If you are an employee, you may be able to deduct your un-reimbursed work-related expenses as an itemized deduction on Schedule A. Employee business expenses are subject to the 2% of AGI limitation (see below). You can deduct un-reimbursed employee business expenses incurred in the normal course of carrying out your responsibilities as an employee.
You can deduct un-reimbursed travel expenses that you incur as an employee if you temporarily travel away from your tax home for your job. These expenses include transportation, car expenses, lodging and meals (meals are only allowed if you are traveling overnight). You can also deduct your job-related education expenses. You claim your employee business expenses on line 21 of Schedule A.
Although commuting costs (travel between home and work) are not deductible, some local transportation expenses are. Deductible local transportation expenses include the ordinary and necessary expenses of going from one workplace to another. If you have an office in your home that you use as your principal place of business for your employer, you may deduct the cost of traveling between your home office and work places associated with your employment.
You may deduct the cost of traveling between your residence and a temporary work location outside of the metropolitan area where you live and normally work. If you have one or more regular work locations away from your residence, you may also deduct the cost of going between your residence and a temporary work location within your metropolitan area.
Where is your tax home?
In determining the deductibility of travel expenses when you travel outside your general work area, the location of your tax home must first be established. Your tax home is your main place of business or work, regardless of where you maintain your family home. The following factors are used to determine your main place of business or work:
- The total time ordinarily spent working in each area.
- The level of business activity in each area.
- Whether the income from each place is significant or insignificant.
You are considered away from your tax home if you are required to be away from the general area of your tax home for longer than an ordinary workday, and you need to get sleep or rest.
What expenses are deductible?
If you are on a temporary assignment or job away from your tax home, your job expenses may or may not be deductible. A temporary assignment is one that is expected to last for one year or less, and does in fact last for one year or less. The following factors are used to determine if traveling expenses to that temporary assignment or job are deductible or not:
- If the assignment has a fixed ending date (one year or less), the expenses are deductible.
- If the assignment or job lasts or is expected to last indefinitely, the expenses are not deductible.
Your employee business (job) expenses can be deductible as long as they were:
- Paid or incurred during the tax year.
- Incurred for carrying out your job as an employee.
- Ordinary and necessary business expenses.
To figure your meal expenses when traveling away from your tax home, you can use either the actual expenses incurred, or a standard rate of $46 per day. The standard rate can be higher in some cities, and you can find this information on the IRS website. Whichever method you use, tax law allows you to deduct ONLY 50% of your un-reimbursed meal expenses.
You can deduct expenses of up to $2,000 per year for attending conventions, seminars, or similar meeting held on cruise ships.
Meal and entertainment expenses
If your job requires you to entertain customers, you can deduct ordinary and necessary meals and entertainment expenses, but only if they are directly related and associated with your business.
The directly related test is met if:
- The meal or entertainment takes place in a clear business setting.
- The main purpose of the meal and entertainment is for the conduct of business.
- You did in fact engage in business.
- You had more than a general expectation of getting income or some other business benefit.
The associated test is met if:
- The meal or entertainment is associated with the active conduct or your trade or business.
- The meal or entertainment directly precedes or follows a substantial business discussion.
In general, you can deduct only 50% of business related meal and entertainment expenses. Therefore if you receive one bill, which includes the costs of meals, lodging, transportation, etc., you must allocate the expenses between the cost of meals and entertainment, and the cost of the other services.
If you gave away tickets to an entertainment event, you can deduct only the face value of the tickets. If you gave a customer tickets and did not accompany the customer to the event, you can treat the cost of the tickets as either an entertainment or a gift expense, whichever is to your advantage.
Business gift expenses
If the nature of your job requires you to give gifts to customers, pengeluaran hk the cost of gifts given directly or indirectly to a customer is deductible up to a maximum limit. The following rules apply to gifts:
- You cannot deduct a gift of more than $25 per person (incidental costs, such as engraving on jewelry, or packaging and mailing, are not included in determining the cost of the gift).
- A gift to a customer’s family member is considered an indirect gift to that customer.
- If both spouses give gifts, they are treated as one taxpayer with one $25 limit per customer.
- Items costing less than $4, and used for promotional purposes, such as pens, key chains, mugs, etc., with the business name clearly imprinted, are not included in the $25 limit.