Important Changes
Standard mileage rate. The standard mileage rate for the cost of operating your car in 2000 is 32½ cents a mile for all business miles.
Car expenses and use of the standard mileage rate are explained in chapter 4.
Depreciation limits on cars. Generally, the total section 179 and depreciation deductions you can claim for a car that you use in your business and first placed in service in 2000 is $3,060. Depreciation on cars and the section 179 deduction are covered in chapter 4.
Exceptions for clean-fuel cars. There are two exceptions to the depreciation limits for cars that run on clean fuel. See Exceptions for clean-fuel cars under Depreciation Limits in chapter 4.
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. 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 60% for 2000 and 2001 and it gradually increases to 80% by the year 2008. Business meal expenses are covered in chapter 1.
Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843- 5678) if you recognize a child.
Important Reminders
Standard meal allowance. The standard meal allowance (also referred to as the limit on meals and incidental expenses (M&IE rate)) for most small localities in the United States is $30. However, the standard meal allowance is higher for most major cities and many other localities in the continental United States. See Publication 1542, Per Diem Rates. These rates (allowances/limits) are also listed in Appendix A of Chapter 41, Part 301 of the Code of Federal Regulations. If you have a computer, you can find them on the Internet at www.policyworks.gov/perdiem. Click on Domestic per diem rates. Use of the standard meal allowance is explained in chapter 1.
Days you depart and return. For the days you depart for and return from a business trip, you can claim ¾ of the standard meal allowance amount. For more information, see Travel for days you depart and return under Standard Meal Allowance in chapter 1.
Limits that apply to employee deductions. If you are an employee, deduct your work-related expenses discussed in this publication as a miscellaneous itemized deduction on Schedule A (Form 1040). Generally, the amount of miscellaneous itemized deductions you can deduct is limited to the amount that is more than 2% of your adjusted gross income. It may be further limited if your adjusted gross income is more than $128,950 ($64,475 if you are married filing separately). How to report your expenses is covered in chapter 6.
Introduction
You may be able to deduct the ordinary and necessary business-related expenses you have for:
- Travel away from home,
- Entertainment,
- Gifts, or
- Local transportation.
An ordinary expense is one that is common and accepted in your field of trade, business, or profession. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.
This publication explains what expenses are deductible, how to report them on your return, what records you need to prove your expenses, and how to treat any expense reimbursements you may receive.
Who should use this publication. You should read this publication if you are an employee or a sole proprietor who has these business-related expenses that may be deductible. Other businesses (such as partnerships, corporations, and trusts) and employers who reimburse their employees for business expenses should refer to their tax form instructions and chapter 13 of Publication 535, Business Expenses, for information on deducting travel, entertainment, and transportation expenses.
Who does not need to use this publication. You will not need to read this publication if all of the following are true.
- You fully accounted to your employer for your work-related expenses.
- You received full reimbursement for your expenses.
- Your employer required you to return any excess reimbursement and you did so.
- Box 13 of your Form W-2, Wage and Tax Statement, shows no amount with a code L.
If you meet these four conditions, there is no need to show the expenses or the reimbursements on your return. If you would like more information on reimbursements and accounting to your employer, see chapter 6.
If you meet these conditions and your employer included reimbursements on your Form W-2 in error, ask your employer for a corrected Form W-2.
If you do not meet all of these conditions, you generally must complete Form 2106 or 2106-EZ and itemize your deductions on Schedule A (Form 1040) to claim your expenses. See chapter 6.
Volunteers. If you perform services as a volunteer worker for a qualified charity, you may be able to deduct some of your costs as a charitable contribution. See Out-of-Pocket Expenses in Giving Services in Publication 526, Charitable Contributions, for information on the expenses you can deduct.
Users of employer-provided vehicles. If an employer-provided vehicle was available for your use, you received a fringe benefit. Generally, your employer must include the value of the use or availability in your income as pay. However, there are exceptions if the use of the vehicle qualifies as a working condition fringe benefit (such as the use of a qualified nonpersonal use vehicle). Employers should see Publication 15-B, Employer's Tax Guide to Fringe Benefits, for information on fringe benefits.
A working condition fringe benefit is any property or service provided to you by your employer for which you could deduct the cost as an employee business expense if you had paid for it.
A qualified nonpersonal use vehicle is one that is not likely to be used more than minimally for personal purposes because of its design.
For information on how to report your car expenses that your employer did not provide or reimburse you for (such as when you pay for gas and maintenance for a car your employer provides), see Vehicle Provided by Your Employer in chapter 6.
Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions.
You can e-mail us while visiting our web site at www.irs.gov/help/email2.html.
You can write to us at the following address:
Internal Revenue Service
Technical Publications Branch
W:CAR:MP:FP:P
1111 Constitution Ave. NW
Washington, DC 20224
We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.
Useful Items You may want to see:
Publication
- 225 Farmer's Tax Guide
- 529 Miscellaneous Deductions
- 535 Business Expenses
- 946 How To Depreciate Property
- 1542 Per Diem Rates
Form (and Instructions)
- Schedule A (Form 1040) Itemized Deductions
- Schedule C (Form 1040) Profit or Loss From Business
- Schedule C-EZ (Form 1040) Net Profit From Business
- Schedule F (Form 1040) Profit or Loss From Farming
- 2106 Employee Business Expenses
- 2106-EZ Unreimbursed Employee Business Expenses
- 4562 Depreciation and Amortization
See chapter 7, How To Get Tax Help, for information about getting these publications and forms.
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