1998 Tax Help Archives  

Publication 553 1998 Tax Year

Chapter 1
Tax Changes for Individuals

This is archived information that pertains only to the 1998 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Employee Business Expenses

Standard mileage rate. If you use your car in your business, you can figure your deduction for business use based on either your actual costs or the optional standard mileage rate. For 1998, the optional standard mileage rate for the cost of operating your car in your business is 32.5 cents a mile for all business miles.

Rate extended to leased cars. You can now use the standard mileage rate for a car you lease, as well as a car you own. Previously, you could only use actual car expenses if you did not own the car.

Rural mail carriers. Beginning in 1998, the higher standard mileage rate for rural mail carriers (U.S. Postal Service employees with rural routes) is repealed. If you are a rural mail carrier, you may be able to treat the amount of qualified reimbursement you received in 1998 as the amount of your allowable expense.

CAUTIONIf you are a rural mail carrier who received a qualified reimbursement, you cannot use the standard mileage rate.

Business car expenses and reimbursements are covered in Publication 463, Travel, Entertainment, Gift, and Car Expenses.

Depreciation limits on business cars. The total section 179 deduction and depreciation you can take on a car you use in your business and first place in service in 1998 cannot exceed $3,160. Your depreciation cannot exceed $5,000 for the second year of recovery, $2,950 for the third year of recovery, and $1,775 for each later tax year. Business car expenses are discussed in chapter 4 of Publication 463.

Exceptions for clean-fuel cars. There are two exceptions to the depreciation limits.

  1. The first exception is for a car that was produced to run primarily on electricity and that you place in service in 1998. For this type of car the depreciation limit is increased as shown below.   
    a) $9,380 for the first year of recovery.
    b) $15,000 for the second year of recovery.
    c) $8,950 for the third year of recovery.
    d) $5,425 for each later tax year.

  2. The second exception is for costs you pay to retrofit parts and components to modify a car to run on clean fuel. These costs are not subject to the limits on depreciation for cars. Only the cost of the car excluding this modification is subject to the limit. This exception applies to modifications you place in service after August 5, 1997.

For more information on clean-fuel vehicles, see chapter 15 in Publication 535, Business Expenses.

Increases to section 179 deduction. The total cost of section 179 property that you can elect to deduct for 1998 is increased from $18,000 to $18,500. For tax years after 1998, this amount increases as shown below.

Tax Year

Maximum Deduction
1999.................................. $19,000
2000.................................. 20,000
2001 and 2002.................. 24,000
After 2002........................ 25,000

For more information on the section 179 deduction, see chapter 2 in Publication 946, How To Depreciate Property.

Meal expenses when subject to hours of service limits. Generally, you can deduct only 50% of your business-related meal expenses while traveling away from your tax home for business purposes. Beginning in 1998, you can deduct a higher percentage if the meals take place during or incident to any period subject to the Department of Transportation's hours of service limits. (These limits apply to certain workers who are under certain federal regulations.) The percentage is 55% for 1998 and 1999, and it gradually increases to 80% by the year 2008.

Business meal expenses are covered in chapter 1 of Publication 463.

Sale of Your Home

Form 2119, Sale of Your Home, is obsolete beginning in 1998.

Report the sale of your main home on your tax return only if you have a gain and at least part of it is taxable. Report any taxable gain on Schedule D (Form 1040), Capital Gains and Losses. For more information, see Publication 523, Selling Your Home.

Exclusion of Gain From Sales of Small Business Stock

Beginning in 1998, you may have to pay tax on only one-half of your gain from the sale or exchange of qualified small business stock. This applies only to stock originally issued after August 10, 1993, and held by you for more than 5 years.

For more information, see Gains on Qualified Small Business Stock in chapter 4 of Publication 550.

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