Part I - Employee Business Expenses and Reimbursements
Fill in all of Part I if you were reimbursed for employee business expenses. If you were not reimbursed for your expenses, skip line 7
and complete the rest of Part I.
Step 1 - Enter Your Expenses
Line 1.
If you were a rural mail carrier, your deduction for vehicle expense is equal to your equipment maintenance allowance. This rule applies to you if
you were an employee of the United States Postal Service (USPS) who performed services involving the collection and delivery of mail on a rural route.
You also must have received the equipment maintenance allowance under a collective bargaining agreement between the USPS and the National Rural Letter
Carriers' Association, paid at a rate that does not exceed the rate contained in the 1991 collective bargaining agreement, adjusted for inflation.
If this rule applies to you, you should complete Form 2106 only if you have expenses to deduct other than vehicle expenses.
Line 2.
See the line 15 instructions for the definition of commuting.
Line 3.
Enter lodging and transportation expenses connected with overnight travel away from your tax home (defined later). Do not include
expenses for meals and entertainment. For more details, including limits, see Pub. 463.
Generally, you cannot deduct any expenses for travel away from your tax home for any period of temporary employment of more than 1 year. However,
this rule does not apply for any period in which you were a Federal employee certified by the Attorney General as traveling in temporary duty status
for the U.S. government to investigate or prosecute a Federal crime (or to provide support services for the investigation or prosecution of that
crime).
Generally, your tax home is your main place of business or post of duty regardless of where you maintain your family home. If you do not
have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. If you do not
fit in either of these categories, you are considered an itinerant and your tax home is wherever you work. As an itinerant, you are never away from
home and cannot claim a travel expense deduction. For more details on your tax home, see Pub. 463.
Line 4.
Enter other job-related expenses not listed on any other line of this form. Include expenses for business gifts, education (tuition and books),
home office, trade publications, etc. For details, including limits, see Pub. 463 and Pub. 529. Do not include on line 4 any tuition and
fees you deducted on Form 1040, line 26, or any educator expenses you deducted on Form 1040, line 23.
If you are deducting home office expenses, see Pub. 587 for special instructions on how to report these expenses.
If you are deducting depreciation or claiming a section 179 deduction for a cellular telephone or other similar telecommunications equipment, a
home computer, etc., see Form 4562, Depreciation and Amortization, to figure the depreciation and section 179 deduction to enter on line 4.
You may be able to take a credit for your educational expenses instead of a deduction. See Form 8863, Education Credits (Hope and
Lifetime Learning Credits) for details.
Do not include expenses for meals and entertainment, taxes, or interest on line 4. Deductible taxes are entered on lines 5 through 9 of Schedule A
(Form 1040). Employees cannot deduct car loan interest.
Note:
If line 4 is your only entry, do not complete Form 2106, unless you are claiming:
- Expenses for performing your job as a fee-basis state or local government official,
- Performing-arts-related business expenses as a qualified performing artist, or
- Impairment-related work expenses as an individual with a disability.
See the line 10 instructions for definitions. If you are not required to file Form 2106, enter your expenses directly on Schedule A (Form 1040),
line 20.
Line 5.
Enter your allowable meals and entertainment expense. Include meals while away from your tax home overnight and other business meals and
entertainment. Instead of actual cost, you may be able to claim the standard meal allowance for your daily meals and incidental expenses
while away from your tax home overnight. Under this method, you deduct a specified amount, depending on where you travel, instead of keeping records
of your actual meal expenses. However, you must still keep records to prove the time, place, and business purpose of your travel.
The standard meal allowance is the Federal M&IE rate. For travel in 2002, this rate is $30 a day for most small localities in the United
States. Most major cities and many other localities in the United States are designated as high-cost areas and qualify for higher rates. You can find
these rates on the Internet at www.policyworks.gov/perdiem. Click on 2002 Domestic Per Diem Rates for the period January 1, 2002
- September 30, 2002, and on 2003 Domestic Per Diem Rates for the period October 1, 2002 - December 31, 2002. For locations outside
the continental United States, the applicable rates are published monthly. You can find these rates on the Internet at
www.state.gov/m/a/als/prdm/2002.
See Pub. 463 for details on how to figure your deduction using the standard meal allowance, including special rules for partial days of travel,
transportation workers, and taxpayers related to their employer.
Step 2 - Enter Reimbursements Received From Your Employer for Expenses Listed in Step 1
Line 7.
Enter reimbursements received from your employer (or third party) for expenses shown in Step 1 that were not reported to you in box 1 of
your Form W-2. This includes reimbursements reported under code L in box 12 of Form W-2. Amounts reported under code L are certain
reimbursements you received for business expenses that were not included as wages on Form W-2 because the expenses were treated as meeting specific
IRS substantiation requirements.
Generally, when your employer pays for your expenses, the payments should not be included in box 1 of your Form W-2 if, within a reasonable period
of time, you:
- Accounted to your employer for the expenses and
- Were required to return, and did return, any payment not spent (or considered not spent) for business expenses.
If these payments were included in box 1, ask your employer for a corrected Form W-2.
Accounting to your employer means that you gave your employer documentary evidence and an account book, diary, or similar statement to
verify the amount, time, place, and business purpose of each expense. You are also treated as having accounted for your expenses if either of the
following applies:
- Your employer gave you a fixed travel allowance that is similar in form to the per diem allowance specified by the Federal Government and
you verified the time, place, and business purpose of each expense.
- Your employer reimbursed you for vehicle expenses at the standard mileage rate or according to a flat rate or stated schedule, and you
verified the date of each trip, mileage, and business purpose of the vehicle use.
See Pub. 463 for more details.
Allocating your reimbursement.
If your employer paid you a single amount that covers meals and entertainment as well as other business expenses, you must allocate the
reimbursement so that you know how much to enter in Column A and Column B of line 7. Use the following worksheet to figure this allocation.
Worksheet (keep for your records)
| 1.
|
Enter the total amount of reimbursements your employer gave you that were not reported to you in box 1 of Form W-2
|
|
| 2.
|
Enter the total amount of your expenses for the periods covered by this reimbursement
|
|
| 3.
|
Of the amount on line 2, enter your total expense for meals and entertainment
|
|
| 4.
|
Divide line 3 by line 2. Enter the result as a decimal (rounded to at least three places)
|
|
| 5.
|
Multiply line 1 by line 4. Enter the result here and in Column B, line 7
|
|
| 6.
|
Subtract line 5 from line 1. Enter the result here and in Column A, line 7
|
|
Step 3 - Figure Expenses To Deduct on Schedule A (Form 1040)
Line 9.
Generally, you may deduct only 50% of your business meal and entertainment expenses, including meals incurred while away from home on business. If
you were an employee subject to the Department of Transportation (DOT) hours of service limits, that percentage is increased to 65% for business meals
consumed during, or incident to, any period of duty for which those limits are in effect.
Employees subject to the DOT hours of service limits include certain air transportation employees, such as pilots, crew, dispatchers, mechanics,
and control tower operators; interstate truck operators and interstate bus drivers; certain railroad employees, such as engineers, conductors, train
crews, dispatchers, and control operations personnel; and certain merchant mariners.
Line 10 - Special rules.
If you were a fee-basis state or local government official (defined below), include the expenses you incurred for services performed in
that job in the total on Form 1040, line 34. Write FBO and the amount in the space to the left of line 34 on Form 1040. Your employee business
expenses are deductible whether or not you itemize deductions. A fee-basis state or local government official is an official who is an employee of a
state or political subdivision of a state and is compensated, in whole or in part, on a fee basis.
If you were a qualified performing artist (defined below), include the part of the line 10 amount attributable to
performing-arts-related expenses in the total on Form 1040, line 34. Write QPA and the amount in the space to the left of line 34 on Form 1040.
Your performing-arts-
related business expenses are deductible whether or not you itemize deductions.
A qualified performing artist is an individual who:
- Performed services in the performing arts as an employee for at least two employers during the tax year,
- Received from at least two of those employers wages of $200 or more per employer,
- Had allowable business expenses attributable to the performing arts of more than 10% of gross income from the performing arts,
and
- Had adjusted gross income of $16,000 or less before deducting expenses as a performing artist.
To be treated as a qualified performing artist, a married individual must also file a joint return, unless the individual and his or her spouse
lived apart for all of 2002. On a joint return, requirements 1, 2, and 3 must be figured separately for each spouse.
However, requirement 4 applies to the combined adjusted gross income of both spouses.
If you were an individual with a disability and are claiming impairment-related work expenses (defined below), enter the part of the
line 10 amount attributable to those expenses on Schedule A, line 27, instead of on Schedule A, line 20. Your impairment-related work expenses are not
subject to the 2% limit that applies to most other employee business expenses.
Impairment-related work expenses are the allowable expenses of an individual with physical or mental disabilities for attendant care at
his or her place of employment. They also include other expenses in connection with the place of employment that enable the employee to work. See Pub.
463 for more details.
Part II - Vehicle Expenses
There are two methods for computing vehicle expenses - the standard mileage rate and the actual expense method. You can use the standard
mileage rate for 2002 only if:
- You owned the vehicle and used the standard mileage rate for the first year you placed the vehicle in service or
- You leased the vehicle and are using the standard mileage rate for the entire lease period (except the period, if any, before
1998).
You cannot use actual expenses for a leased vehicle if you previously used the standard mileage rate for that vehicle.
If you have the option of using either the standard mileage rate or actual expense method, you should figure your expenses both ways to find the
method most beneficial to you. But when completing Form 2106, fill in only the sections that apply to the method you choose.
If you were a rural mail carrier and received an equipment maintenance allowance see the line 1 instructions.
For more information on the standard mileage rate and actual expenses, see Pub. 463.
Section A - General Information
If you used two vehicles for business during the year, use a separate column in Sections A, C, and D for each vehicle. If you used more than two
vehicles, attach a statement using the format in Sections A, C,
and D.
Line 11.
Date placed in service is generally the date you first start using your vehicle. However, if you first start using your vehicle for personal use
and later convert it to business use, the vehicle is treated as placed in service on the date you started using it for business.
Line 12.
Enter the total number of miles you drove each vehicle during 2002. But if you converted your vehicle during the year from personal to business use
(or vice versa), enter the total miles for only the months you drove the vehicle for business.
Line 13.
Do not include commuting miles on this line; commuting miles are not considered business miles. See the line 15 instructions for the definition of
commuting.
Line 14.
Divide line 13 by line 12 to figure your business use percentage. However, if you converted your vehicle during the year from personal to business
use (or vice versa), multiply this percentage by the number of months you drove the vehicle for business and divide the result by 12.
Line 15.
Enter your average daily roundtrip commuting distance. If you went to more than one work location, figure the average.
Generally, commuting is travel between your home and a work location. However, travel that meets any of the following
conditions is not commuting.
- You have at least one regular work location away from your home and the travel is to a temporary work location in the same trade or
business, regardless of the distance. Generally, a temporary work location is one where your employment is expected to last 1 year or less. See Pub.
463 for more details.
- The travel is to a temporary work location outside the metropolitan area where you live and normally work.
- Your home is your principal place of business under section 280A(c)(1)(A) (for purposes of deducting expenses for business use of your home)
and the travel is to another work location in the same trade or business, regardless of whether that location is regular or temporary and regardless
of distance.
Line 16.
If you do not know the total actual miles you used your vehicle for commuting during the year, figure the amount to enter on line 16 by multiplying
the number of days during the year that you used each vehicle for commuting by the average daily roundtrip commuting distance in miles. However, if
you converted your vehicle during the year from personal to business use (or vice versa), enter your commuting miles only for the period you drove
your vehicle for business.
Section B - Standard Mileage Rate
You may be able to use the standard mileage rate instead of actual expenses to figure the deductible costs of operating a passenger car, including
a van, pickup, or panel truck.
If you want to use the standard mileage rate for a vehicle you own, you must do so in the first year you place your vehicle in service. In later
years, you may deduct actual expenses instead, but you may not use a depreciation method other than straight line.
If you lease your vehicle, you may use the standard mileage rate, but only if you use the rate for the entire lease period (except for the period,
if any, before January 1, 1998).
You may also deduct state and local personal property taxes. Enter these taxes on Schedule A (Form 1040), line 7.
If you are claiming the standard mileage rate for mileage driven in more than one business activity, you must figure the deduction for each
business on a separate form or schedule (for example, Form 2106 or Schedule C, C-EZ, E, or F).
Section C - Actual Expenses
Line 23.
Enter your total annual expenses for gasoline, oil, repairs, insurance, tires, license plates, or similar items. Do not include state and local
personal property taxes or interest expense you paid. Deduct state and local personal property taxes on Schedule A (Form 1040), line 7. Employees
cannot deduct car loan interest.
Line 24a.
If during 2002 you rented or leased instead of using your own vehicle, enter the cost of renting. Also, include on this line any temporary rentals,
such as when your car was being repaired, except for amounts included on line 3.
Line 24b.
If you leased a vehicle for a term of 30 days or more after June 18, 1984, you may have to reduce your deduction for vehicle lease payments by an
amount called the inclusion amount. You may have an inclusion amount if:
| The lease term began in:
|
And the vehicle's fair market value
on the first day of the lease exceeded: |
| 1999 or later |
$15,500 |
| 1997 or 1998 |
15,800 |
| 1995 or 1996 |
15,500 |
| If the lease term began before
1995, see Pub. 463 to find out if you have an inclusion
amount. |
See Pub. 463 to figure the inclusion amount.
Line 25.
If during 2002 your employer provided a vehicle for your business use and included 100% of its annual lease value in box 1 of your Form W-2, enter
this amount on line 25. If less than 100% of the annual lease value was included in box 1 of your Form W-2, skip line 25.
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