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Free tax extensions Publication 547 - Main Content Table of Contents CasualtyFamily pet. Free tax extensions Progressive deterioration. Free tax extensions Special Procedure for Damage From Corrosive Drywall Theft Loss on Deposits Proof of Loss Figuring a LossGain from reimbursement. Free tax extensions Business or income-producing property. Free tax extensions Loss of inventory. Free tax extensions Leased property. Free tax extensions Exception for personal-use real property. Free tax extensions Decrease in Fair Market Value Adjusted Basis Insurance and Other Reimbursements Deduction Limits2% Rule $100 Rule 10% Rule Figuring the Deduction Figuring a GainPostponement of Gain When To Report Gains and LossesLoss on deposits. Free tax extensions Lessee's loss. Free tax extensions Disaster Area LossesDisaster loss to inventory. Free tax extensions Main home in disaster area. Free tax extensions Unsafe home. Free tax extensions Time limit for making choice. Free tax extensions Revoking your choice. Free tax extensions Figuring the loss deduction. Free tax extensions How to report the loss on Form 1040X. Free tax extensions Records. Free tax extensions Need a copy of your tax return for the preceding year? Postponed Tax Deadlines Contacting the Federal Emergency Management Agency (FEMA) How To Report Gains and LossesProperty held 1 year or less. Free tax extensions Property held more than 1 year. Free tax extensions Depreciable property. Free tax extensions Adjustments to Basis If Deductions Are More Than Income How To Get Tax HelpLow Income Taxpayer Clinics Casualty A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Free tax extensions A sudden event is one that is swift, not gradual or progressive. Free tax extensions An unexpected event is one that is ordinarily unanticipated and unintended. Free tax extensions An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged. Free tax extensions Generally, casualty losses are deductible during the taxable year that the loss occurred. Free tax extensions See Table 3, later. Free tax extensions Deductible losses. Free tax extensions   Deductible casualty losses can result from a number of different causes, including the following. Free tax extensions Car accidents (but see Nondeductible losses , next, for exceptions). Free tax extensions Earthquakes. Free tax extensions Fires (but see Nondeductible losses , next, for exceptions). Free tax extensions Floods. Free tax extensions Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses , later. Free tax extensions Mine cave-ins. Free tax extensions Shipwrecks. Free tax extensions Sonic booms. Free tax extensions Storms, including hurricanes and tornadoes. Free tax extensions Terrorist attacks. Free tax extensions Vandalism. Free tax extensions Volcanic eruptions. Free tax extensions Nondeductible losses. Free tax extensions   A casualty loss is not deductible if the damage or destruction is caused by the following. Free tax extensions Accidentally breaking articles such as glassware or china under normal conditions. Free tax extensions A family pet (explained below). Free tax extensions A fire if you willfully set it, or pay someone else to set it. Free tax extensions A car accident if your willful negligence or willful act caused it. Free tax extensions The same is true if the willful act or willful negligence of someone acting for you caused the accident. Free tax extensions Progressive deterioration (explained below). Free tax extensions However, see Special Procedure for Damage From Corrosive Drywall , later. Free tax extensions Family pet. Free tax extensions   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed earlier under Casualty are met. Free tax extensions Example. Free tax extensions Your antique oriental rug was damaged by your new puppy before it was housebroken. Free tax extensions Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss. Free tax extensions Progressive deterioration. Free tax extensions   Loss of property due to progressive deterioration is not deductible as a casualty loss. Free tax extensions This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. Free tax extensions The following are examples of damage due to progressive deterioration. Free tax extensions The steady weakening of a building due to normal wind and weather conditions. Free tax extensions The deterioration and damage to a water heater that bursts. Free tax extensions However, the rust and water damage to rugs and drapes caused by the bursting of a water heater does qualify as a casualty. Free tax extensions Most losses of property caused by droughts. Free tax extensions To be deductible, a drought-related loss generally must be incurred in a trade or business or in a transaction entered into for profit. Free tax extensions Termite or moth damage. Free tax extensions The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. Free tax extensions However, a sudden destruction due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss. Free tax extensions Special Procedure for Damage From Corrosive Drywall Under a special procedure, you can deduct the amounts you paid to repair damage to your home and household appliances due to corrosive drywall. Free tax extensions Under this procedure, you treat the amounts paid for repairs as a casualty loss in the year of payment. Free tax extensions For example, amounts you paid for repairs in 2013 are deductible on your 2013 tax return and amounts you paid for repairs in 2012 are deductible on your 2012 tax return. Free tax extensions Note. Free tax extensions If you paid for any repairs before 2013 and you choose to follow this special procedure, you can amend your return for the earlier year by filing Form 1040X, Amended U. Free tax extensions S. Free tax extensions Individual Income Tax Return, and attaching a completed Form 4684 for the appropriate year. Free tax extensions Form 4684 for the appropriate year can be found at IRS. Free tax extensions gov. Free tax extensions Generally, Form 1040X must be filed within 3 years after the date the original return was filed or within 2 years after the date the tax was paid, whichever is later. Free tax extensions Corrosive drywall. Free tax extensions   For purposes of this special procedure, “corrosive drywall” means drywall that is identified as problem drywall under the two-step identification method published by the Consumer Product Safety Commission (CPSC) and the Department of Housing and Urban Development (HUD) in their interim guidance dated January 28, 2010, as revised by the CPSC and HUD. Free tax extensions The revised identification guidance and remediation guidelines are available at www. Free tax extensions cpsc. Free tax extensions gov/Safety-Education/Safety-Education-Centers/Drywall. Free tax extensions Special instructions for completing Form 4684. Free tax extensions   If you choose to follow this special procedure, complete Form 4684, Section A, according to the instructions below. Free tax extensions The IRS will not challenge your treatment of damage resulting from corrosive drywall as a casualty loss if you determine and report the loss as explained below. Free tax extensions Top margin of Form 4684. Free tax extensions   Enter “Revenue Procedure 2010-36”. Free tax extensions Line 1. Free tax extensions   Enter the information required by the line 1 instructions. Free tax extensions Line 2. Free tax extensions   Skip this line. Free tax extensions Line 3. Free tax extensions   Enter the amount of insurance or other reimbursements you received (including through litigation). Free tax extensions If none, enter -0-. Free tax extensions Lines 4–7. Free tax extensions   Skip these lines. Free tax extensions Line 8. Free tax extensions   Enter the amount you paid to repair the damage to your home and household appliances due to corrosive drywall. Free tax extensions Enter only the amounts you paid to restore your home to the condition existing immediately before the damage. Free tax extensions Do not enter any amounts you paid for improvements or additions that increased the value of your home above its pre-loss value. Free tax extensions If you replaced a household appliance instead of repairing it, enter the lesser of: The current cost to replace the original appliance, or The basis of the original appliance (generally its cost). Free tax extensions Line 9. Free tax extensions   If line 8 is more than line 3, do one of the following. Free tax extensions If you have a pending claim for reimbursement (or you intend to pursue reimbursement), enter 75% of the difference between lines 3 and 8. Free tax extensions If item (1) does not apply to you, enter the full amount of the difference between lines 3 and 8. Free tax extensions If line 8 is less than or equal to line 3, you cannot claim a casualty loss deduction using this special procedure. Free tax extensions    If you have a pending claim for reimbursement (or you intend to pursue reimbursement), you may have income or an additional deduction in a later tax year depending on the actual amount of reimbursement received. Free tax extensions See Reimbursement Received After Deducting Loss, later. Free tax extensions Lines 10–18. Free tax extensions   Complete these lines according to the Instructions for Form 4684. Free tax extensions Choosing not to follow this special procedure. Free tax extensions   If you choose not to follow this special procedure, you are subject to all of the provisions that apply to the deductibility of casualty losses, and you must complete lines 1–9 according to the Instructions for Form 4684. Free tax extensions This means, for example, that you must establish that the damage, destruction, or loss of property resulted from an identifiable event as defined earlier under Casualty . Free tax extensions Furthermore, you must have proof that shows the following. Free tax extensions The loss is properly deductible in the tax year you claimed it and not in some other year. Free tax extensions See When To Report Gains and Losses , later. Free tax extensions The amount of the claimed loss. Free tax extensions See Proof of Loss , later. Free tax extensions No claim for reimbursement of any portion of the loss exists for which there is a reasonable prospect of recovery. Free tax extensions See When To Report Gains and Losses , later. Free tax extensions Theft A theft is the taking and removing of money or property with the intent to deprive the owner of it. Free tax extensions The taking of property must be illegal under the law of the state where it occurred and it must have been done with criminal intent. Free tax extensions You do not need to show a conviction for theft. Free tax extensions Theft includes the taking of money or property by the following means. Free tax extensions Blackmail. Free tax extensions Burglary. Free tax extensions Embezzlement. Free tax extensions Extortion. Free tax extensions Kidnapping for ransom. Free tax extensions Larceny. Free tax extensions Robbery. Free tax extensions The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. Free tax extensions Decline in market value of stock. Free tax extensions   You cannot deduct as a theft loss the decline in market value of stock acquired on the open market for investment if the decline is caused by disclosure of accounting fraud or other illegal misconduct by the officers or directors of the corporation that issued the stock. Free tax extensions However, you can deduct as a capital loss the loss you sustain when you sell or exchange the stock or the stock becomes completely worthless. Free tax extensions You report a capital loss on Schedule D (Form 1040). Free tax extensions For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. Free tax extensions Mislaid or lost property. Free tax extensions    The simple disappearance of money or property is not a theft. Free tax extensions However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. Free tax extensions Sudden, unexpected, and unusual events were defined earlier under Casualty . Free tax extensions Example. Free tax extensions A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Free tax extensions The diamond falls from the ring and is never found. Free tax extensions The loss of the diamond is a casualty. Free tax extensions Losses from Ponzi-type investment schemes. Free tax extensions   The IRS has issued the following guidance to assist taxpayers who are victims of losses from Ponzi-type investment schemes: Revenue Ruling 2009-9, 2009-14 I. Free tax extensions R. Free tax extensions B. Free tax extensions 735 (available at www. Free tax extensions irs. Free tax extensions gov/irb/2009-14_IRB/ar07. Free tax extensions html). Free tax extensions Revenue Procedure 2009-20, 2009-14 I. Free tax extensions R. Free tax extensions B. Free tax extensions 749 (available at www. Free tax extensions irs. Free tax extensions gov/irb/2009-14_IRB/ar11. Free tax extensions html). Free tax extensions Revenue Procedure 2011-58, 2011-50 I. Free tax extensions R. Free tax extensions B. Free tax extensions 847 (available at www. Free tax extensions irs. Free tax extensions gov/irb/2011-50_IRB/ar11. Free tax extensions html). Free tax extensions If you qualify to use Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, and you choose to follow the procedures in the guidance, first fill out Section C of Form 4684 to determine the amount to enter on Section B, line 28. Free tax extensions Skip lines 19 to 27, but you must fill out Section B, lines 29 to 39, as appropriate. Free tax extensions Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Free tax extensions You do not need to complete Appendix A. Free tax extensions For more information, see the above revenue ruling and revenue procedures, and the Instructions for Form 4684. Free tax extensions   If you choose not to use the procedures in Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, you may claim your theft loss by filling out Section B, lines 19 to 39, as appropriate. Free tax extensions Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. Free tax extensions If you incurred this type of loss, you can choose one of the following ways to deduct the loss. Free tax extensions As a casualty loss. Free tax extensions As an ordinary loss. Free tax extensions As a nonbusiness bad debt. Free tax extensions Casualty loss or ordinary loss. Free tax extensions   You can choose to deduct a loss on deposits as a casualty loss or as an ordinary loss for any year in which you can reasonably estimate how much of your deposits you have lost in an insolvent or bankrupt financial institution. Free tax extensions The choice generally is made on the return you file for that year and applies to all your losses on deposits for the year in that particular financial institution. Free tax extensions If you treat the loss as a casualty or ordinary loss, you cannot treat the same amount of the loss as a nonbusiness bad debt when it actually becomes worthless. Free tax extensions However, you can take a nonbusiness bad debt deduction for any amount of loss that is more than the estimated amount you deducted as a casualty or ordinary loss. Free tax extensions Once you make the choice, you cannot change it without permission from the Internal Revenue Service. Free tax extensions   If you claim an ordinary loss, report it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Free tax extensions The maximum amount you can claim is $20,000 ($10,000 if you are married filing separately) reduced by any expected state insurance proceeds. Free tax extensions Your loss is subject to the 2%-of-adjusted-gross-income limit. Free tax extensions You cannot choose to claim an ordinary loss if any part of the deposit is federally insured. Free tax extensions Nonbusiness bad debt. Free tax extensions   If you do not choose to deduct the loss as a casualty loss or as an ordinary loss, you must wait until the year the actual loss is determined and deduct the loss as a nonbusiness bad debt in that year. Free tax extensions How to report. Free tax extensions   The kind of deduction you choose for your loss on deposits determines how you report your loss. Free tax extensions See Table 1. Free tax extensions More information. Free tax extensions   For more information, see Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions in the Instructions for Form 4684. Free tax extensions Deducted loss recovered. Free tax extensions   If you recover an amount you deducted as a loss in an earlier year, you may have to include the amount recovered in your income for the year of recovery. Free tax extensions If any part of the original deduction did not reduce your tax in the earlier year, you do not have to include that part of the recovery in your income. Free tax extensions For more information, see Recoveries in Publication 525. Free tax extensions Proof of Loss To deduct a casualty or theft loss, you must be able to show that there was a casualty or theft. Free tax extensions You also must be able to support the amount you take as a deduction. Free tax extensions Casualty loss proof. Free tax extensions   For a casualty loss, you should be able to show all of the following. Free tax extensions The type of casualty (car accident, fire, storm, etc. Free tax extensions ) and when it occurred. Free tax extensions That the loss was a direct result of the casualty. Free tax extensions That you were the owner of the property, or if you leased the property from someone else, that you were contractually liable to the owner for the damage. Free tax extensions Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Free tax extensions Theft loss proof. Free tax extensions   For a theft loss, you should be able to show all of the following. Free tax extensions When you discovered that your property was missing. Free tax extensions That your property was stolen. Free tax extensions That you were the owner of the property. Free tax extensions Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Free tax extensions    It is important that you have records that will prove your deduction. Free tax extensions If you do not have the actual records to support your deduction, you can use other satisfactory evidence to support it. Free tax extensions Figuring a Loss To determine your deduction for a casualty or theft loss, you must first figure your loss. Free tax extensions Table 1. Free tax extensions Reporting Loss on Deposits IF you choose to report the loss as a(n). Free tax extensions . Free tax extensions . Free tax extensions   THEN report it on. Free tax extensions . Free tax extensions . Free tax extensions casualty loss   Form 4684 and Schedule A  (Form 1040). Free tax extensions ordinary loss   Schedule A (Form 1040). Free tax extensions nonbusiness bad debt   Form 8949 and Schedule D (Form 1040). Free tax extensions Amount of loss. Free tax extensions   Figure the amount of your loss using the following steps. Free tax extensions Determine your adjusted basis in the property before the casualty or theft. Free tax extensions Determine the decrease in fair market value (FMV) of the property as a result of the casualty or theft. Free tax extensions From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive. Free tax extensions For personal-use property and property used in performing services as an employee, apply the deduction limits, discussed later, to determine the amount of your deductible loss. Free tax extensions Gain from reimbursement. Free tax extensions   If your reimbursement is more than your adjusted basis in the property, you have a gain. Free tax extensions This is true even if the decrease in the FMV of the property is smaller than your adjusted basis. Free tax extensions If you have a gain, you may have to pay tax on it, or you may be able to postpone reporting the gain. Free tax extensions See Figuring a Gain , later. Free tax extensions Business or income-producing property. Free tax extensions   If you have business or income-producing property, such as rental property, and it is stolen or completely destroyed, the decrease in FMV is not considered. Free tax extensions Your loss is figured as follows:   Your adjusted basis in the property     MINUS     Any salvage value     MINUS     Any insurance or other reimbursement you  receive or expect to receive   Loss of inventory. Free tax extensions   There are two ways you can deduct a casualty or theft loss of inventory, including items you hold for sale to customers. Free tax extensions   One way is to deduct the loss through the increase in the cost of goods sold by properly reporting your opening and closing inventories. Free tax extensions Do not claim this loss again as a casualty or theft loss. Free tax extensions If you take the loss through the increase in the cost of goods sold, include any insurance or other reimbursement you receive for the loss in gross income. Free tax extensions   The other way is to deduct the loss separately. Free tax extensions If you deduct it separately, eliminate the affected inventory items from the cost of goods sold by making a downward adjustment to opening inventory or purchases. Free tax extensions Reduce the loss by the reimbursement you received. Free tax extensions Do not include the reimbursement in gross income. Free tax extensions If you do not receive the reimbursement by the end of the year, you may not claim a loss to the extent you have a reasonable prospect of recovery. Free tax extensions Leased property. Free tax extensions   If you are liable for casualty damage to property you lease, your loss is the amount you must pay to repair the property minus any insurance or other reimbursement you receive or expect to receive. Free tax extensions Separate computations. Free tax extensions   Generally, if a single casualty or theft involves more than one item of property, you must figure the loss on each item separately. Free tax extensions Then combine the losses to determine the total loss from that casualty or theft. Free tax extensions Exception for personal-use real property. Free tax extensions   In figuring a casualty loss on personal-use real property, the entire property (including any improvements, such as buildings, trees, and shrubs) is treated as one item. Free tax extensions Figure the loss using the smaller of the following. Free tax extensions The decrease in FMV of the entire property. Free tax extensions The adjusted basis of the entire property. Free tax extensions   See Real property under Figuring the Deduction, later. Free tax extensions Decrease in Fair Market Value Fair market value (FMV) is the price for which you could sell your property to a willing buyer when neither of you has to sell or buy and both of you know all the relevant facts. Free tax extensions The decrease in FMV used to figure the amount of a casualty or theft loss is the difference between the property's fair market value immediately before and immediately after the casualty or theft. Free tax extensions FMV of stolen property. Free tax extensions   The FMV of property immediately after a theft is considered to be zero because you no longer have the property. Free tax extensions Example. Free tax extensions Several years ago, you purchased silver dollars at face value for $150. Free tax extensions This is your adjusted basis in the property. Free tax extensions Your silver dollars were stolen this year. Free tax extensions The FMV of the coins was $1,000 just before they were stolen, and insurance did not cover them. Free tax extensions Your theft loss is $150. Free tax extensions Recovered stolen property. Free tax extensions   Recovered stolen property is your property that was stolen and later returned to you. Free tax extensions If you recovered property after you had already taken a theft loss deduction, you must refigure your loss using the smaller of the property's adjusted basis (explained later) or the decrease in FMV from the time just before it was stolen until the time it was recovered. Free tax extensions Use this amount to refigure your total loss for the year in which the loss was deducted. Free tax extensions   If your refigured loss is less than the loss you deducted, you generally have to report the difference as income in the recovery year. Free tax extensions But report the difference only up to the amount of the loss that reduced your tax. Free tax extensions For more information on the amount to report, see Recoveries in Publication 525. Free tax extensions Figuring Decrease in FMV — Items To Consider To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. Free tax extensions However, other measures also can be used to establish certain decreases. Free tax extensions See Appraisal and Cost of cleaning up or making repairs , next. Free tax extensions Appraisal. Free tax extensions   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterwards should be made by a competent appraiser. Free tax extensions The appraiser must recognize the effects of any general market decline that may occur along with the casualty. Free tax extensions This information is needed to limit any deduction to the actual loss resulting from damage to the property. Free tax extensions   Several factors are important in evaluating the accuracy of an appraisal, including the following. Free tax extensions The appraiser's familiarity with your property before and after the casualty or theft. Free tax extensions The appraiser's knowledge of sales of comparable property in the area. Free tax extensions The appraiser's knowledge of conditions in the area of the casualty. Free tax extensions The appraiser's method of appraisal. Free tax extensions You may be able to use an appraisal that you used to get a federal loan (or a federal loan guarantee) as the result of a federally declared disaster to establish the amount of your disaster loss. Free tax extensions For more information on disasters, see Disaster Area Losses, later. Free tax extensions Cost of cleaning up or making repairs. Free tax extensions   The cost of repairing damaged property is not part of a casualty loss. Free tax extensions Neither is the cost of cleaning up after a casualty. Free tax extensions But you can use the cost of cleaning up or of making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. Free tax extensions The repairs are actually made. Free tax extensions The repairs are necessary to bring the property back to its condition before the casualty. Free tax extensions The amount spent for repairs is not excessive. Free tax extensions The repairs take care of the damage only. Free tax extensions The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. Free tax extensions Landscaping. Free tax extensions   The cost of restoring landscaping to its original condition after a casualty may indicate the decrease in FMV. Free tax extensions You may be able to measure your loss by what you spend on the following. Free tax extensions Removing destroyed or damaged trees and shrubs, minus any salvage you receive. Free tax extensions Pruning and other measures taken to preserve damaged trees and shrubs. Free tax extensions Replanting necessary to restore the property to its approximate value before the casualty. Free tax extensions Car value. Free tax extensions   Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. Free tax extensions You can use the books' retail values and modify them by factors such as the mileage and condition of your car to figure its value. Free tax extensions The prices are not official, but they may be useful in determining value and suggesting relative prices for comparison with current sales and offerings in your area. Free tax extensions If your car is not listed in the books, determine its value from other sources. Free tax extensions A dealer's offer for your car as a trade-in on a new car is not usually a measure of its true value. Free tax extensions Figuring Decrease in FMV — Items Not To Consider You generally should not consider the following items when attempting to establish the decrease in FMV of your property. Free tax extensions Cost of protection. Free tax extensions   The cost of protecting your property against a casualty or theft is not part of a casualty or theft loss. Free tax extensions The amount you spend on insurance or to board up your house against a storm is not part of your loss. Free tax extensions If the property is business property, these expenses are deductible as business expenses. Free tax extensions   If you make permanent improvements to your property to protect it against a casualty or theft, add the cost of these improvements to your basis in the property. Free tax extensions An example would be the cost of a dike to prevent flooding. Free tax extensions Exception. Free tax extensions   You cannot increase your basis in the property by, or deduct as a business expense, any expenditures you made with respect to qualified disaster mitigation payments (discussed later under Disaster Area Losses ). Free tax extensions Related expenses. Free tax extensions   The incidental expenses due to a casualty or theft, such as expenses for the treatment of personal injuries, for temporary housing, or for a rental car, are not part of your casualty or theft loss. Free tax extensions However, they may be deductible as business expenses if the damaged or stolen property is business property. Free tax extensions Replacement cost. Free tax extensions   The cost of replacing stolen or destroyed property is not part of a casualty or theft loss. Free tax extensions Example. Free tax extensions You bought a new chair 4 years ago for $300. Free tax extensions In April, a fire destroyed the chair. Free tax extensions You estimate that it would cost $500 to replace it. Free tax extensions If you had sold the chair before the fire, you estimate that you could have received only $100 for it because it was 4 years old. Free tax extensions The chair was not insured. Free tax extensions Your loss is $100, the FMV of the chair before the fire. Free tax extensions It is not $500, the replacement cost. Free tax extensions Sentimental value. Free tax extensions   Do not consider sentimental value when determining your loss. Free tax extensions If a family portrait, heirloom, or keepsake is damaged, destroyed, or stolen, you must base your loss on its FMV, as limited by your adjusted basis in the property. Free tax extensions Decline in market value of property in or near casualty area. Free tax extensions   A decrease in the value of your property because it is in or near an area that suffered a casualty, or that might again suffer a casualty, is not to be taken into consideration. Free tax extensions You have a loss only for actual casualty damage to your property. Free tax extensions However, if your home is in a federally declared disaster area, see Disaster Area Losses , later. Free tax extensions Costs of photographs and appraisals. Free tax extensions   Photographs taken after a casualty will be helpful in establishing the condition and value of the property after it was damaged. Free tax extensions Photographs showing the condition of the property after it was repaired, restored, or replaced may also be helpful. Free tax extensions   Appraisals are used to figure the decrease in FMV because of a casualty or theft. Free tax extensions See Appraisal , earlier, under Figuring Decrease in FMV — Items To Consider, for information about appraisals. Free tax extensions   The costs of photographs and appraisals used as evidence of the value and condition of property damaged as a result of a casualty are not a part of the loss. Free tax extensions They are expenses in determining your tax liability. Free tax extensions You can claim these costs as a miscellaneous itemized deduction subject to the 2%-of-adjusted-gross-income limit on Schedule A (Form 1040). Free tax extensions Adjusted Basis The measure of your investment in the property you own is its basis. Free tax extensions For property you buy, your basis is usually its cost to you. Free tax extensions For property you acquire in some other way, such as inheriting it, receiving it as a gift, or getting it in a nontaxable exchange, you must figure your basis in another way, as explained in Publication 551. Free tax extensions If you inherited the property from someone who died in 2010 and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Free tax extensions Adjustments to basis. Free tax extensions    While you own the property, various events may take place that change your basis. Free tax extensions Some events, such as additions or permanent improvements to the property, increase basis. Free tax extensions Others, such as earlier casualty losses and depreciation deductions, decrease basis. Free tax extensions When you add the increases to the basis and subtract the decreases from the basis, the result is your adjusted basis. Free tax extensions See Publication 551 for more information on figuring the basis of your property. Free tax extensions Insurance and Other Reimbursements If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. Free tax extensions You do not have a casualty or theft loss to the extent you are reimbursed. Free tax extensions If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. Free tax extensions You must reduce your loss even if you do not receive payment until a later tax year. Free tax extensions See Reimbursement Received After Deducting Loss , later. Free tax extensions Failure to file a claim for reimbursement. Free tax extensions   If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. Free tax extensions Otherwise, you cannot deduct this loss as a casualty or theft. Free tax extensions The portion of the loss usually not covered by insurance (for example, a deductible) is not subject to this rule. Free tax extensions Example. Free tax extensions You have a car insurance policy with a $1,000 deductible. Free tax extensions Because your insurance did not cover the first $1,000 of an auto collision, the $1,000 would be deductible (subject to the $100 and 10% rules, discussed later). Free tax extensions This is true, even if you do not file an insurance claim, because your insurance policy would never have reimbursed you for the deductible. Free tax extensions Types of Reimbursements The most common type of reimbursement is an insurance payment for your stolen or damaged property. Free tax extensions Other types of reimbursements are discussed next. Free tax extensions Also see the Instructions for Form 4684. Free tax extensions Employer's emergency disaster fund. Free tax extensions   If you receive money from your employer's emergency disaster fund and you must use that money to rehabilitate or replace property on which you are claiming a casualty loss deduction, you must take that money into consideration in computing the casualty loss deduction. Free tax extensions Take into consideration only the amount you used to replace your destroyed or damaged property. Free tax extensions Example. Free tax extensions Your home was extensively damaged by a tornado. Free tax extensions Your loss after reimbursement from your insurance company was $10,000. Free tax extensions Your employer set up a disaster relief fund for its employees. Free tax extensions Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. Free tax extensions You received $4,000 from the fund and spent the entire amount on repairs to your home. Free tax extensions In figuring your casualty loss, you must reduce your unreimbursed loss ($10,000) by the $4,000 you received from your employer's fund. Free tax extensions Your casualty loss before applying the deduction limits (discussed later) is $6,000. Free tax extensions Cash gifts. Free tax extensions   If you receive excludable cash gifts as a disaster victim and there are no limits on how you can use the money, you do not reduce your casualty loss by these excludable cash gifts. Free tax extensions This applies even if you use the money to pay for repairs to property damaged in the disaster. Free tax extensions Example. Free tax extensions Your home was damaged by a hurricane. Free tax extensions Relatives and neighbors made cash gifts to you that were excludable from your income. Free tax extensions You used part of the cash gifts to pay for repairs to your home. Free tax extensions There were no limits or restrictions on how you could use the cash gifts. Free tax extensions It was an excludable gift, so the money you received and used to pay for repairs to your home does not reduce your casualty loss on the damaged home. Free tax extensions Insurance payments for living expenses. Free tax extensions   You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations. Free tax extensions You lose the use of your main home because of a casualty. Free tax extensions Government authorities do not allow you access to your main home because of a casualty or threat of one. Free tax extensions Inclusion in income. Free tax extensions   If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. Free tax extensions Report this amount on Form 1040, line 21. Free tax extensions However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. Free tax extensions See Qualified disaster relief payments , later, under Disaster Area Losses. Free tax extensions   A temporary increase in your living expenses is the difference between the actual living expenses you and your family incurred during the period you could not use your home and your normal living expenses for that period. Free tax extensions Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. Free tax extensions Generally, these expenses include the amounts you pay for the following. Free tax extensions Renting suitable housing. Free tax extensions Transportation. Free tax extensions Food. Free tax extensions Utilities. Free tax extensions Miscellaneous services. Free tax extensions Normal living expenses consist of these same expenses that you would have incurred but did not because of the casualty or the threat of one. Free tax extensions Example. Free tax extensions As a result of a fire, you vacated your apartment for a month and moved to a motel. Free tax extensions You normally pay $525 a month for rent. Free tax extensions None was charged for the month the apartment was vacated. Free tax extensions Your motel rent for this month was $1,200. Free tax extensions You normally pay $200 a month for food. Free tax extensions Your food expenses for the month you lived in the motel were $400. Free tax extensions You received $1,100 from your insurance company to cover your living expenses. Free tax extensions You determine the payment you must include in income as follows. Free tax extensions 1. Free tax extensions Insurance payment for living expenses $1,100 2. Free tax extensions Actual expenses during the month you are unable to use your home because of the fire $1,600   3. Free tax extensions Normal living expenses 725   4. Free tax extensions Temporary increase in living expenses: Subtract line 3  from line 2 875 5. Free tax extensions Amount of payment includible in income: Subtract line 4 from line 1 $ 225 Tax year of inclusion. Free tax extensions   You include the taxable part of the insurance payment in income for the year you regain the use of your main home or, if later, for the year you receive the taxable part of the insurance payment. Free tax extensions Example. Free tax extensions Your main home was destroyed by a tornado in August 2011. Free tax extensions You regained use of your home in November 2012. Free tax extensions The insurance payments you received in 2011 and 2012 were $1,500 more than the temporary increase in your living expenses during those years. Free tax extensions You include this amount in income on your 2012 Form 1040. Free tax extensions If, in 2013, you receive further payments to cover the living expenses you had in 2011 and 2012, you must include those payments in income on your 2013 Form 1040. Free tax extensions Disaster relief. Free tax extensions   Food, medical supplies, and other forms of assistance you receive do not reduce your casualty loss, unless they are replacements for lost or destroyed property. Free tax extensions Table 2. Free tax extensions Deduction Limit Rules for Personal-Use and Employee Property       $100 Rule 10% Rule 2% Rule General Application You must reduce each casualty or theft loss by $100 when figuring your deduction. Free tax extensions Apply this rule to personal-use property after you have figured the amount of your loss. Free tax extensions You must reduce your total casualty or theft loss by 10% of your adjusted gross income. Free tax extensions Apply this rule to personal-use property after you reduce each loss by $100 (the $100 rule). Free tax extensions You must reduce your total casualty or theft loss by 2% of your adjusted gross income. Free tax extensions Apply this rule to property you used in performing services as an employee after you have figured the amount of your loss and added it to your job expenses and most other miscellaneous itemized deductions. Free tax extensions Single Event Apply this rule only once, even if many pieces of property are affected. Free tax extensions Apply this rule only once, even if many pieces of property are affected. Free tax extensions Apply this rule only once, even if many pieces of property are affected. Free tax extensions More Than One Event Apply to the loss from each event. Free tax extensions Apply to the total of all your losses from all events. Free tax extensions Apply to the total of all your losses from all events. Free tax extensions More Than One Person— With Loss From the   Same Event  (other than a married couple  filing jointly) Apply separately to each person. Free tax extensions Apply separately to each person. Free tax extensions Apply separately to each person. Free tax extensions Married Couple—  With Loss From the  Same Event Filing Joint Return Apply as if you were one person. Free tax extensions Apply as if you were one person. Free tax extensions Apply as if you were one person. Free tax extensions Filing Separate Return Apply separately to each spouse. Free tax extensions Apply separately to each spouse. Free tax extensions Apply separately to each spouse. Free tax extensions More Than One Owner (other than a married couple filing jointly) Apply separately to each owner of jointly owned property. Free tax extensions Apply separately to each owner of jointly owned property. Free tax extensions Apply separately to each owner of jointly owned property. Free tax extensions    Qualified disaster relief payments you receive for expenses you incurred as a result of a federally declared disaster, are not taxable income to you. Free tax extensions For more information, see Qualified disaster relief payments under Disaster Area Losses, later. Free tax extensions   Disaster unemployment assistance payments are unemployment benefits that are taxable. Free tax extensions   Generally, disaster relief grants received under the Robert T. Free tax extensions Stafford Disaster Relief and Emergency Assistance Act are not included in your income. Free tax extensions See Federal disaster relief grants , later, under Disaster Area Losses. Free tax extensions Loan proceeds. Free tax extensions   Do not reduce your casualty loss by loan proceeds you use to rehabilitate or replace property on which you are claiming a casualty loss deduction. Free tax extensions If you have a federal loan that is canceled (forgiven), see Federal loan canceled , later, under Disaster Area Losses. Free tax extensions Reimbursement Received After Deducting Loss If you figured your casualty or theft loss using the amount of your expected reimbursement, you may have to adjust your tax return for the tax year in which you get your actual reimbursement. Free tax extensions This section explains the adjustment you may have to make. Free tax extensions Actual reimbursement less than expected. Free tax extensions   If you later receive less reimbursement than you expected, include that difference as a loss with your other losses (if any) on your return for the year in which you can reasonably expect no more reimbursement. Free tax extensions Example. Free tax extensions Your personal car had a FMV of $2,000 when it was destroyed in a collision with another car in 2012. Free tax extensions The accident was due to the negligence of the other driver. Free tax extensions At the end of 2012, there was a reasonable prospect that the owner of the other car would reimburse you in full. Free tax extensions You did not have a deductible loss in 2012. Free tax extensions In January 2013, the court awards you a judgment of $2,000. Free tax extensions However, in July it becomes apparent that you will be unable to collect any amount from the other driver. Free tax extensions Since this is your only casualty or theft loss, you can deduct the loss in 2013 that is figured by applying the Deduction Limits (discussed later). Free tax extensions Actual reimbursement more than expected. Free tax extensions   If you later receive more reimbursement than you expected, after you have claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. Free tax extensions However, if any part of the original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. Free tax extensions You do not refigure your tax for the year you claimed the deduction. Free tax extensions See Recoveries in Publication 525 to find out how much extra reimbursement to include in income. Free tax extensions Example. Free tax extensions In 2012, a hurricane destroyed your motorboat. Free tax extensions Your loss was $3,000, and you estimated that your insurance would cover $2,500 of it. Free tax extensions You did not itemize deductions on your 2012 return, so you could not deduct the loss. Free tax extensions When the insurance company reimburses you for the loss, you do not report any of the reimbursement as income. Free tax extensions This is true even if it is for the full $3,000 because you did not deduct the loss on your 2012 return. Free tax extensions The loss did not reduce your tax. Free tax extensions    If the total of all the reimbursements you receive is more than your adjusted basis in the destroyed or stolen property, you will have a gain on the casualty or theft. Free tax extensions If you have already taken a deduction for a loss and you receive the reimbursement in a later year, you may have to include the gain in your income for the later year. Free tax extensions Include the gain as ordinary income up to the amount of your deduction that reduced your tax for the earlier year. Free tax extensions You may be able to postpone reporting any remaining gain as explained under Postponement of Gain, later. Free tax extensions Actual reimbursement same as expected. Free tax extensions   If you receive exactly the reimbursement you expected to receive, you do not have to include any of the reimbursement in your income and you cannot deduct any additional loss. Free tax extensions Example. Free tax extensions In December 2013, you had a collision while driving your personal car. Free tax extensions Repairs to the car cost $950. Free tax extensions You had $100 deductible collision insurance. Free tax extensions Your insurance company agreed to reimburse you for the rest of the damage. Free tax extensions Because you expected a reimbursement from the insurance company, you did not have a casualty loss deduction in 2013. Free tax extensions Due to the $100 rule, you cannot deduct the $100 you paid as the deductible. Free tax extensions When you receive the $850 from the insurance company in 2014, do not report it as income. Free tax extensions Deduction Limits After you have figured your casualty or theft loss, you must figure how much of the loss you can deduct. Free tax extensions The deduction for casualty and theft losses of employee property and personal-use property is limited. Free tax extensions A loss on employee property is subject to the 2% rule, discussed next. Free tax extensions With certain exceptions, a loss on property you own for your personal use is subject to the $100 and 10% rules, discussed later. Free tax extensions The 2%, $100, and 10% rules are also summarized in Table 2 . Free tax extensions Losses on business property (other than employee property) and income-producing property are not subject to these rules. Free tax extensions However, if your casualty or theft loss involved a home you used for business or rented out, your deductible loss may be limited. Free tax extensions See the Instructions for Form 4684, Section B. Free tax extensions If the casualty or theft loss involved property used in a passive activity, see Form 8582, Passive Activity Loss Limitations, and its instructions. Free tax extensions 2% Rule The casualty and theft loss deduction for employee property, when added to your job expenses and most other miscellaneous itemized deductions on Schedule A (Form 1040) or Form 1040NR, Schedule A, must be reduced by 2% of your adjusted gross income. Free tax extensions Employee property is property used in performing services as an employee. Free tax extensions $100 Rule After you have figured your casualty or theft loss on personal-use property, as discussed earlier, you must reduce that loss by $100. Free tax extensions This reduction applies to each total casualty or theft loss. Free tax extensions It does not matter how many pieces of property are involved in an event. Free tax extensions Only a single $100 reduction applies. Free tax extensions Example. Free tax extensions You have $750 deductible collision insurance on your car. Free tax extensions The car is damaged in a collision. Free tax extensions The insurance company pays you for the damage minus the $750 deductible. Free tax extensions The amount of the casualty loss is based solely on the deductible. Free tax extensions The casualty loss is $650 ($750 − $100) because the first $100 of a casualty loss on personal-use property is not deductible. Free tax extensions Single event. Free tax extensions   Generally, events closely related in origin cause a single casualty. Free tax extensions It is a single casualty when the damage is from two or more closely related causes, such as wind and flood damage caused by the same storm. Free tax extensions A single casualty may also damage two or more pieces of property, such as a hailstorm that damages both your home and your car parked in your driveway. Free tax extensions Example 1. Free tax extensions A thunderstorm destroyed your pleasure boat. Free tax extensions You also lost some boating equipment in the storm. Free tax extensions Your loss was $5,000 on the boat and $1,200 on the equipment. Free tax extensions Your insurance company reimbursed you $4,500 for the damage to your boat. Free tax extensions You had no insurance coverage on the equipment. Free tax extensions Your casualty loss is from a single event and the $100 rule applies once. Free tax extensions Figure your loss before applying the 10% rule (discussed later) as follows. Free tax extensions     Boat Equipment 1. Free tax extensions Loss $5,000 $1,200 2. Free tax extensions Subtract insurance 4,500 -0- 3. Free tax extensions Loss after reimbursement $ 500 $1,200 4. Free tax extensions Total loss $1,700 5. Free tax extensions Subtract $100 100 6. Free tax extensions Loss before 10% rule $1,600 Example 2. Free tax extensions Thieves broke into your home in January and stole a ring and a fur coat. Free tax extensions You had a loss of $200 on the ring and $700 on the coat. Free tax extensions This is a single theft. Free tax extensions The $100 rule applies to the total $900 loss. Free tax extensions Example 3. Free tax extensions In September, hurricane winds blew the roof off your home. Free tax extensions Flood waters caused by the hurricane further damaged your home and destroyed your furniture and personal car. Free tax extensions This is considered a single casualty. Free tax extensions The $100 rule is applied to your total loss from the flood waters and the wind. Free tax extensions More than one loss. Free tax extensions   If you have more than one casualty or theft loss during your tax year, you must reduce each loss by $100. Free tax extensions Example. Free tax extensions Your family car was damaged in an accident in January. Free tax extensions Your loss after the insurance reimbursement was $75. Free tax extensions In February, your car was damaged in another accident. Free tax extensions This time your loss after the insurance reimbursement was $90. Free tax extensions Apply the $100 rule to each separate casualty loss. Free tax extensions Since neither accident resulted in a loss of over $100, you are not entitled to any deduction for these accidents. Free tax extensions More than one person. Free tax extensions   If two or more individuals (other than a husband and wife filing a joint return) have losses from the same casualty or theft, the $100 rule applies separately to each individual. Free tax extensions Example. Free tax extensions A fire damaged your house and also damaged the personal property of your house guest. Free tax extensions You must reduce your loss by $100. Free tax extensions Your house guest must reduce his or her loss by $100. Free tax extensions Married taxpayers. Free tax extensions   If you and your spouse file a joint return, you are treated as one individual in applying the $100 rule. Free tax extensions It does not matter whether you own the property jointly or separately. Free tax extensions   If you and your spouse have a casualty or theft loss and you file separate returns, each of you must reduce your loss by $100. Free tax extensions This is true even if you own the property jointly. Free tax extensions If one spouse owns the property, only that spouse can figure a loss deduction on a separate return. Free tax extensions   If the casualty or theft loss is on property you own as tenants by the entirety, each of you can figure your deduction on only one-half of the loss on separate returns. Free tax extensions Neither of you can figure your deduction on the entire loss on a separate return. Free tax extensions Each of you must reduce the loss by $100. Free tax extensions More than one owner. Free tax extensions   If two or more individuals (other than a husband and wife filing a joint return) have a loss on property jointly owned, the $100 rule applies separately to each. Free tax extensions For example, if two sisters live together in a home they own jointly and they have a casualty loss on the home, the $100 rule applies separately to each sister. Free tax extensions 10% Rule You must reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. Free tax extensions Apply this rule after you reduce each loss by $100. Free tax extensions For more information, see the Form 4684 instructions. Free tax extensions If you have both gains and losses from casualties or thefts, see Gains and losses , later in this discussion. Free tax extensions Example. Free tax extensions In June, you discovered that your house had been burglarized. Free tax extensions Your loss after insurance reimbursement was $2,000. Free tax extensions Your adjusted gross income for the year you discovered the theft is $29,500. Free tax extensions Figure your theft loss as follows. Free tax extensions 1. Free tax extensions Loss after insurance $2,000 2. Free tax extensions Subtract $100 100 3. Free tax extensions Loss after $100 rule $1,900 4. Free tax extensions Subtract 10% of $29,500 AGI $2,950 5. Free tax extensions Theft loss deduction $-0- You do not have a theft loss deduction because your loss ($1,900) is less than 10% of your adjusted gross income ($2,950). Free tax extensions More than one loss. Free tax extensions   If you have more than one casualty or theft loss during your tax year, reduce each loss by any reimbursement and by $100. Free tax extensions Then you must reduce the total of all your losses by 10% of your adjusted gross income. Free tax extensions Example. Free tax extensions In March, you had a car accident that totally destroyed your car. Free tax extensions You did not have collision insurance on your car, so you did not receive any insurance reimbursement. Free tax extensions Your loss on the car was $1,800. Free tax extensions In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items you had stored there. Free tax extensions Your loss on the basement items after reimbursement was $2,100. Free tax extensions Your adjusted gross income for the year that the accident and fire occurred is $25,000. Free tax extensions You figure your casualty loss deduction as follows. Free tax extensions     Car Basement 1. Free tax extensions Loss $1,800 $2,100 2. Free tax extensions Subtract $100 per incident 100 100 3. Free tax extensions Loss after $100 rule $1,700 $2,000 4. Free tax extensions Total loss $3,700 5. Free tax extensions Subtract 10% of $25,000 AGI 2,500 6. Free tax extensions Casualty loss deduction $1,200 Married taxpayers. Free tax extensions   If you and your spouse file a joint return, you are treated as one individual in applying the 10% rule. Free tax extensions It does not matter if you own the property jointly or separately. Free tax extensions   If you file separate returns, the 10% rule applies to each return on which a loss is claimed. Free tax extensions More than one owner. Free tax extensions   If two or more individuals (other than husband and wife filing a joint return) have a loss on property that is owned jointly, the 10% rule applies separately to each. Free tax extensions Gains and losses. Free tax extensions   If you have casualty or theft gains as well as losses to personal-use property, you must compare your total gains to your total losses. Free tax extensions Do this after you have reduced each loss by any reimbursements and by $100 but before you have reduced the losses by 10% of your adjusted gross income. Free tax extensions Casualty or theft gains do not include gains you choose to postpone. Free tax extensions See Postponement of Gain, later. Free tax extensions Losses more than gains. Free tax extensions   If your losses are more than your recognized gains, subtract your gains from your losses and reduce the result by 10% of your adjusted gross income. Free tax extensions The rest, if any, is your deductible loss from personal-use property. Free tax extensions Example. Free tax extensions Your theft loss after reducing it by reimbursements and by $100 is $2,700. Free tax extensions Your casualty gain is $700. Free tax extensions Your loss is more than your gain, so you must reduce your $2,000 net loss ($2,700 − $700) by 10% of your adjusted gross income. Free tax extensions Gains more than losses. Free tax extensions   If your recognized gains are more than your losses, subtract your losses from your gains. Free tax extensions The difference is treated as a capital gain and must be reported on Schedule D (Form 1040). Free tax extensions The 10% rule does not apply to your gains. Free tax extensions Example. Free tax extensions Your theft loss is $600 after reducing it by reimbursements and by $100. Free tax extensions Your casualty gain is $1,600. Free tax extensions Because your gain is more than your loss, you must report the $1,000 net gain ($1,600 − $600) on Schedule D (Form 1040). Free tax extensions More information. Free tax extensions   For information on how to figure recognized gains, see Figuring a Gain , later. Free tax extensions Figuring the Deduction Generally, you must figure your loss separately for each item stolen, damaged, or destroyed. Free tax extensions However, a special rule applies to real property you own for personal use. Free tax extensions Real property. Free tax extensions   In figuring a loss to real estate you own for personal use, all improvements (such as buildings and ornamental trees and the land containing the improvements) are considered together. Free tax extensions Example 1. Free tax extensions In June, a fire destroyed your lakeside cottage, which cost $144,800 (including $14,500 for the land) several years ago. Free tax extensions (Your land was not damaged. Free tax extensions ) This was your only casualty or theft loss for the year. Free tax extensions The FMV of the property immediately before the fire was $180,000 ($145,000 for the cottage and $35,000 for the land). Free tax extensions The FMV immediately after the fire was $35,000 (value of the land). Free tax extensions You collected $130,000 from the insurance company. Free tax extensions Your adjusted gross income for the year the fire occurred is $80,000. Free tax extensions Your deduction for the casualty loss is $6,700, figured in the following manner. Free tax extensions 1. Free tax extensions Adjusted basis of the entire property (cost in this example) $144,800 2. Free tax extensions FMV of entire property  before fire $180,000 3. Free tax extensions FMV of entire property after fire 35,000 4. Free tax extensions Decrease in FMV of entire property (line 2 − line 3) $145,000 5. Free tax extensions Loss (smaller of line 1 or line 4) $144,800 6. Free tax extensions Subtract insurance 130,000 7. Free tax extensions Loss after reimbursement $14,800 8. Free tax extensions Subtract $100 100 9. Free tax extensions Loss after $100 rule $14,700 10. Free tax extensions Subtract 10% of $80,000 AGI 8,000 11. Free tax extensions Casualty loss deduction $ 6,700 Example 2. Free tax extensions You bought your home a few years ago. Free tax extensions You paid $150,000 ($10,000 for the land and $140,000 for the house). Free tax extensions You also spent an additional $2,000 for landscaping. Free tax extensions This year a fire destroyed your home. Free tax extensions The fire also damaged the shrubbery and trees in your yard. Free tax extensions The fire was your only casualty or theft loss this year. Free tax extensions Competent appraisers valued the property as a whole at $175,000 before the fire, but only $50,000 after the fire. Free tax extensions Shortly after the fire, the insurance company paid you $95,000 for the loss. Free tax extensions Your adjusted gross income for this year is $70,000. Free tax extensions You figure your casualty loss deduction as follows. Free tax extensions 1. Free tax extensions Adjusted basis of the entire property (cost of land, building, and landscaping) $152,000 2. Free tax extensions FMV of entire property  before fire $175,000 3. Free tax extensions FMV of entire property after fire 50,000 4. Free tax extensions Decrease in FMV of entire property (line 2 − line 3) $125,000 5. Free tax extensions Loss (smaller of line 1 or line 4) $125,000 6. Free tax extensions Subtract insurance 95,000 7. Free tax extensions Loss after reimbursement $30,000 8. Free tax extensions Subtract $100 100 9. Free tax extensions Loss after $100 rule $29,900 10. Free tax extensions Subtract 10% of $70,000 AGI 7,000 11. Free tax extensions Casualty loss deduction $ 22,900 Personal property. Free tax extensions   Personal property is any property that is not real property. Free tax extensions If your personal property is stolen or is damaged or destroyed by a casualty, you must figure your loss separately for each item of property. Free tax extensions Then combine these separate losses to figure the total loss. Free tax extensions Reduce the total loss by $100 and 10% of your adjusted gross income to figure the loss deduction. Free tax extensions Example 1. Free tax extensions In August, a storm destroyed your pleasure boat, which cost $18,500. Free tax extensions This was your only casualty or theft loss for the year. Free tax extensions Its FMV immediately before the storm was $17,000. Free tax extensions You had no insurance, but were able to salvage the motor of the boat and sell it for $200. Free tax extensions Your adjusted gross income for the year the casualty occurred is $70,000. Free tax extensions Although the motor was sold separately, it is part of the boat and not a separate item of property. Free tax extensions You figure your casualty loss deduction as follows. Free tax extensions 1. Free tax extensions Adjusted basis (cost in this example) $18,500 2. Free tax extensions FMV before storm $17,000 3. Free tax extensions FMV after storm 200 4. Free tax extensions Decrease in FMV  (line 2 − line 3) $16,800 5. Free tax extensions Loss (smaller of line 1 or line 4) $16,800 6. Free tax extensions Subtract insurance -0- 7. Free tax extensions Loss after reimbursement $16,800 8. Free tax extensions Subtract $100 100 9. Free tax extensions Loss after $100 rule $16,700 10. Free tax extensions Subtract 10% of $70,000 AGI 7,000 11. Free tax extensions Casualty loss deduction $ 9,700 Example 2. Free tax extensions In June, you were involved in an auto accident that totally destroyed your personal car and your antique pocket watch. Free tax extensions You had bought the car for $30,000. Free tax extensions The FMV of the car just before the accident was $17,500. Free tax extensions Its FMV just after the accident was $180 (scrap value). Free tax extensions Your insurance company reimbursed you $16,000. Free tax extensions Your watch was not insured. Free tax extensions You had purchased it for $250. Free tax extensions Its FMV just before the accident was $500. Free tax extensions Your adjusted gross income for the year the accident occurred is $97,000. Free tax extensions Your casualty loss deduction is zero, figured as follows. Free tax extensions     Car Watch 1. Free tax extensions Adjusted basis (cost) $30,000 $250 2. Free tax extensions FMV before accident $17,500 $500 3. Free tax extensions FMV after accident 180 -0- 4. Free tax extensions Decrease in FMV (line 2 − line 3) $17,320 $500 5. Free tax extensions Loss (smaller of line 1 or line 4) $17,320 $250 6. Free tax extensions Subtract insurance 16,000 -0- 7. Free tax extensions Loss after reimbursement $1,320 $250 8. Free tax extensions Total loss $1,570 9. Free tax extensions Subtract $100 100 10. Free tax extensions Loss after $100 rule $1,470 11. Free tax extensions Subtract 10% of $97,000 AGI 9,700 12. Free tax extensions Casualty loss deduction $ -0- Both real and personal properties. Free tax extensions   When a casualty involves both real and personal properties, you must figure the loss separately for each type of property. Free tax extensions However, you apply a single $100 reduction to the total loss. Free tax extensions Then, you apply the 10% rule to figure the casualty loss deduction. Free tax extensions Example. Free tax extensions In July, a hurricane damaged your home, which cost you $164,000 including land. Free tax extensions The FMV of the property (both building and land) immediately before the storm was $170,000 and its FMV immediately after the storm was $100,000. Free tax extensions Your household furnishings were also damaged. Free tax extensions You separately figured the loss on each damaged household item and arrived at a total loss of $600. Free tax extensions You collected $50,000 from the insurance company for the damage to your home, but your household furnishings were not insured. Free tax extensions Your adjusted gross income for the year the hurricane occurred is $65,000. Free tax extensions You figure your casualty loss deduction from the hurricane in the following manner. Free tax extensions 1. Free tax extensions Adjusted basis of real property (cost in this example) $164,000 2. Free tax extensions FMV of real property before hurricane $170,000 3. Free tax extensions FMV of real property after hurricane 100,000 4. Free tax extensions Decrease in FMV of real property (line 2 − line 3) $70,000 5. Free tax extensions Loss on real property (smaller of line 1 or line 4) $70,000 6. Free tax extensions Subtract insurance 50,000 7. Free tax extensions Loss on real property after reimbursement $20,000 8. Free tax extensions Loss on furnishings $600 9. Free tax extensions Subtract insurance -0- 10. Free tax extensions Loss on furnishings after reimbursement $600 11. Free tax extensions Total loss (line 7 plus line 10) $20,600 12. Free tax extensions Subtract $100 100 13. Free tax extensions Loss after $100 rule $20,500 14. Free tax extensions Subtract 10% of $65,000 AGI 6,500 15. Free tax extensions Casualty loss deduction $14,000 Property used partly for business and partly for personal purposes. Free tax extensions   When property is used partly for personal purposes and partly for business or income-producing purposes, the casualty or theft loss deduction must be figured separately for the personal-use portion and for the business or income-producing portion. Free tax extensions You must figure each loss separately because the losses attributed to these two uses are figured in two different ways. Free tax extensions When figuring each loss, allocate the total cost or basis, the FMV before and after the casualty or theft loss, and the insurance or other reimbursement between the business and personal use of the property. Free tax extensions The $100 rule and the 10% rule apply only to the casualty or theft loss on the personal-use portion of the property. Free tax extensions Example. Free tax extensions You own a building that you constructed on leased land. Free tax extensions You use half of the building for your business and you live in the other half. Free tax extensions The cost of the building was $400,000. Free tax extensions You made no further improvements or additions to it. Free tax extensions A flood in March damaged the entire building. Free tax extensions The FMV of the building was $380,000 immediately before the flood and $320,000 afterwards. Free tax extensions Your insurance company reimbursed you $40,000 for the flood damage. Free tax extensions Depreciation on the business part of the building before the flood totaled $24,000. Free tax extensions Your adjusted gross income for the year the flood occurred is $125,000. Free tax extensions You have a deductible business casualty loss of $10,000. Free tax extensions You do not have a deductible personal casualty loss because of the 10% rule. Free tax extensions You figure your loss as follows. Free tax extensions     Business   Personal     Part   Part 1. Free tax extensions Cost (total $400,000) $200,000   $200,000 2. Free tax extensions Subtract depreciation 24,000   -0- 3. Free tax extensions Adjusted basis $176,000   $200,000 4. Free tax extensions FMV before flood (total $380,000) $190,000   $190,000 5. Free tax extensions FMV after flood (total $320,000) 160,000   160,000 6. Free tax extensions Decrease in FMV  (line 4 − line 5) $30,000   $30,000 7. Free tax extensions Loss (smaller of line 3 or line 6) $30,000   $30,000 8. Free tax extensions Subtract insurance 20,000   20,000 9. Free tax extensions Loss after reimbursement $10,000   $10,000 10. Free tax extensions Subtract $100 on personal-use property -0-   100 11. Free tax extensions Loss after $100 rule $10,000   $9,900 12. Free tax extensions Subtract 10% of $125,000 AGI on personal-use property -0-   12,500 13. Free tax extensions Deductible business loss $10,000     14. Free tax extensions Deductible personal loss $-0- Figuring a Gain If you receive an insurance payment or other reimbursement that is more than your adjusted basis in the destroyed, damaged, or stolen property, you have a gain from the casualty or theft. Free tax extensions Your gain is figured as follows. Free tax extensions The amount you receive (discussed next), minus Your adjusted basis in the property at the time of the casualty or theft. Free tax extensions See Adjusted Basis , earlier, for information on adjusted basis. Free tax extensions Even if the decrease in FMV of your property is smaller than the adjusted basis of your property, use your adjusted basis to figure the gain. Free tax extensions Amount you receive. Free tax extensions   The amount you receive includes any money plus the value of any property you receive minus any expenses you have in obtaining reimbursement. Free tax extensions It also includes any reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property. Free tax extensions Example. Free tax extensions A hurricane destroyed your personal residence and the insurance company awarded you $145,000. Free tax extensions You received $140,000 in cash. Free tax extensions The remaining $5,000 was paid directly to the holder of a mortgage on the property. Free tax extensions The amount you received includes the $5,000 reimbursement paid on the mortgage. Free tax extensions Main home destroyed. Free tax extensions   If you have a gain because your main home was destroyed, you generally can exclude the gain from your income as if you had sold or exchanged your home. Free tax extensions You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). Free tax extensions To exclude a gain, you generally must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date it was destroyed. Free tax extensions For information on this exclusion, see Publication 523. Free tax extensions If your gain is more than the amount you can exclude, but you buy replacement property, you may be able to postpone reporting the excess gain. Free tax extensions See Postponement of Gain , later. Free tax extensions Reporting a gain. Free tax extensions   You generally must report your gain as income in the year you receive the reimbursement. Free tax extensions However, you do not have to report your gain if you meet certain requirements and choose to postpone reporting the gain according to the rules explained under Postponement of Gain, next. Free tax extensions   For information on how to report a gain, see How To Report Gains and Losses , later. Free tax extensions    If you have a casualty or theft gain on personal-use property that you choose to postpone reporting (as explained next) and you also have another casualty or theft loss on personal-use property, do not consider the gain you are postponing when figuring your casualty or theft loss deduction. Free tax extensions See 10% Rule under Deduction Limits, earlier. Free tax extensions Postponement of Gain Do not report a gain if you receive reimbursement in the form of property similar or related in service or use to the destroyed or stolen property. Free tax extensions Your basis in the new property is generally the same as your adjusted basis in the property it replaces. Free tax extensions You must ordinarily report the gain on your stolen or destroyed property if you receive money or unlike property as reimbursement. Free tax extensions However, you can choose to postpone reporting the gain if you purchase property that is similar or related in service or use to the stolen or destroyed property within a specified replacement period, discussed later. Free tax extensions You also can choose to postpone reporting the gain if you purchase a controlling interest (at least 80%) in a corporation owning property that is similar or related in service or use to the property. Free tax extensions See Controlling interest in a corporation , later. Free tax extensions If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property. Free tax extensions To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. Free tax extensions If the cost of the replacement property is less than the reimbursement, you must include the gain in your income up to the amount of the unspent reimbursement. Free tax extensions Example. Free tax extensions In 1970, you bought an oceanfront cottage for your personal use at a cost of $18,000. Free tax extensions You made no further improvements or additions to it. Free tax extensions When a storm destroyed the cottage this January, the cottage was worth $250,000. Free tax extensions You received $146,000 from the insurance company in March. Free tax extensions You had a gain of $128,000 ($146,000 − $18,000). Free tax extensions You spent $144,000 to rebuild the cottage. Free tax extensions Since this is less than the insurance proceeds received, you must include $2,000 ($146,000 − $144,000) in your income. Free tax extensions Buying replacement property from a related person. Free tax extensions   You cannot postpone reporting a gain from a casualty or theft if you buy the replacement property from a related person (discussed later). Free tax extensions This rule applies to the following taxpayers. Free tax extensions C corporations. Free tax extensions Partnerships in which more than 50% of the capital or profits interests is owned by C corporations. Free tax extensions All others (including individuals, partnerships — other than those in (2) — and S corporations) if the total realized gain for the tax year on all destroyed or stolen properties on which there are realized gains is more than $100,000. Free tax extensions For casualties and thefts described in (3) above, gains cannot be offset by any losses when determining whether the total gain is more than $100,000. Free tax extensions If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Free tax extensions If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Free tax extensions Exception. Free tax extensions   This rule does not apply if the related person acquired the property from an unrelated person within the period of time allowed for replacing the destroyed or stolen property. Free tax extensions Related persons. Free tax extensions   Under this rule, related persons include, for example, a parent and child, a brother and sister, a corporation and an individual who owns more than 50% of its outstanding stock, and two partnerships in which the same C corporations own more than 50% of the capital or profits interests. Free tax extensions For more information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Free tax extensions Death of a taxpayer. Free tax extensions   If a taxpayer dies after having a gain but before buying replacement property, the gain must be reported for the year in which the decedent realized the gain. Free tax extensions The executor of the estate or the person succeeding to the funds from the casualty or theft cannot postpone reporting the gain by buying replacement property. Free tax extensions Replacement Property You must buy replacement property for the specific purpose of replacing your destroyed or stolen property. Free tax extensions Property you acquire as a gift or inheritance does not qualify. Free tax extensions You do not have to use the same funds you receive as
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Free tax extensions 12. Free tax extensions   Business Deduction for Work-Related Education Table of Contents What's New Introduction Qualifying Work-Related EducationEducation Required by Employer or by Law Education To Maintain or Improve Skills Education To Meet Minimum Requirements Education That Qualifies You for a New Trade or Business What Expenses Can Be DeductedUnclaimed reimbursement. Free tax extensions Transportation Expenses Travel Expenses No Double Benefit Allowed How To Treat ReimbursementsAccountable Plans Nonaccountable Plans Deducting Business ExpensesSelf-Employed Persons Employees Performing Artists and Fee-Basis Officials Impairment-Related Work Expenses Recordkeeping Illustrated Example What's New Standard mileage rate. Free tax extensions  Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount you can deduct for miles driven from January 1, 2013 through December 31, 2013, is 56. Free tax extensions 5 cents per mile. Free tax extensions For more information, see Transportation Expenses under What Expenses Can Be Deducted, later. Free tax extensions Introduction This chapter discusses work-related education expenses that you may be able to deduct as business expenses. Free tax extensions To claim such a deduction, you must: Itemize your deductions on Schedule A (Form 1040 or 1040NR) if you are an employee, File Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming if you are self-employed, and Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education , later. Free tax extensions What is the tax benefit of taking a business deduction for work-related education. Free tax extensions   If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. Free tax extensions Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses (except for impairment-related work expenses of disabled individuals) is greater than 2% of your adjusted gross income. Free tax extensions An itemized deduction reduces the amount of your income subject to tax. Free tax extensions   If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. Free tax extensions This reduces the amount of your income subject to both income tax and self-employment tax. Free tax extensions   Your work-related education expenses may also qualify you for other tax benefits, such as the American opportunity and lifetime learning credits. Free tax extensions You may qualify for these other benefits even if you do not meet the requirements listed above. Free tax extensions   Also, your work-related education expenses may qualify you to claim more than one tax benefit. Free tax extensions Generally, you may claim any number of benefits as long as you use different expenses to figure each one. Free tax extensions Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. Free tax extensions This is education that meets at least one of the following two tests. Free tax extensions The education is required by your employer or the law to keep your present salary, status, or job. Free tax extensions The required education must serve a bona fide business purpose of your employer. Free tax extensions The education maintains or improves skills needed in your present work. Free tax extensions However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. Free tax extensions You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. Free tax extensions Use Figure 12-1, Does Your Work-Related Education Qualify as a quick check to see if your education qualifies. Free tax extensions Education Required by Employer or by Law Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. Free tax extensions This additional education is qualifying work-related education if all three of the following requirements are met. Free tax extensions It is required for you to keep your present salary, status, or job, The requirement serves a bona fide business purpose of your employer, and The education is not part of a program that will qualify you for a new trade or business. Free tax extensions When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work. Free tax extensions See Education To Maintain or Improve Skills , later. Free tax extensions Example. Free tax extensions You are a teacher who has satisfied the minimum requirements for teaching. Free tax extensions Your employer requires you to take an additional college course each year to keep your teaching job. Free tax extensions If the courses will not qualify you for a new trade or business, they are qualifying work-related education even if you eventually receive a master's degree and an increase in salary because of this extra education. Free tax extensions This image is too large to be displayed in the current screen. Free tax extensions Please click the link to view the image. Free tax extensions Figure 12-1 Education To Maintain or Improve Skills If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. Free tax extensions This could include refresher courses, courses on current developments, and academic or vocational courses. Free tax extensions Example. Free tax extensions You repair televisions, radios, and stereo systems for XYZ Store. Free tax extensions To keep up with the latest changes, you take special courses in radio and stereo service. Free tax extensions These courses maintain and improve skills required in your work. Free tax extensions Maintaining skills vs. Free tax extensions qualifying for new job. Free tax extensions   Education to maintain or improve skills needed in your present work is not qualifying education if it will also qualify you for a new trade or business. Free tax extensions Education during temporary absence. Free tax extensions   If you stop working for a year or less in order to get education to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. Free tax extensions Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. Free tax extensions Example. Free tax extensions You quit your biology research job to become a full-time biology graduate student for 1 year. Free tax extensions If you return to work in biology research after completing the courses, the education is related to your present work even if you do not go back to work with the same employer. Free tax extensions Education during indefinite absence. Free tax extensions   If you stop work for more than a year, your absence from your job is considered indefinite. Free tax extensions Education during an indefinite absence, even if it maintains or improves skills needed in the work from which you are absent, is considered to qualify you for a new trade or business. Free tax extensions Therefore, it is not qualifying work-related education. Free tax extensions Education To Meet Minimum Requirements Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. Free tax extensions The minimum educational requirements are determined by: Laws and regulations, Standards of your profession, trade, or business, and Your employer. Free tax extensions Once you have met the minimum educational requirements that were in effect when you were hired, you do not have to meet any new minimum educational requirements. Free tax extensions This means that if the minimum requirements change after you were hired, any education you need to meet the new requirements can be qualifying education. Free tax extensions You have not necessarily met the minimum educational requirements of your trade or business simply because you are already doing the work. Free tax extensions Example 1. Free tax extensions You are a full-time engineering student. Free tax extensions Although you have not received your degree or certification, you work part time as an engineer for a firm that will employ you as a full-time engineer after you finish college. Free tax extensions Although your college engineering courses improve your skills in your present job, they are also needed to meet the minimum job requirements for a full-time engineer. Free tax extensions The education is not qualifying work-related education. Free tax extensions Example 2. Free tax extensions You are an accountant and you have met the minimum educational requirements of your employer. Free tax extensions Your employer later changes the minimum educational requirements and requires you to take college courses to keep your job. Free tax extensions These additional courses can be qualifying work-related education because you have already satisfied the minimum requirements that were in effect when you were hired. Free tax extensions Requirements for Teachers States or school districts usually set the minimum educational requirements for teachers. Free tax extensions The requirement is the college degree or the minimum number of college hours usually required of a person hired for that position. Free tax extensions If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. Free tax extensions The determination of whether you are a faculty member of an educational institution must be made on the basis of the particular practices of the institution. Free tax extensions You generally will be considered a faculty member when one or more of the following occurs. Free tax extensions You have tenure. Free tax extensions Your years of service count toward obtaining tenure. Free tax extensions You have a vote in faculty decisions. Free tax extensions Your school makes contributions for you to a retirement plan other than social security or a similar program. Free tax extensions Example 1. Free tax extensions The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional education courses. Free tax extensions In addition, to keep the job a teacher must complete a fifth year of training within 10 years from the date of hire. Free tax extensions If the employing school certifies to the state Department of Education that qualified teachers cannot be found, the school can hire persons with only 3 years of college. Free tax extensions However, to keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years. Free tax extensions Under these facts, the bachelor's degree, whether or not it includes the 10 professional education courses, is considered the minimum educational requirement for qualification as a teacher in your state. Free tax extensions If you have all the required education except the fifth year, you have met the minimum educational requirements. Free tax extensions The fifth year of training is qualifying work-related education unless it is part of a program of study that will qualify you for a new trade or business. Free tax extensions Example 2. Free tax extensions Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. Free tax extensions The additional four education courses can be qualifying work-related education. Free tax extensions Although you do not have all the required courses, you have already met the minimum educational requirements. Free tax extensions Example 3. Free tax extensions Assume the same facts as in Example 1 except that you are hired with only 3 years of college. Free tax extensions The courses you take that lead to a bachelor's degree (including those in education) are not qualifying work-related education. Free tax extensions They are needed to meet the minimum educational requirements for employment as a teacher. Free tax extensions Example 4. Free tax extensions You have a bachelor's degree and you work as a temporary instructor at a university. Free tax extensions At the same time, you take graduate courses toward an advanced degree. Free tax extensions The rules of the university state that you can become a faculty member only if you get a graduate degree. Free tax extensions Also, you can keep your job as an instructor only as long as you show satisfactory progress toward getting this degree. Free tax extensions You have not met the minimum educational requirements to qualify you as a faculty member. Free tax extensions The graduate courses are not qualifying work-related education. Free tax extensions Certification in a new state. Free tax extensions   Once you have met the minimum educational requirements for teachers for your state, you are considered to have met the minimum educational requirements in all states. Free tax extensions This is true even if you must get additional education to be certified in another state. Free tax extensions Any additional education you need is qualifying work-related education. Free tax extensions You have already met the minimum requirements for teaching. Free tax extensions Teaching in another state is not a new trade or business. Free tax extensions Example. Free tax extensions You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. Free tax extensions You move to State B and are promptly hired as a teacher. Free tax extensions You are required, however, to complete certain prescribed courses to get a permanent teaching certificate in State B. Free tax extensions These additional courses are qualifying work-related education because the teaching position in State B involves the same general kind of work for which you were qualified in State A. Free tax extensions Education That Qualifies You for a New Trade or Business Education that is part of a program of study that will qualify you for a new trade or business is not qualifying work-related education. Free tax extensions This is true even if you do not plan to enter that trade or business. Free tax extensions If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business. Free tax extensions Example 1. Free tax extensions You are an accountant. Free tax extensions Your employer requires you to get a law degree at your own expense. Free tax extensions You register at a law school for the regular curriculum that leads to a law degree. Free tax extensions Even if you do not intend to become a lawyer, the education is not qualifying because the law degree will qualify you for a new trade or business. Free tax extensions Example 2. Free tax extensions You are a general practitioner of medicine. Free tax extensions You take a 2-week course to review developments in several specialized fields of medicine. Free tax extensions The course does not qualify you for a new profession. Free tax extensions It is qualifying work- related education because it maintains or improves skills required in your present profession. Free tax extensions Example 3. Free tax extensions While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. Free tax extensions The program will lead to qualifying you to practice psychoanalysis. Free tax extensions The psychoanalytic training does not qualify you for a new profession. Free tax extensions It is qualifying work-related education because it maintains or improves skills required in your present profession. Free tax extensions Bar or CPA Review Course Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are not qualifying work-related education. Free tax extensions They are part of a program of study that can qualify you for a new profession. Free tax extensions Teaching and Related Duties All teaching and related duties are considered the same general kind of work. Free tax extensions A change in duties in any of the following ways is not considered a change to a new business. Free tax extensions Elementary school teacher to secondary school teacher. Free tax extensions Teacher of one subject, such as biology, to teacher of another subject, such as art. Free tax extensions Classroom teacher to guidance counselor. Free tax extensions Classroom teacher to school administrator. Free tax extensions What Expenses Can Be Deducted If your education meets the requirements described earlier under Qualifying Work-Related Education you can generally deduct your education expenses as business expenses. Free tax extensions If you are not self-employed, you can deduct business expenses only if you itemize your deductions. Free tax extensions You cannot deduct expenses related to tax-exempt and excluded income. Free tax extensions Deductible expenses. Free tax extensions   The following education expenses can be deducted. Free tax extensions Tuition, books, supplies, lab fees, and similar items. Free tax extensions Certain transportation and travel costs. Free tax extensions Other education expenses, such as costs of research and typing when writing a paper as part of an educational program. Free tax extensions Nondeductible expenses. Free tax extensions   You cannot deduct personal or capital expenses. Free tax extensions For example, you cannot deduct the dollar value of vacation time or annual leave you take to attend classes. Free tax extensions This amount is a personal expense. Free tax extensions Unclaimed reimbursement. Free tax extensions   If you do not claim reimbursement that you are entitled to receive from your employer, you cannot deduct the expenses that apply to that unclaimed reimbursement. Free tax extensions Example. Free tax extensions Your employer agrees to pay your education expenses if you file a voucher showing your expenses. Free tax extensions You do not file a voucher and you do not get reimbursed. Free tax extensions Because you did not file a voucher, you cannot deduct the expenses on your tax return. Free tax extensions Transportation Expenses If your education qualifies, you can deduct local transportation costs of going directly from work to school. Free tax extensions If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning from school to home. Free tax extensions Temporary basis. Free tax extensions   You go to school on a temporary basis if either of the following situations applies to you. Free tax extensions Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less. Free tax extensions Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. Free tax extensions Your attendance is temporary up to the date you determine it will last more than 1 year. Free tax extensions If you are in either situation (1) or (2) above, your attendance is not temporary if facts and circumstances indicate otherwise. Free tax extensions Attendance not on a temporary basis. Free tax extensions   You do not go to school on a temporary basis if either of the following situations apply to you. Free tax extensions Your attendance at school is realistically expected to last more than 1 year. Free tax extensions It does not matter how long you actually attend. Free tax extensions Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. Free tax extensions Your attendance is not temporary after the date you determine it will last more than 1 year. Free tax extensions Deductible Transportation Expenses If you are regularly employed and go directly from home to school on a temporary basis, you can deduct the round-trip costs of transportation between your home and school. Free tax extensions This is true regardless of the location of the school, the distance traveled, or whether you attend school on nonwork days. Free tax extensions Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. Free tax extensions Transportation expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight. Free tax extensions Example 1. Free tax extensions You regularly work in a nearby town, and go directly from work to home. Free tax extensions You also attend school every work night for 3 months to take a course that improves your job skills. Free tax extensions Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation expenses in going between home and school. Free tax extensions This is true regardless of the distance traveled. Free tax extensions Example 2. Free tax extensions Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. Free tax extensions You can deduct your transportation expenses from your regular work site to school and then home. Free tax extensions Example 3. Free tax extensions Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. Free tax extensions Since you are attending school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school. Free tax extensions Example 4. Free tax extensions Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. Free tax extensions Since your attendance in school is not considered temporary, you cannot deduct your transportation expenses in going between home and school. Free tax extensions If you go directly from work to school, you can deduct the one-way transportation expenses of going from work to school. Free tax extensions If you go from work to home to school and return home, your transportation expenses cannot be more than if you had gone directly from work to school. Free tax extensions Using your car. Free tax extensions    If you use your car (whether you own or lease it) for transportation to school, you can deduct your actual expenses or use the standard mileage rate to figure the amount you can deduct. Free tax extensions The standard mileage rate for miles driven from January 1, 2013 through December 31, 2013, is 56. Free tax extensions 5 cents per mile. Free tax extensions Whichever method you use, you can also deduct parking fees and tolls. Free tax extensions See Publication 463, chapter 4, for information on deducting your actual expenses of using a car. Free tax extensions Travel Expenses You can deduct expenses for travel, meals (see 50% limit on meals , later), and lodging if you travel overnight mainly to obtain qualifying work-related education. Free tax extensions Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business purposes. Free tax extensions For more information, see chapter 1 of Publication 463. Free tax extensions You cannot deduct expenses for personal activities such as sightseeing, visiting, or entertaining. Free tax extensions Mainly personal travel. Free tax extensions   If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging. Free tax extensions You can deduct only your expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities. Free tax extensions   Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. Free tax extensions An important factor is the comparison of time spent on personal activities with time spent on educational activities. Free tax extensions If you spend more time on personal activities, the trip is considered mainly educational only if you can show a substantial nonpersonal reason for traveling to a particular location. Free tax extensions Example 1. Free tax extensions John works in Newark, New Jersey. Free tax extensions He traveled to Chicago to take a deductible 1-week course at the request of his employer. Free tax extensions His main reason for going to Chicago was to take the course. Free tax extensions While there, he took a sightseeing trip, entertained some friends, and took a side trip to Pleasantville for a day. Free tax extensions Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. Free tax extensions He cannot deduct his transportation expenses of going to Pleasantville. Free tax extensions He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities. Free tax extensions Example 2. Free tax extensions Sue works in Boston. Free tax extensions She went to a university in Michigan to take a course for work. Free tax extensions The course is qualifying work-related education. Free tax extensions She took one course, which is one-fourth of a full course load of study. Free tax extensions She spent the rest of the time on personal activities. Free tax extensions Her reasons for taking the course in Michigan were all personal. Free tax extensions Sue's trip is mainly personal because three-fourths of her time is considered personal time. Free tax extensions She cannot deduct the cost of her round-trip train ticket to Michigan. Free tax extensions She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended the university. Free tax extensions Example 3. Free tax extensions Dave works in Nashville and recently traveled to California to take a 2-week seminar. Free tax extensions The seminar is qualifying work-related education. Free tax extensions While there, he spent an extra 8 weeks on personal activities. Free tax extensions The facts, including the extra 8-week stay, show that his main purpose was to take a vacation. Free tax extensions Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. Free tax extensions He can deduct only his expenses for meals (subject to the 50% limit) and lodging for the 2 weeks he attended the seminar. Free tax extensions Cruises and conventions. Free tax extensions   Certain cruises and conventions offer seminars or courses as part of their itinerary. Free tax extensions Even if the seminars or courses are work related, your deduction for travel may be limited. Free tax extensions This applies to: Travel by ocean liner, cruise ship, or other form of luxury water transportation, and Conventions outside the North American area. Free tax extensions   For a discussion of the limits on travel expense deductions that apply to cruises and conventions, see Luxury Water Travel and Conventions in chapter 1 of Publication 463. Free tax extensions 50% limit on meals. Free tax extensions   You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related education. Free tax extensions If you were reimbursed for the meals, see How To Treat Reimbursements , later. Free tax extensions   Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit. Free tax extensions Travel as Education You cannot deduct the cost of travel as a form of education even if it is directly related to your duties in your work or business. Free tax extensions Example. Free tax extensions You are a French language teacher. Free tax extensions While on sabbatical leave granted for travel, you traveled through France to improve your knowledge of the French language. Free tax extensions You chose your itinerary and most of your activities to improve your French language skills. Free tax extensions You cannot deduct your travel expenses as education expenses. Free tax extensions This is true even if you spent most of your time learning French by visiting French schools and families, attending movies or plays, and engaging in similar activities. Free tax extensions No Double Benefit Allowed You cannot do either of the following. Free tax extensions Deduct work-related education expenses as business expenses if you benefit from these expenses under any other provision of the law, for example, as a tuition and fees deduction. Free tax extensions Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance. Free tax extensions See Adjustments to Qualifying Work-Related Education Expenses, next. Free tax extensions Adjustments to Qualifying Work-Related Education Expenses If you pay qualifying work-related education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. Free tax extensions You must reduce the qualifying expenses by the amount of such expenses allocable to the tax-free educational assistance. Free tax extensions Tax-free educational assistance. Free tax extensions   This includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions). Free tax extensions Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Free tax extensions Amounts that do not reduce qualifying work-related education expenses. Free tax extensions   Do not reduce the qualifying work-related education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. Free tax extensions Also, do not reduce the qualifying work-related education expenses by any scholarship or fellowship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualifying work-related education expenses. Free tax extensions How To Treat Reimbursements How you treat reimbursements depends on the arrangement you have with your employer. Free tax extensions There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. Free tax extensions You can tell the type of plan you are reimbursed under by the way the reimbursement is reported on your Form W-2. Free tax extensions Note. Free tax extensions The following rules about reimbursement arrangements also apply to expense allowances received from your employer. Free tax extensions Accountable Plans To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules. Free tax extensions Your expenses must have a business connection. Free tax extensions This means your expenses must be deductible under the rules for qualifying work-related education explained earlier. Free tax extensions You must adequately account to your employer for your expenses within a reasonable period of time. Free tax extensions You must return any reimbursement or allowance in excess of the expenses accounted for within a reasonable period of time. Free tax extensions If you are reimbursed under an accountable plan, your employer should not include any reimbursement in your income in box 1 of your Form W-2. Free tax extensions If your employer included reimbursements in box 1 of your Form W-2 and you meet all three rules for accountable plans, ask your employer for a corrected Form W-2. Free tax extensions Accountable plan rules not met. Free tax extensions   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules for accountable plans. Free tax extensions Those expenses that fail to meet the three rules are treated as having been reimbursed under a Nonaccountable Plan (discussed later). Free tax extensions Expenses equal reimbursement. Free tax extensions   Under an accountable plan, if your expenses equal your reimbursement, you do not complete Form 2106 or 2106-EZ. Free tax extensions Because your expenses and reimbursements are equal, you do not have a deduction. Free tax extensions Excess expenses. Free tax extensions   If your expenses are more than your reimbursement, you can deduct your excess expenses. Free tax extensions This is discussed later, under Deducting Business Expenses . Free tax extensions Allocating your reimbursements for meals. Free tax extensions   Because your excess meal expenses are subject to the 50% limit, you must figure them separately from your other expenses. Free tax extensions If your employer paid you a single amount to cover both meals and other expenses, you must allocate the reimbursement so that you can figure your excess meal expenses separately. Free tax extensions Make the allocation as follows. Free tax extensions Divide your meal expenses by your total expenses. Free tax extensions Multiply your total reimbursement by the result from (1). Free tax extensions This is the allocated reimbursement for your meal expenses. Free tax extensions Subtract the amount figured in (2) from your total reimbursement. Free tax extensions The difference is the allocated reimbursement for your other expenses of qualifying work-related education. Free tax extensions Example. Free tax extensions Your employer paid you an expense allowance of $2,000 under an accountable plan. Free tax extensions The allowance was to cover all of your expenses of traveling away from home to take a 2-week training course for work. Free tax extensions There was no indication of how much of the reimbursement was for each type of expense. Free tax extensions Your actual expenses equal $2,500 ($425 for meals + $700 lodging + $150 transportation expenses + $1,225 for books and tuition). Free tax extensions Using the steps listed above, allocate the reimbursement between the $425 meal expenses and the $2,075 other expenses. Free tax extensions   1. Free tax extensions $425 meal expenses  $2,500 total expenses = . Free tax extensions 17   2. Free tax extensions $2,000 (reimbursement)×. Free tax extensions 17     =$340 (allocated reimbursement for meal expenses)   3. Free tax extensions $2,000 (reimbursement)−$340 (meals)     = $1,660 (allocated reimbursement for other qualifying work-related education expenses) Your excess meal expenses are $85 ($425 − $340) and your excess other expenses are $415 ($2,075 − $1,660). Free tax extensions After you apply the 50% limit to your meals, you have a deduction for work-related education expenses of $458 (($85 × 50%) + $415). Free tax extensions Nonaccountable Plans Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a nonaccountable plan with your wages, salary, or other pay and report the total in box 1 of your Form W-2. Free tax extensions You can deduct your expenses regardless of whether they are more than, less than, or equal to your reimbursement. Free tax extensions This is discussed later under Deducting Business Expenses . Free tax extensions An illustrated example of a nonaccountable plan, using Form 2106-EZ, is shown at the end of this chapter. Free tax extensions Reimbursements for nondeductible expenses. Free tax extensions   Reimbursements you received for nondeductible expenses are treated as paid under a nonaccountable plan. Free tax extensions You must include them in your income. Free tax extensions For example, you must include in your income reimbursements your employer gave you for expenses of education that: You need to meet the minimum educational requirements for your job, or Is part of a program of study that can qualify you for a new trade or business. Free tax extensions   For more information on accountable and nonaccountable plans, see chapter 6 of Publication 463. Free tax extensions Deducting Business Expenses Self-employed persons and employees report their business expenses differently. Free tax extensions The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense. Free tax extensions Self-Employed Persons If you are self-employed, you must report the cost of your qualifying work-related education on the appropriate form used to report your business income and expenses (generally Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040)). Free tax extensions If your education expenses include expenses for a car or truck, travel, or meals, report those expenses the same way you report other business expenses for those items. Free tax extensions See the instructions for the form you file for information on how to complete it. Free tax extensions Employees If you are an employee, you can deduct the cost of qualifying work-related education only if you: Did not receive (and were not entitled to receive) any reimbursement from your employer, Were reimbursed under a nonaccountable plan (amount is included in box 1 of Form W-2), or Received reimbursement under an accountable plan, but the amount received was less than your expenses for which you claimed reimbursement. Free tax extensions If either (1) or (2) applies, you can deduct the total qualifying cost. Free tax extensions If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement. Free tax extensions In order to deduct the cost of your qualifying work-related education as a business expense, include the amount with your deduction for any other employee business expenses on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. Free tax extensions (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. Free tax extensions ) This deduction (except for impairment-related work expenses of disabled individuals) is subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. Free tax extensions Form 2106 or 2106-EZ. Free tax extensions   To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or 2106-EZ. Free tax extensions Form not required. Free tax extensions   Do not complete either Form 2106 or 2106-EZ if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are not claiming travel, transportation, meal, or entertainment expenses. Free tax extensions   If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. Free tax extensions (Special rules for expenses of certain Performing Artists and Fee-Basis Officials and for Impairment-Related Work Expenses are explained later. Free tax extensions ) Using Form 2106-EZ. Free tax extensions   This form is shorter and easier to use than Form 2106. Free tax extensions Generally, you can use this form if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are using the standard mileage rate if you are claiming vehicle expenses. Free tax extensions   If you do not meet both of these requirements, use Form 2106. Free tax extensions Performing Artists and Fee-Basis Officials If you are a qualified performing artist, or a state (or local) government official who is paid in whole or in part on a fee basis, you can deduct the cost of your qualifying work-related education as an adjustment to gross income rather than as an itemized deduction. Free tax extensions Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24, or Form 1040NR, line 35. Free tax extensions You do not have to itemize your deductions on Schedule A (Form 1040 or 1040NR), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income limit. Free tax extensions You must complete Form 2106 or 2106-EZ to figure your deduction even if you meet the requirements described earlier under Form not required . Free tax extensions For more information on qualified performing artists, see chapter 6 of Publication 463. Free tax extensions Impairment-Related Work Expenses If you are disabled and have impairment-related work expenses that are necessary for you to be able to get qualifying work-related education, you can deduct these expenses on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14. Free tax extensions They are not subject to the 2%-of-adjusted-gross-income limit. Free tax extensions To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required . Free tax extensions For more information on impairment-related work expenses, see chapter 6 of Publication 463. Free tax extensions Recordkeeping You must keep records as proof of any deduction claimed on your tax return. Free tax extensions Generally, you should keep your records for 3 years from the date of filing the tax return and claiming the deduction. Free tax extensions If you are an employee who is reimbursed for expenses and you give your records and documentation to your employer, you do not have to keep duplicate copies of this information. Free tax extensions However, you should keep your records for a 3-year period if: You claim deductions for expenses that are more than your reimbursement, Your employer does not use adequate accounting procedures to verify expense accounts, You are related to your employer, or Your expenses are reimbursed under a nonaccountable plan. Free tax extensions Examples of records to keep. Free tax extensions   If any of the above cases apply to you, you must be able to prove that your expenses are deductible. Free tax extensions You should keep adequate records or have sufficient evidence that will support your expenses. Free tax extensions Estimates or approximations do not qualify as proof of an expense. Free tax extensions Some examples of what can be used to help prove your expenses are: Documents, such as transcripts, course descriptions, catalogs, etc. Free tax extensions , showing periods of enrollment in educational institutions, principal subjects studied, and descriptions of educational activity. Free tax extensions Canceled checks and receipts to verify amounts you spent for: Tuition and books, Meals and lodging while away from home overnight for educational purposes, Travel and transportation, and Other education expenses. Free tax extensions Statements from your employer explaining whether the education was necessary for you to keep your job, salary, or status; how the education helped maintain or improve skills needed in your job; how much reimbursement you received; and, if you are a teacher, the type of certificate and subjects taught. Free tax extensions Complete information about any scholarship or fellowship grants, including amounts you received during the year. Free tax extensions Illustrated Example Victor Jones teaches math at a private high school in North Carolina. Free tax extensions He was selected to attend a 3-week math seminar at a university in California. Free tax extensions The seminar will improve his skills in his current job and is qualifying work-related education. Free tax extensions He was reimbursed for his expenses under his employer's nonaccountable plan, so his reimbursement of $2,100 is included in the wages shown in box 1 of his Form W-2. Free tax extensions Victor will file Form 1040. Free tax extensions His actual expenses for the seminar are as follows:   Lodging   $1,050     Meals   526     Airfare   550     Taxi fares   50     Tuition and books   400     Total Expenses   $2,576   Victor files Form 2106-EZ with his tax return. Free tax extensions He shows his expenses for the seminar in Part I of the form. Free tax extensions He enters $1,650 ($1,050 + $550 + $50) on line 3 to account for his lodging, airfare, and taxi fares. Free tax extensions He enters $400 on line 4 for his tuition and books. Free tax extensions On the line provided for total meals and entertainment expenses, Victor enters $526 for meal expenses. Free tax extensions He multiplies that amount by 50% and enters the result, $263, on line 5. Free tax extensions On line 6, Victor totals the amounts from lines 3 through 5. Free tax extensions He carries the total, $2,313, to Schedule A (Form 1040), line 21. Free tax extensions Since he does not claim any vehicle expenses, Victor leaves Part II blank. Free tax extensions His filled-in form is shown on the next page. Free tax extensions This image is too large to be displayed in the current screen. Free tax extensions Please click the link to view the image. Free tax extensions Form 2106-EZ for V. Free tax extensions Jones Prev  Up  Next   Home   More Online Publications