filling 1040x w form 8863 When Are Transportation Expenses Deductible? Most employees and self-employed persons can use this chart. Filling 1040x w form 8863 (Do not use this chart if your home is your principal place of business. Filling 1040x w form 8863 See Office in the home . Filling 1040x w form 8863 ) Please click here for the text description of the image. Filling 1040x w form 8863 Figure 26-B. Filling 1040x w form 8863 Local Transportation Examples of deductible transportation. Filling 1040x w form 8863   The following examples show when you can deduct transportation expenses based on the location of your work and your home. Filling 1040x w form 8863 Example 1. Filling 1040x w form 8863 You regularly work in an office in the city where you live. Filling 1040x w form 8863 Your employer sends you to a 1-week training session at a different office in the same city. Filling 1040x w form 8863 You travel directly from your home to the training location and return each day. Filling 1040x w form 8863 You can deduct the cost of your daily round-trip transportation between your home and the training location. Filling 1040x w form 8863 Example 2. Filling 1040x w form 8863 Your principal place of business is in your home. Filling 1040x w form 8863 You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business. Filling 1040x w form 8863 Example 3. Filling 1040x w form 8863 You have no regular office, and you do not have an office in your home. Filling 1040x w form 8863 In this case, the location of your first business contact inside the metropolitan area is considered your office. Filling 1040x w form 8863 Transportation expenses between your home and this first contact are nondeductible commuting expenses. Filling 1040x w form 8863 Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. Filling 1040x w form 8863 While you cannot deduct the costs of these first and last trips, you can deduct the costs of going from one client or customer to another. Filling 1040x w form 8863 With no regular or home office, the costs of travel between two or more business contacts in a metropolitan area are deductible while the costs of travel between the home to (and from) business contacts are not deductible. Filling 1040x w form 8863 Car Expenses If you use your car for business purposes, you may be able to deduct car expenses. Filling 1040x w form 8863 You generally can use one of the two following methods to figure your deductible expenses. Filling 1040x w form 8863 Standard mileage rate. Filling 1040x w form 8863 Actual car expenses. Filling 1040x w form 8863 If you use actual car expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. Filling 1040x w form 8863 See Leasing a car under Actual Car Expenses, later. Filling 1040x w form 8863 In this chapter, “car” includes a van, pickup, or panel truck. Filling 1040x w form 8863 Rural mail carriers. Filling 1040x w form 8863   If you are a rural mail carrier, you may be able to treat the amount of qualified reimbursement you received as the amount of your allowable expense. Filling 1040x w form 8863 Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the amount of reimbursement in your income. Filling 1040x w form 8863   If your vehicle expenses are more than the amount of your reimbursement, you can deduct the unreimbursed expenses as an itemized deduction on Schedule A (Form 1040). Filling 1040x w form 8863 You must complete Form 2106 and attach it to your Form 1040. Filling 1040x w form 8863   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. Filling 1040x w form 8863 It is given as an equipment maintenance allowance (EMA) to employees of the U. Filling 1040x w form 8863 S. Filling 1040x w form 8863 Postal Service. Filling 1040x w form 8863 It is at the rate contained in the 1991 collective bargaining agreement. Filling 1040x w form 8863 Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. Filling 1040x w form 8863 See your employer for information on your reimbursement. Filling 1040x w form 8863 If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. Filling 1040x w form 8863 Standard Mileage Rate You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. Filling 1040x w form 8863 For 2013, the standard mileage rate for business use is 56½ cents per mile. Filling 1040x w form 8863 If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year, but see Parking fees and tolls, later. Filling 1040x w form 8863 You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. Filling 1040x w form 8863 See Reimbursements under How To Report, later. Filling 1040x w form 8863 Choosing the standard mileage rate. Filling 1040x w form 8863   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Filling 1040x w form 8863 Then in later years, you can choose to use either the standard mileage rate or actual expenses. Filling 1040x w form 8863   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. Filling 1040x w form 8863   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. Filling 1040x w form 8863 You cannot revoke the choice. Filling 1040x w form 8863 However, in a later year, you can switch from the standard mileage rate to the actual expenses method. Filling 1040x w form 8863 If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation. Filling 1040x w form 8863 Example. Filling 1040x w form 8863 Larry is an employee who occasionally uses his own car for business purposes. Filling 1040x w form 8863 He purchased the car in 2011, but he did not claim any unreimburse