© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 1 Federal Income Tax Business Related Deductions.

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 2 Chapter 9 Travel and Transportation Automobile Expenses Entertainment Moving Expenses Education Expenses Home Office Reimbursements Hobby losses (from Chap 6)

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 5 Automobile Expenses Business $.55 pg 9 – 11 Moving Medical Charitable Contribution Note prev yrs’ amts: ’01 = $.345 ’02 = $.365 ’03 = $.36 ’04 = $.375 ’05 = $.405 $.485 ’06 = $.445 ’07 = $.485 ’08 = $.505 $.585

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 8 Problem 9 - 60 Actual Gas & Oil$ 9,000 Repairs1,400 Depreciation4,700 Insurance & License 1,300 Total to Apportion$16,400 x Bus Use 60% Sub-total$ 9,840 Exp NOT Apportioned 100 Total ACTUAL Costs$ 9,940 Standard

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 9 Problem 9 - 60 Standard vs. Actual Total STANDARD Costs$13,300 Total ACTUAL Costs$ 9,940 Choose Larger$13,300 Less: Reimbursement 7,200 Deductible Amount$ 6,100

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 14 Moving Expenses Prior to 1981 –expenses classified as “direct” and “indirect” –“direct” costs fully deductible; limits on “indirect” costs –costs (in excess of reimbursement) deductible FOR A.G.I.

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 15 Moving Expenses 1981 – 1996 –direct and indirect costs deductible FROM –reimbursement included in Gross Income Present Law –only DIRECT costs deductible –costs deductible FOR A.G.I.

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 16 Moving Expenses 1981 – 1996 –direct and indirect costs deductible FROM –reimbursement included in Gross Income Present Law –only DIRECT costs deductible –costs deductible FOR A.G.I. Problem 9 – 64

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 18 Automobile Expenses Business $.55 pg 9 – 11 Moving $.24 pg 9 – 19 Medical Charitable Contribution Note prev yrs: $.12 in 2001 $.13 in 2002 $.12 in 2003 $.14 in 2004 $.15 $.22 in 2005 $.20 in 2007 $.19 in 2008 $.24

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 21 Education Expenses Ways for education costs to be deductible: –Required by law –Required by employer –Maintain or improve skills Problem 9 – 26

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 22 Problem 9 - 26 CPA Review$ 400 Law School4,000 Continuing Education600 $5,000 $500 Deductible FROM – Tier 2 New trade or business personal

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 23 Education Expenses Ways for education costs to be deductible: –Required by law –Required by employer –Maintain or improve skills Problem 9 – 26 Problem 9 – 27

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 24 Problem 9 - 27 Teachers generally allowed? –Sometimes required by law or employer –Maintain and improve skills New trade or business? –elementary to secondary? –biology to art? –classroom to counselor? –teacher to principal?

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 25 Education Expenses Ways for education costs to be deductible: –Required by law –Required by employer –Maintain or improve skills Problem 9 – 26 Problem 9 – 27 Problem 9 – 65

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 26 Problem 9 - 65 a.Law school? Not deductible – new trade or bus b.Self-employed accountant? $1,800 FOR c.MBA for executive? $5,000 FROM, Tier 2 d.Graduate courses for teacher? $1,000 FROM, Tier 2 e.Bar review for recent grad? Not deductible – personal

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 31 Home Office Expenses Controversial Requirements: –“exclusive use” –principal place of business (1998) –meetings with customers/clients etc. –separate structure? –“convenience of the employer”

http://www.irs.gov/pub/irs-pdf/p587.pdf Pub. 587 page 7

Publication 587, page 7 http://www.irs.gov/pub/irs-pdf/p587.pdf

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 35 What’s Deductible? Business Incomexxxx Less: Regular Business Expenses x Sub-Totalxxx Home Office Exp Deductible Anyway x Sub-Totalxx Less: Other Home Office Expensesx Net Incomex

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 60 Problem 9 – 67 (b) Income$2,500 Exp of Business 2,000 Sub-total$ 500 Exp Ded Anyway 700 Sub-total($ 200) Other Home Exp -0- Net Income (Loss)($ 200)

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 92 Chapter 9 Travel and Transportation Automobile Expenses Entertainment Moving Expenses Education Expenses Home Office Reimbursements Hobby losses (from Chap 6) Itemized Deductions

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 94 Hobby Losses Criteria Consequences Order of deductible expenses –Tier 1: deductible anyway (itemized) –Tier 2: other exp (not reduce basis) –Tier 3: expenses that reduce basis Problems 6 - 54 and 6 - 55

© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 1 Federal Income Tax Business Related Deductions.

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© Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 1 Federal Income Tax Business Related Deductions.

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