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            Department of the Treasury                        Contents
            Internal Revenue Service
                                                              Future Developments . . . . . . . . . . . . . . . . . . . . . . .            2
                                                              What's New   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2
Publication 463
Cat. No. 11081L                                               Reminder     . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
                                                              Introduction   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2
                                                              Chapter  1.  Travel . . . . . . . . . . . . . . . . . . . . . . . . . .      3
Travel,
                                                              Traveling Away From Home . . . . . . . . . . . . . . . . .                   4
                                                              Tax Home               . . . . . . . . . . . . . . . . . . . . . . . . . .   4
Gift, and Car                                                 Tax Home Different From Family Home                            . . . . . .   5
                                                              Temporary Assignment or Job . . . . . . . . . . . . . . .                    5
                                                              What Travel Expenses Are Deductible?                       . . . . . . . .   6
Expenses
                                                              Meals            . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   7
                                                              Travel in the United States . . . . . . . . . . . . . . .                    9
For use in preparing
                                                              Travel Outside the United States                       . . . . . . . . .     10
                                                              Luxury Water Travel                  . . . . . . . . . . . . . . . . . .     12
2023 Returns                                                                           . . . . . . . . . . . . . . . . . . . . . . . .     13
                                                              Conventions
                                                              Chapter  2.  Meals and Entertainment                   . . . . . . . . .     14
                                                              50% Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          16
                                                              Exception to the 50% Limit for Meals                         . . . . . .     17
                                                              Chapter  3.  Gifts   . . . . . . . . . . . . . . . . . . . . . . . . . .     17
                                                              Chapter  4.  Transportation . . . . . . . . . . . . . . . . . .              18
                                                              Car Expenses           . . . . . . . . . . . . . . . . . . . . . . . . .     21
                                                              Standard Mileage Rate . . . . . . . . . . . . . . . .                        21
                                                              Actual Car Expenses                    . . . . . . . . . . . . . . . . .     22
                                                              Leasing a Car . . . . . . . . . . . . . . . . . . . . . . .                  33
                                                              Disposition of a Car         . . . . . . . . . . . . . . . . . . . . . .     34
                                                              Chapter  5.  Recordkeeping             . . . . . . . . . . . . . . . . .     35
                                                              How To Prove Expenses                . . . . . . . . . . . . . . . . . .     36
                                                              What Are Adequate Records? . . . . . . . . . . .                             36
                                                              What if I Have Incomplete Records? . . . . . . .                             37
                                                              Separating and Combining Expenses                            . . . . . .     38
                                                              How Long To Keep Records and 
                                                                           Receipts    . . . . . . . . . . . . . . . . . . . . . . . .     38
                                                              Examples of Records                    . . . . . . . . . . . . . . . . .     38
                                                              Chapter  6.  How To Report . . . . . . . . . . . . . . . . . .               41
                                                              Where To Report            . . . . . . . . . . . . . . . . . . . . . . .     41
                                                              Vehicle Provided by Your Employer                          . . . . . . .     42
                                                              Reimbursements             . . . . . . . . . . . . . . . . . . . . . . .     42
                                                              Accountable Plans                  . . . . . . . . . . . . . . . . . . .     42
                                                              Nonaccountable Plans                     . . . . . . . . . . . . . . . .     46
                                                              Rules for Independent Contractors and 
                                                                           Clients . . . . . . . . . . . . . . . . . . . . . . . . . .     47
                                                              How To Use Per Diem Rate Tables . . . . . . . . . . .                        48
                                                              The Two Substantiation Methods . . . . . . . . .                             48
                                                              Transition Rules               . . . . . . . . . . . . . . . . . . . . .     48
                                                              Completing Form 2106               . . . . . . . . . . . . . . . . . . .     48
                                                              Special Rules . . . . . . . . . . . . . . . . . . . . . . .                  50
Get forms and other information faster and easier at:
• IRS.gov (English)         • IRS.gov/Korean (한국어)            How To Get Tax Help        . . . . . . . . . . . . . . . . . . . . . . .     52
• IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский) 
• IRS.gov/Chinese (中文)      • IRS.gov/Vietnamese (Tiếng Việt) Appendices     . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     55

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Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Per diem rates. Current and prior per diem rates may be
found on the U.S. General Services Administration (GSA)
website at GSA.gov/travel/plan-book/per-diem-rates.
Future Developments
For the latest information about developments related to
Introduction
Pub. 463, such as legislation enacted after it was
published, go to IRS.gov/Pub463. You may be able to deduct the ordinary and necessary
business-related expenses you have for:
• Travel,
What's New • Non-entertainment-related meals,
Standard mileage rate. For 2023, the standard mileage • Gifts, or
rate for the cost of operating your car for business use is
• Transportation.
65.5 cents ($0.655) per mile. Car expenses and use of the
standard mileage rate are explained in chapter 4. An ordinary expense is one that is common and accepted
in your trade or business. A necessary expense is one that
Depreciation limits on cars, trucks, and vans. The
is helpful and appropriate for your business. An expense
first-year limit on the depreciation deduction, special de-
doesn’t have to be required to be considered necessary.
preciation allowance, and section 179 deduction for vehi-
This publication explains:
cles acquired before September 28, 2017, and placed in
service during 2023, is $12,200. The first-year limit on de- • What expenses are deductible,
preciation, special depreciation allowance, and section How to report them on your return,
•
179 deduction for vehicles acquired after September 27,
2017, and placed in service during 2023 increases to • What records you need to prove your expenses, and
$20,200. If you elect not to claim a special depreciation al- • How to treat any expense reimbursements you may
lowance for a vehicle placed in service in 2023, the receive.
amount increases to $12,200. Depreciation limits are ex-
plained in chapter 4. Who should use this publication. You should read this
Section 179 deduction. The maximum amount you can publication if you are an employee or a sole proprietor who
elect to deduct for section 179 property (including cars, has business-related travel, non-entertainment-related
trucks, and vans) you placed in service in tax years begin- meals, gift, or transportation expenses.
ning in 2023 is $1,160,000. This limit is reduced by the Users of employer-provided vehicles. If an em-
amount by which the cost of section 179 property placed ployer-provided vehicle was available for your use, you re-
in service during the tax year exceeds $2,890,000. Sec- ceived a fringe benefit. Generally, your employer must in-
tion 179 deduction is explained in chapter 4. clude the value of the use or availability of the vehicle in
Also, the maximum section 179 expense deduction for your income. However, there are exceptions if the use of
sport utility vehicles placed in service in tax years begin- the vehicle qualifies as a working condition fringe benefit
ning in 2023 is $28,900. (such as the use of a qualified nonpersonal use vehicle).
Temporary deduction of 100% business meals. The A working condition fringe benefit is any property or
100% deduction on certain business meals expenses as service provided to you by your employer, the cost of
amended under the Taxpayer Certainty and Disaster Tax which would be allowable as an employee business ex-
Relief Act of 2020, and enacted by the Consolidated Ap- pense deduction if you had paid for it.
propriations Act, 2021, has expired. Generally, the cost of A qualified nonpersonal use vehicle is one that isn’t
business meals remains deductible, subject to the 50% likely to be used more than minimally for personal purpo-
limitation. See 50% Limit in chapter 2 for more informa- ses because of its design. See Qualified nonpersonal use
tion. vehicles under Actual Car Expenses in chapter 4.
For information on how to report your car expenses that
your employer didn’t provide or reimburse you for (such as
when you pay for gas and maintenance for a car your em-
Reminder ployer provides), see Vehicle Provided by Your Employer
in chapter 6.
Photographs of missing children. The IRS is a proud
partner with the National Center for Missing & Exploited Who doesn’t need to use this publication. Partner-
Children® (NCMEC). Photographs of missing children se- ships, corporations, trusts, and employers who reimburse
lected by the Center may appear in this publication on pa- their employees for business expenses should refer to the
ges that would otherwise be blank. You can help bring instructions for their required tax forms, for information on
these children home by looking at the photographs and deducting travel, meals, and entertainment expenses.
calling 800-THE-LOST (800-843-5678) if you recognize a
child.

2 Publication 463 (2023)

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If you are an employee, you won’t need to read this Useful Items
publication if all of the following are true. You may want to see:
• You fully accounted to your employer for your work-re-
lated expenses. Publication
946
• You received full reimbursement for your expenses. 946 How To Depreciate Property

• Your employer required you to return any excess reim- Form (and Instructions)
bursement and you did so. Schedule A (Form 1040) Schedule A (Form 1040) Itemized Deductions
• There is no amount shown with a code L in box 12 of Schedule C (Form 1040) Schedule C (Form 1040) Profit or Loss From
your Form W-2, Wage and Tax Statement.
Business (Sole Proprietorship)
If you meet all of these conditions, there is no need to Schedule F (Form 1040) Schedule F (Form 1040) Profit or Loss From
show the expenses or the reimbursements on your return.
If you would like more information on reimbursements and Farming
accounting to your employer, see chapter 6. 2106 2106 Employee Business Expenses
If you meet these conditions and your employer 4562 4562 Depreciation and Amortization (Including
TIP included reimbursements on your Form W-2 in er- Information on Listed Property)
ror, ask your employer for a corrected Form W-2.
See How To Get Tax Help for information about getting
Volunteers. If you perform services as a volunteer these publications and forms.
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 Pub. 526,
Charitable Contributions, for information on the expenses
you can deduct.
1.
Comments and suggestions. We welcome your com-
ments about this publication and suggestions for future
editions. Travel
You can send us comments through IRS.gov/
FormComments. Or, you can write to the Internal Revenue If you temporarily travel away from your tax home, you can
Service, Tax Forms and Publications, 1111 Constitution use this chapter to determine if you have deductible travel
Ave. NW, IR-6526, Washington, DC 20224. expenses.
Although we can’t respond individually to each com-
This chapter discusses:
ment received, we do appreciate your feedback and will
consider your comments and suggestions as we revise • Traveling away from home,
our tax forms, instructions, and publications. Don’t send • Temporary assignment or job, and
tax questions, tax returns, or payments to the above ad-
dress. • What travel expenses are deductible.
Getting answers to your tax questions. If you have It also discusses the standard meal allowance, rules for
a tax question not answered by this publication or the How travel inside and outside the United States, luxury water
To Get Tax Help section at the end of this publication, go travel, and deductible convention expenses.

to the IRS Interactive Tax Assistant page at IRS.gov/ Travel expenses defined. For tax purposes, travel ex-
Help/ITA where you can find topics by using the search penses are the ordinary and necessary expenses of trav-
feature or viewing the categories listed. eling away from home for your business, profession, or
Getting tax forms, instructions, and publications. job.
Go to IRS.gov/Forms to download current and prior-year An ordinary expense is one that is common and accep-
forms, instructions, and publications. ted in your trade or business. A necessary expense is one
that is helpful and appropriate for your business. An ex-
Ordering tax forms, instructions, and publications. pense doesn’t have to be required to be considered nec-
Go to IRS.gov/OrderForms to order current forms, instruc- essary.
tions, and publications; call 800-829-3676 to order You will find examples of deductible travel expenses in
prior-year forms and instructions. The IRS will process Table 1-1 .
your order for forms and publications as soon as possible.
Don’t resubmit requests you’ve already sent us. You can
get forms and publications faster online.

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If you don’t have a regular or main place of business or
post of duty and there is no place where you regularly live,
Traveling Away From Home you are considered an itinerant (a transient) and your tax
home is wherever you work. As an itinerant, you can’t
You are traveling away from home if: claim a travel expense deduction because you are never
• Your duties require you to be away from the general considered to be traveling away from home.
area of your tax home (defined later) substantially lon-
ger than an ordinary day's work, and Main place of business or work. If you have more than
one place of work, consider the following when determin-
• You need to sleep or rest to meet the demands of your ing which one is your main place of business or work.
work while away from home.
• The total time you ordinarily spend in each place.
This rest requirement isn’t satisfied by merely napping in
your car. You don’t have to be away from your tax home for • The level of your business activity in each place.
a whole day or from dusk to dawn as long as your relief • Whether your income from each place is significant or
from duty is long enough to get necessary sleep or rest. insignificant.

Example 1. You are a railroad conductor. You leave Example. You live in Cincinnati where you have a sea-
your home terminal on a regularly scheduled round-trip sonal job for 8 months each year and earn $40,000. You
run between two cities and return home 16 hours later. work the other 4 months in Miami, also at a seasonal job,
During the run, you have 6 hours off at your turnaround and earn $15,000. Cincinnati is your main place of work
point where you eat two meals and rent a hotel room to because you spend most of your time there and earn most
get necessary sleep before starting the return trip. You are of your income there.
considered to be away from home.
No main place of business or work. You may have a
Example 2. You are a truck driver. You leave your ter- tax home even if you don’t have a regular or main place of
minal and return to it later the same day. You get an hour work. Your tax home may be the home where you regu-
off at your turnaround point to eat. Because you aren’t off larly live.
to get necessary sleep and the brief time off isn’t an ade-
quate rest period, you aren’t traveling away from home. Factors used to determine tax home. If you don’t
have a regular or main place of business or work, use the
Members of the Armed Forces. If you are a member of following three factors to determine where your tax home
the U.S. Armed Forces on a permanent duty assignment is.
overseas, you aren’t traveling away from home. You can’t
1. You perform part of your business in the area of your
deduct your expenses for meals and lodging. You can’t
main home and use that home for lodging while doing
deduct these expenses even if you have to maintain a
business in the area.
home in the United States for your family members who
aren’t allowed to accompany you overseas. If you are 2. You have living expenses at your main home that you
transferred from one permanent duty station to another, duplicate because your business requires you to be
you may have deductible moving expenses, which are ex- away from that home.
plained in Pub. 3, Armed Forces' Tax Guide.
3. You haven’t abandoned the area in which both your
A naval officer assigned to permanent duty aboard a
historical place of lodging and your claimed main
ship that has regular eating and living facilities has a tax
home are located; you have a member or members of
home (explained next) aboard the ship for travel expense
your family living at your main home; or you often use
purposes.
that home for lodging.
Tax Home If you satisfy all three factors, your tax home is the
home where you regularly live. If you satisfy only two fac-
To determine whether you are traveling away from home, tors, you may have a tax home depending on all the facts
you must first determine the location of your tax home. and circumstances. If you satisfy only one factor, you are
an itinerant; your tax home is wherever you work and you
Generally, your tax home is your regular place of busi- can’t deduct travel expenses.
ness or post of duty, regardless of where you maintain
your family home. It includes the entire city or general area Example 1. You are single and live in Boston in an
in which your business or work is located. apartment you rent. You have worked for your employer in
Boston for a number of years. Your employer enrolls you in
If you have more than one regular place of business, a 12-month executive training program. You don’t expect
your tax home is your main place of business. See Main to return to work in Boston after you complete your train-
place of business or work, later. ing.
During your training, you don’t do any work in Boston.
If you don’t have a regular or a main place of business
Instead, you receive classroom and on-the-job training
because of the nature of your work, then your tax home
throughout the United States. You keep your apartment in
may be the place where you regularly live. See No main
Boston and return to it frequently. You use your apartment
place of business or work, later.

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to conduct your personal business. You also keep up your
community contacts in Boston. When you complete your
training, you are transferred to Los Angeles. Temporary
You don’t satisfy factor (1) because you didn’t work in
Assignment or Job
Boston. You satisfy factor (2) because you had duplicate
living expenses. You also satisfy factor (3) because you
You may regularly work at your tax home and also work at
didn’t abandon your apartment in Boston as your main
another location. It may not be practical to return to your
home, you kept your community contacts, and you fre-
tax home from this other location at the end of each work-
quently returned to live in your apartment. Therefore, you
day.
have a tax home in Boston.
Temporary assignment vs. indefinite assignment. If
Example 2. You are an outside salesperson with a
your assignment or job away from your main place of work
sales territory covering several states. Your employer's
is temporary, your tax home doesn’t change. You are con-
main office is in Newark, but you don’t conduct any busi-
sidered to be away from home for the whole period you
ness there. Your work assignments are temporary, and
are away from your main place of work. You can deduct
you have no way of knowing where your future assign-
your travel expenses if they otherwise qualify for deduc-
ments will be located. You have a room in your married si-
tion. Generally, a temporary assignment in a single loca-
ster's house in Dayton. You stay there for one or two
tion is one that is realistically expected to last (and does in
weekends a year, but you do no work in the area. You
fact last) for 1 year or less.
don’t pay your sister for the use of the room.
However, if your assignment or job is indefinite, the lo-
You don’t satisfy any of the three factors listed earlier.
cation of the assignment or job becomes your new tax
You are an itinerant and have no tax home.
home and you can’t deduct your travel expenses while
there. An assignment or job in a single location is consid-
Tax Home Different From Family ered indefinite if it is realistically expected to last for more
Home than 1 year, whether or not it actually lasts for more than 1
year.
If you (and your family) don’t live at your tax home (defined If your assignment is indefinite, you must include in your
earlier), you can’t deduct the cost of traveling between income any amounts you receive from your employer for
your tax home and your family home. You also can’t de- living expenses, even if they are called “travel allowances”
duct the cost of meals and lodging while at your tax home. and you account to your employer for them. You may be
See Example 1, later. able to deduct the cost of relocating to your new tax home
as a moving expense. See Pub. 3 for more information.
If you are working temporarily in the same city where
you and your family live, you may be considered as travel- For tax years beginning after December 2017 and
ing away from home. See Example 2, later. ! before January 2026, the deduction of certain
CAUTION moving expenses is suspended for nonmilitary
Example 1. You are a truck driver and you and your taxpayers. In order to deduct certain moving expenses,
family live in Tucson. You are employed by a trucking firm you must be an active member of the military and moving
that has its terminal in Phoenix. At the end of your long due to a permanent change of duty station.
runs, you return to your home terminal in Phoenix and
spend one night there before returning home. You can’t Exception for federal crime investigations or prose-
deduct any expenses you have for meals and lodging in cutions. If you are a federal employee participating in a
Phoenix or the cost of traveling from Phoenix to Tucson. federal crime investigation or prosecution, you aren’t sub-
This is because Phoenix is your tax home. ject to the 1-year rule. This means you may be able to de-
duct travel expenses even if you are away from your tax
Example 2. Your family home is in Pittsburgh, where
home for more than 1 year provided you meet the other re-
you work 12 weeks a year. The rest of the year you work
quirements for deductibility.
for the same employer in Baltimore. In Baltimore, you eat
For you to qualify, the Attorney General (or their desig-
in restaurants and sleep in a rooming house. Your salary is
nee) must certify that you are traveling:
the same whether you are in Pittsburgh or Baltimore.
Because you spend most of your working time and earn • For the federal government;
most of your salary in Baltimore, that city is your tax home.
• In a temporary duty status; and
You can’t deduct any expenses you have for meals and
lodging there. However, when you return to work in Pitts- • To investigate, prosecute, or provide support services
burgh, you are away from your tax home even though you for the investigation or prosecution of a federal crime.
stay at your family home. You can deduct the cost of your
round trip between Baltimore and Pittsburgh. You can also Determining temporary or indefinite. You must deter-
deduct your part of your family's living expenses for mine whether your assignment is temporary or indefinite
non-entertainment-related meals and lodging while you when you start work. If you expect an assignment or job to
are living and working in Pittsburgh. last for 1 year or less, it is temporary unless there are facts
and circumstances that indicate otherwise. An assignment
or job that is initially temporary may become indefinite due

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to changed circumstances. A series of assignments to the your expenses for meals and lodging during the probation-
same location, all for short periods but that together cover ary period.
a long period, may be considered an indefinite assign-
ment.
The following examples illustrate whether an assign-
What Travel Expenses Are
ment or job is temporary or indefinite.
Deductible?
Example 1. You are a construction worker. You live
and regularly work in Los Angeles. You are a member of a
Once you have determined that you are traveling away
trade union in Los Angeles that helps you get work in the
from your tax home, you can determine what travel expen-
Los Angeles area. Your tax home is Los Angeles. Be-
ses are deductible.
cause of a shortage of work, you took a job on a construc-
tion project in Fresno. Your job was scheduled to end in 8 You can deduct ordinary and necessary expenses you
months. The job actually lasted 10 months. have when you travel away from home on business. The
You realistically expected the job in Fresno to last 8 type of expense you can deduct depends on the facts and
months. The job actually did last less than 1 year. The job your circumstances.
is temporary and your tax home is still in Los Angeles.
Table 1-1 summarizes travel expenses you may be able
Example 2. The facts are the same as in Example 1, to deduct. You may have other deductible travel expenses
except that you realistically expected the work in Fresno to that aren’t covered there, depending on the facts and your
last 18 months. The job was actually completed in 10 circumstances.
months. When you travel away from home on business,
Your job in Fresno is indefinite because you realistically you must keep records of all the expenses you
expected the work to last longer than 1 year, even though RECORDS have and any advances you receive from your
it actually lasted less than 1 year. You can’t deduct any employer. You can use a log, diary, notebook, or any other
travel expenses you had in Fresno because Fresno be- written record to keep track of your expenses. The types
came your tax home. of expenses you need to record, along with supporting
documentation, are described in Table 5-1 (see chap-
Example 3. The facts are the same as in Example 1, ter 5).
except that you realistically expected the work in Fresno to
last 9 months. After 8 months, however, you were asked to
Separating costs. If you have one expense that includes
remain for 7 more months (for a total actual stay of 15
the costs of non-entertainment-related meals, entertain-
months).
ment, and other services (such as lodging or transporta-
Initially, you realistically expected the job in Fresno to
tion), you must allocate that expense between the cost of
last for only 9 months. However, due to changed circum-
non-entertainment-related meals, and entertainment and
stances occurring after 8 months, it was no longer realistic
the cost of other services. You must have a reasonable
for you to expect that the job in Fresno would last for 1
basis for making this allocation. For example, you must al-
year or less. You can deduct only your travel expenses for
locate your expenses if a hotel includes one or more
the first 8 months. You can’t deduct any travel expenses
meals in its room charge.
you had after that time because Fresno became your tax
home when the job became indefinite. Travel expenses for another individual. If a spouse,
dependent, or other individual goes with you (or your em-
Going home on days off. If you go back to your tax
ployee) on a business trip or to a business convention,
home from a temporary assignment on your days off, you
you generally can’t deduct their travel expenses.
aren’t considered away from home while you are in your
hometown. You can’t deduct the cost of your meals and Employee. You can deduct the travel expenses of
lodging there. However, you can deduct your travel expen- someone who goes with you if that person:
ses, including meals and lodging, while traveling between
your temporary place of work and your tax home. You can 1. Is your employee,
claim these expenses up to the amount it would have cost 2. Has a bona fide business purpose for the travel, and
you to stay at your temporary place of work.
If you keep your hotel room during your visit home, you 3. Would otherwise be allowed to deduct the travel ex-
can deduct the cost of your hotel room. In addition, you penses.
can deduct your expenses of returning home up to the Business associate. If a business associate travels
amount you would have spent for meals had you stayed at with you and meets the conditions in (2) and (3) above,
your temporary place of work. you can deduct the travel expenses you have for that per-
son. A business associate is someone with whom you
Probationary work period. If you take a job that re- could reasonably expect to actively conduct business. A
quires you to move, with the understanding that you will business associate can be a current or prospective (likely
keep the job if your work is satisfactory during a probation- to become) customer, client, supplier, employee, agent,
ary period, the job is indefinite. You can’t deduct any of partner, or professional advisor.

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Table 1-1. Travel Expenses You Can Deduct

This chart summarizes expenses you can deduct when you travel away from home for business purposes
IF you have expenses for... THEN you can deduct the cost of...
transportation travel by airplane, train, bus, or car between your home and your business destination. If you were provided
with a free ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero. If
you travel by ship, see Luxury Water Travel and Cruise Ships under Conventions, later, for additional rules and
limits.
taxi, commuter bus, and fares for these and other types of transportation that take you between:
airport limousine • The airport or station and your hotel; and
• The hotel and the work location of your customers or clients, your business meeting place, or your
temporary work location.
baggage and shipping sending baggage and sample or display material between your regular and temporary work locations.
car operating and maintaining your car when traveling away from home on business. You can deduct actual
expenses or the standard mileage rate, as well as business-related tolls and parking. If you rent a car while
away from home on business, you can deduct only the business-use portion of the expenses.
lodging and meals your lodging and non-entertainment-related meals if your business trip is overnight or long enough that you
need to stop for sleep or rest to properly perform your duties. Meals include amounts spent for food,
beverages, taxes, and related tips. See Meals, later, for additional rules and limits.
cleaning dry cleaning and laundry.
telephone business calls while on your business trip. This includes business communication by fax machine or other
communication devices.
tips tips you pay for any expenses in this chart.
other other similar ordinary and necessary expenses related to your business travel. These expenses might include
transportation to or from a business meal, public stenographer's fees, computer rental fees, and operating
and maintaining a house trailer.

Bona fide business purpose. A bona fide business amount or because the meals take place at deluxe restau-
purpose exists if you can prove a real business purpose rants, hotels, or resorts.
for the individual's presence. Incidental services, such as
typing notes or assisting in entertaining customers, aren’t 50% limit on meals. You can figure your meal expenses
enough to make the expenses deductible. using either of the following methods.
• Actual cost.
Example. You drive to Chicago on business and take
your spouse with you. Your spouse isn’t your employee. • The standard meal allowance.
Your spouse occasionally types notes, performs similar Both of these methods are explained below. But, regard-
services, and accompanies you to luncheons and dinners. less of the method you use, you can generally deduct only
The performance of these services doesn’t establish that 50% of the unreimbursed cost of your meals.
your spouse’s presence on the trip is necessary to the If you are reimbursed for the cost of your meals, how
conduct of your business. Your spouse’s expenses aren’t you apply the 50% limit depends on whether your employ-
deductible. er's reimbursement plan was accountable or nonaccount-
You pay $199 a day for a double room. A single room able. If you aren’t reimbursed, the 50% limit applies even if
costs $149 a day. You can deduct the total cost of driving the unreimbursed meal expense is for business travel.
your car to and from Chicago, but only $149 a day for your Chapter 2 discusses the 50% Limit in more detail, and
hotel room. If both you and your spouse use public trans- chapter 6 discusses accountable and nonaccountable
portation, you can only deduct your fare. plans.

Meals Actual Cost

You can deduct a portion of the cost of meals if it is neces- You can use the actual cost of your meals to figure the
sary for you to stop for substantial sleep or rest to properly amount of your expense before reimbursement and appli-
perform your duties while traveling away from home on cation of the 50% deduction limit. If you use this method,
business. Meal and entertainment expenses are dis- you must keep records of your actual cost.
cussed in chapter 2.
Lavish or extravagant. You can't deduct expenses for Standard Meal Allowance
meals that are lavish or extravagant. An expense isn't con-
sidered lavish or extravagant if it is reasonable based on Generally, you can use the “standard meal allowance”
the facts and circumstances. Meal expenses won't be dis- method as an alternative to the actual cost method. It al-
allowed merely because they are more than a fixed dollar lows you to use a set amount for your daily meals and inci-
dental expenses (M&IE), instead of keeping records of

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your actual costs. The set amount varies depending on ard meal allowance to figure the cost of your meals when
where and when you travel. In this publication, “standard you travel for medical or charitable purposes.
meal allowance” refers to the federal rate for M&IE, dis-
cussed later under Amount of standard meal allowance. If Amount of standard meal allowance. The standard
you use the standard meal allowance, you must still keep meal allowance is the federal M&IE rate. For travel in
records to prove the time, place, and business purpose of 2023, the rate for most small localities in the United States
your travel. See the recordkeeping rules for travel in chap- is $59 per day.
ter 5. Most major cities and many other localities in the Uni-
ted States are designated as high-cost areas, qualifying
Incidental expenses. The term “incidental expenses” for higher standard meal allowances.
means fees and tips given to porters, baggage carriers,
You can find this information (organized by state)
hotel staff, and staff on ships.
at GSA.gov/travel/plan-book/per-diem-rates. En-
Incidental expenses don’t include expenses for laundry,
ter a zip code or select a city and state for the per
cleaning and pressing of clothing, lodging taxes, costs of
diem rates for the current fiscal year. Per diem rates for
telegrams or telephone calls, transportation between pla-
prior fiscal years are available by using the drop-down
ces of lodging or business and places where meals are
menu.
taken, or the mailing cost of filing travel vouchers and pay-
ing employer-sponsored charge card billings. If you travel to more than one location in one day, use
the rate in effect for the area where you stop for sleep or
Incidental-expenses-only method. You can use an op- rest. If you work in the transportation industry, however,
tional method (instead of actual cost) for deducting inci- see Special rate for transportation workers, later.
dental expenses only. The amount of the deduction is $5 a
day. You can use this method only if you didn’t pay or incur Federal government's fiscal year. Per diem rates are
any meal expenses. You can’t use this method on any day listed by the federal government's fiscal year, which runs
that you use the standard meal allowance. This method is from October 1 to September 30. You can choose to use
subject to the proration rules for partial days. See Travel the rates from the 2022 fiscal year per diem tables or the
for days you depart and return, later, in this chapter. rates from the 2023 fiscal year tables, but you must con-
sistently use the same tables for all travel you are report-
Note. The incidental-expenses-only method isn’t sub- ing on your income tax return for the year. See Transition
ject to the 50% limit discussed below. Rules, later.
Federal employees should refer to the Federal Standard meal allowance for areas outside the
continental United States. The standard meal allow-
! Travel Regulations (FTR) at eCFR.gov for
CAUTION changes affecting claims for reimbursement. ance rates above don’t apply to travel in Alaska, Hawaii, or
any other location outside the continental United States.
50% limit may apply. If you use the standard meal allow- The Department of Defense establishes per diem rates for
ance method for non-entertainment-related meal expen- Alaska, Hawaii, Puerto Rico, American Samoa, Guam,
ses and you aren’t reimbursed or you are reimbursed un- Midway, the Northern Mariana Islands, the U.S. Virgin Is-
der a nonaccountable plan, you can generally deduct only lands, Wake Island, and other non-foreign areas outside
50% of the standard meal allowance. If you are reim- the continental United States. The Department of State
bursed under an accountable plan and you are deducting establishes per diem rates for all other foreign areas.
amounts that are more than your reimbursements, you You can access per diem rates for non-foreign
can deduct only 50% of the excess amount. The 50% areas outside the continental United States at
Limit is discussed in more detail in chapter 2, and ac- Travel.dod.mil/Travel-Transportation-Rates/Per-
countable and nonaccountable plans are discussed in Diem/Per-Diem-Rate-Lookup/. You can access all other
chapter 6. foreign per diem rates at aoprals.state.gov/web920/
There is no optional standard lodging amount per_diem.asp.

! similar to the standard meal allowance. Your al- Special rate for transportation workers. You can
CAUTION lowable lodging expense deduction is your actual
cost. use a special standard meal allowance if you work in the
transportation industry. You are in the transportation in-
dustry if your work:
Who can use the standard meal allowance. You can
use the standard meal allowance whether you are an em- • Directly involves moving people or goods by airplane,
ployee or self-employed, and whether or not you are reim- barge, bus, ship, train, or truck; and
bursed for your traveling expenses. • Regularly requires you to travel away from home and,
during any single trip, usually involves travel to areas
Use of the standard meal allowance for other travel.
eligible for different standard meal allowance rates.
You can use the standard meal allowance to figure your
meal expenses when you travel in connection with invest- If this applies, you can claim a standard meal allowance of
ment and other income-producing property. You can also $69 a day ($74 for travel outside the continental United
use it to figure your meal expenses when you travel for States) for travel in 2023.
qualifying educational purposes. You can’t use the stand-

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Using the special rate for transportation workers elimi- Example. You work in Atlanta and take a business trip
nates the need for you to determine the standard meal al- to New Orleans in May. Your business travel totals 900
lowance for every area where you stop for sleep or rest. If miles round trip. On your way home, you stop in Mobile to
you choose to use the special rate for any trip, you must visit your parents. You spend $2,165 for the 9 days you are
use the special rate (and not use the regular standard away from home for travel, non-entertainment-related
meal allowance rates) for all trips you take that year. meals, lodging, and other travel expenses. If you hadn’t
stopped in Mobile, you would have been gone only 6
Travel for days you depart and return. For both the days, and your total cost would have been $1,633.50. You
day you depart for and the day you return from a business can deduct $1,633.50 for your trip, including the cost of
trip, you must prorate the standard meal allowance (figure round-trip transportation to and from New Orleans. The
a reduced amount for each day). You can do so by one of deduction for your non-entertainment-related meals is
two methods. subject to the 50% limit on meals mentioned earlier.
• Method 1: You can claim / of the standard meal al-3 4
lowance. Trip Primarily for
• Method 2: You can prorate using any method that you Personal Reasons
consistently apply and that is in accordance with rea-
sonable business practice. If your trip was primarily for personal reasons, such as a
vacation, the entire cost of the trip is a nondeductible per-
Example. You are employed in New Orleans as a con- sonal expense. However, you can deduct any expenses
vention planner. In March, your employer sent you on a you have while at your destination that are directly related
3-day trip to Washington, DC, to attend a planning semi- to your business.
nar. You left your home in New Orleans at 10 a.m. on
Wednesday and arrived in Washington, DC, at 5:30 p.m. A trip to a resort or on a cruise ship may be a vacation
After spending 2 nights there, you flew back to New Or- even if the promoter advertises that it is primarily for busi-
leans on Friday and arrived back home at 8 p.m. Your em- ness. The scheduling of incidental business activities dur-
ployer gave you a flat amount to cover your expenses and ing a trip, such as viewing videotapes or attending lec-
included it with your wages. tures dealing with general subjects, won’t change what is
Under Method 1, you can claim 2 / days of the stand-1 2 really a vacation into a business trip.
ard meal allowance for Washington, DC: / of the daily 3 4
rate for Wednesday and Friday (the days you departed Part of Trip Outside
and returned), and the full daily rate for Thursday. the United States
Under Method 2, you could also use any method that
you apply consistently and that is in accordance with rea- If part of your trip is outside the United States, use the
sonable business practice. For example, you could claim 3 rules described later in this chapter under Travel Outside
days of the standard meal allowance even though a fed- the United States for that part of the trip. For the part of
eral employee would have to use Method 1 and be limited your trip that is inside the United States, use the rules for
to only 2 / days.1 2 travel in the United States. Travel outside the United
States doesn’t include travel from one point in the United
Travel in the United States States to another point in the United States. The following
discussion can help you determine whether your trip was
The following discussion applies to travel in the United entirely within the United States.
States. For this purpose, the United States includes the 50
states and the District of Columbia. The treatment of your Public transportation. If you travel by public transporta-
travel expenses depends on how much of your trip was tion, any place in the United States where that vehicle
business related and on how much of your trip occurred makes a scheduled stop is a point in the United States.
within the United States. See Part of Trip Outside the Uni- Once the vehicle leaves the last scheduled stop in the
ted States, later. United States on its way to a point outside the United
States, you apply the rules under Travel Outside the Uni-
Trip Primarily for Business ted States, later.

You can deduct all of your travel expenses if your trip was Example. You fly from New York to Puerto Rico with a
entirely business related. If your trip was primarily for busi- scheduled stop in Miami. Puerto Rico isn’t considered part
ness and, while at your business destination, you exten- of the United States for purposes of travel. You return to
ded your stay for a vacation, made a personal side trip, or New York nonstop. The flight from New York to Miami is in
had other personal activities, you can deduct only your the United States, so only the flight from Miami to Puerto
business-related travel expenses. These expenses in- Rico is outside the United States. Because there are no
clude the travel costs of getting to and from your business scheduled stops between Puerto Rico and New York, all
destination and any business-related expenses at your of the return trip is outside the United States.
business destination.
Private car. Travel by private car in the United States is
travel between points in the United States, even though

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you are on your way to a destination outside the United combining business and nonbusiness activities. One
States. week means 7 consecutive days. In counting the days,
don’t count the day you leave the United States, but do
Example. You travel by car from Denver to Mexico City count the day you return to the United States.
and return. Your travel from Denver to the border and from
the border back to Denver is travel in the United States, Example. You traveled to Brussels primarily for busi-
and the rules in this section apply. The rules below under ness. You left Denver on Tuesday and flew to New York.
Travel Outside the United States apply to your trip from the On Wednesday, you flew from New York to Brussels, arriv-
border to Mexico City and back to the border. ing the next morning. On Thursday and Friday, you had
business discussions, and from Saturday until Tuesday,
Travel Outside you were sightseeing. You flew back to New York, arriving
Wednesday afternoon. On Thursday, you flew back to
the United States Denver.
Although you were away from your home in Denver for
If any part of your business travel is outside the United more than a week, you weren’t outside the United States
States, some of your deductions for the cost of getting to for more than a week. This is because the day you depart
and from your destination may be limited. For this pur- doesn’t count as a day outside the United States.
pose, the United States includes the 50 states and the You can deduct your cost of the round-trip flight be-
District of Columbia. tween Denver and Brussels. You can also deduct the cost
How much of your travel expenses you can deduct de- of your stay in Brussels for Thursday and Friday while you
pends in part upon how much of your trip outside the Uni- conducted business. However, you can’t deduct the cost
ted States was business related. of your stay in Brussels from Saturday through Tuesday
because those days were spent on nonbusiness activities.
Travel Entirely for Business or Exception 3—Less than 25% of time on personal
Considered Entirely for Business activities. Your trip is considered entirely for business if:
• You were outside the United States for more than a
You can deduct all your travel expenses of getting to and
week, and
from your business destination if your trip is entirely for
business or considered entirely for business. • You spent less than 25% of the total time you were
outside the United States on nonbusiness activities.
Travel entirely for business. If you travel outside the
For this purpose, count both the day your trip began and
United States and you spend the entire time on business
the day it ended.
activities, you can deduct all of your travel expenses.
Example. You flew from Seattle to Tokyo, where you
Travel considered entirely for business. Even if you
spent 14 days on business and 5 days on personal mat-
didn’t spend your entire time on business activities, your
ters. You then flew back to Seattle. You spent 1 day flying
trip is considered entirely for business if you meet at least
in each direction.
one of the following four exceptions. 5 21
Because only / (less than 25%) of your total time
Exception 1—No substantial control. Your trip is abroad was for nonbusiness activities, you can deduct as
considered entirely for business if you didn’t have sub- travel expenses what it would have cost you to make the
stantial control over arranging the trip. The fact that you trip if you hadn’t engaged in any nonbusiness activity. The
control the timing of your trip doesn’t, by itself, mean that amount you can deduct is the cost of the round-trip plane
you have substantial control over arranging your trip. fare and 16 days of non-entertainment-related meals (sub-
You don’t have substantial control over your trip if you: ject to the 50% Limit), lodging, and other related expen-
ses.
• Are an employee who was reimbursed or paid a travel
expense allowance, and Exception 4—Vacation not a major consideration.
Your trip is considered entirely for business if you can es-
• Aren’t related to your employer, or
tablish that a personal vacation wasn’t a major considera-
• Aren’t a managing executive. tion, even if you have substantial control over arranging
“Related to your employer” is defined later in chapter 6 the trip.
under Per Diem and Car Allowances.
A “managing executive” is an employee who has the Travel Primarily for Business
authority and responsibility, without being subject to the
veto of another, to decide on the need for the business If you travel outside the United States primarily for busi-
travel. ness but spend some of your time on other activities, you
A self-employed person generally has substantial con- generally can’t deduct all of your travel expenses. You can
trol over arranging business trips. only deduct the business portion of your cost of getting to
and from your destination. You must allocate the costs be-
Exception 2—Outside United States no more than tween your business and other activities to determine your
a week. Your trip is considered entirely for business if you deductible amount. See Travel allocation rules, later.
were outside the United States for a week or less,

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You don’t have to allocate your travel expenses if Nonbusiness activity on the way to or from your
TIP you meet one of the four exceptions listed earlier business destination. If you stopped for a vacation or
under Travel considered entirely for business. In other nonbusiness activity either on the way from the Uni-
those cases, you can deduct the total cost of getting to ted States to your business destination, or on the way
and from your destination. back to the United States from your business destination,
you must allocate part of your travel expenses to the non-
Travel allocation rules. If your trip outside the United business activity.
States was primarily for business, you must allocate your The part you must allocate is the amount it would have
travel time on a day-to-day basis between business days cost you to travel between the point where travel outside
and nonbusiness days. The days you depart from and re- the United States begins and your nonbusiness destina-
turn to the United States are both counted as days outside tion and a return to the point where travel outside the Uni-
the United States. ted States ends.
To figure the deductible amount of your round-trip travel You determine the nonbusiness portion of that expense
expenses, use the following fraction. The numerator (top by multiplying it by a fraction. The numerator (top number)
number) is the total number of business days outside the of the fraction is the number of nonbusiness days during
United States. The denominator (bottom number) is the your travel outside the United States, and the denominator
total number of business and nonbusiness days of travel. (bottom number) is the total number of days you spend
outside the United States.
Counting business days. Your business days include
transportation days, days your presence was required, Example. You live in New York. On May 4, you flew to
days you spent on business, and certain weekends and Paris to attend a business conference that began on May
holidays. 5. The conference ended at noon on May 14. That eve-
ning, you flew to Dublin where you visited with friends until
Transportation day. Count as a business day any day the afternoon of May 21, when you flew directly home to
you spend traveling to or from a business destination. New York. The primary purpose for the trip was to attend
However, if because of a nonbusiness activity you don’t the conference.
travel by a direct route, your business days are the days it If you hadn’t stopped in Dublin, you would have arrived
would take you to travel a reasonably direct route to your home the evening of May 14. You don’t meet any of the
business destination. Extra days for side trips or nonbusi- exceptions that would allow you to consider your travel en-
ness activities can’t be counted as business days. tirely for business. May 4 through May 14 (11 days) are
Presence required. Count as a business day any day business days and May 15 through May 21 (7 days) are
your presence is required at a particular place for a spe- nonbusiness days.
cific business purpose. Count it as a business day even if You can deduct the cost of your non-entertainment-re-
you spend most of the day on nonbusiness activities. lated meals (subject to the 50% Limit), lodging, and other
business-related travel expenses while in Paris.
Day spent on business. If your principal activity dur- You can’t deduct your expenses while in Dublin. You
ing working hours is the pursuit of your trade or business, also can’t deduct / of what it would have cost you to 7 18
count the day as a business day. Also, count as a busi- travel round trip between New York and Dublin.
ness day any day you are prevented from working be- You paid $750 to fly from New York to Paris, $400 to fly
cause of circumstances beyond your control. from Paris to Dublin, and $700 to fly from Dublin back to
Certain weekends and holidays. Count weekends, New York. Round-trip airfare from New York to Dublin
holidays, and other necessary standby days as business would have been $1,250.
days if they fall between business days. But if they follow You figure the deductible part of your air travel expen-
your business meetings or activity and you remain at your ses by subtracting / of the round-trip airfare and other 7 18
business destination for nonbusiness or personal reasons, expenses you would have had in traveling directly be-
don’t count them as business days. tween New York and Dublin ($1,250 × / = $486) from 7 18
your total expenses in traveling from New York to Paris to
Example 1. Your tax home is New York City. You travel Dublin and back to New York ($750 + $400 + $700 =
to Quebec, where you have a business meeting on Friday. $1,850).
You have another meeting on the following Monday. Be- Your deductible air travel expense is $1,364 ($1,850 −
cause your presence was required on both Friday and $486).
Monday, they are business days. Because the weekend is
between business days, Saturday and Sunday are coun- Nonbusiness activity at, near, or beyond business
ted as business days. This is true even though you use the destination. If you had a vacation or other nonbusiness
weekend for sightseeing, visiting friends, or other nonbusi- activity at, near, or beyond your business destination, you
ness activity. must allocate part of your travel expenses to the nonbusi-
ness activity.
Example 2. If, in Example 1, you had no business in The part you must allocate is the amount it would have
Quebec after Friday, but stayed until Monday before start- cost you to travel between the point where travel outside
ing home, Saturday and Sunday would be nonbusiness the United States begins and your business destination
days. and a return to the point where travel outside the United
States ends.

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You determine the nonbusiness portion of that expense take one of the trips. You spend about 2 hours at each of
by multiplying it by a fraction. The numerator (top number) the planned sessions. The rest of the time you go touring
of the fraction is the number of nonbusiness days during and sightseeing with your family. The trip lasts less than 1
your travel outside the United States, and the denominator week.
(bottom number) is the total number of days you spend Your travel expenses for the trip aren’t deductible since
outside the United States. the trip was primarily a vacation. However, registration
None of your travel expenses for nonbusiness activities fees and any other incidental expenses you have for the
at, near, or beyond your business destination are deducti- five planned sessions you attended that are directly rela-
ble. ted and beneficial to your business are deductible busi-
ness expenses. These expenses should be specifically
Example. Assume that the dates are the same as in stated in your records to ensure proper allocation of your
the previous example but that instead of going to Dublin deductible business expenses.
for your vacation, you fly to Venice, Italy, for a vacation.
You can’t deduct any part of the cost of your trip from
Paris to Venice and return to Paris. In addition, you can’t Luxury Water Travel

deduct / of the airfare and other expenses from New 7 18 If you travel by ocean liner, cruise ship, or other form of
York to Paris and back to New York. luxury water transportation for business purposes, there is
You can deduct / of the round-trip plane fare and 11 18 a daily limit on the amount you can deduct. The limit is
other travel expenses from New York to Paris, plus your twice the highest federal per diem rate allowable at the
non-entertainment-related meals (subject to the 50% time of your travel. (Generally, the federal per diem is the
Limit), lodging, and any other business expenses you had amount paid to federal government employees for daily
in Paris. (Assume these expenses total $4,939.) If the living expenses when they travel away from home within
round-trip plane fare and other travel-related expenses the United States for business purposes.)
(such as food during the trip) are $1,750, you can deduct
travel costs of $1,069 ( / × $1,750), plus the full $4,939 11 18 Daily limit on luxury water travel. The highest federal
for the expenses you had in Paris. per diem rate allowed and the daily limit for luxury water
travel in 2023 are shown in the following table.
Other methods. You can use another method of count-
ing business days if you establish that it more clearly re- Highest Federal Daily Limit on Luxury
flects the time spent on other than business activities out- 2023 Dates Per Diem Water Travel
side the United States. January 1 – March 31 $564 $1,128
April 1 – April 30 498 996
Travel Primarily for Personal Reasons May 1– May 31 398 796
June 1 – September 30 538 1,076
If you travel outside the United States primarily for vaca-
October 1 – October 31 401 802
tion or for investment purposes, the entire cost of the trip is
a nondeductible personal expense. However, if you spend November 1 – November 30 394 788
some time attending brief professional seminars or a con- December 1 – December 564 1,128
tinuing education program, you can deduct your registra- 31
tion fees and other expenses you have that are directly re-
lated to your business. Example. You are a travel agent and traveled by ocean
liner from New York to London, England, on business in
Example. The university from which you graduated May. Your expense for the 6-day cruise was $6,200. Your
has a continuing education program for members of its deduction for the cruise can’t exceed $4,776 (6 days ×
alumni association. This program consists of trips to vari- $796 daily limit).
ous foreign countries where academic exercises and con-
ferences are set up to acquaint individuals in most occu- Meals and entertainment. If your expenses for luxury
pations with selected facilities in several regions of the water travel include separately stated amounts for meals
world. However, none of the conferences are directed to- or entertainment, those amounts are subject to the 50%
ward specific occupations or professions. It is up to each limit on non-entertainment-related meals and entertain-
participant to seek out specialists and organizational set- ment before you apply the daily limit. For a discussion of
tings appropriate to their occupational interests. the 50% Limit, see chapter 2.

Three-hour sessions are held each day over a 5-day Example. In the previous example, your luxury water
period at each of the selected overseas facilities where travel had a total cost of $6,200. Of that amount, $3,700
participants can meet with individual practitioners. These was separately stated as non-entertainment-related meals
sessions are composed of a variety of activities including and $1,000 was separately stated as entertainment. Con-
workshops, mini-lectures, roleplaying, skill development, sidering that you are self-employed, you aren’t reimbursed
and exercises. Professional conference directors sched- for any of your travel expenses. You figure your deductible
ule and conduct the sessions. Participants can choose travel expenses as follows.
those sessions they wish to attend.
You can participate in this program because you are a
member of the alumni association. You and your family

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Entertainment. . . . . . . . . . . . . . . . . . . . . .      $1,000            Conventions Held Outside
 0% limit . . . . . . . . . . . . . . . . . . . . . . . . .   x 0.00            the North American Area
Allowable entertainment. . . . . . . . . . . . . . . .                $0.00
Non-entertainment-related meals. . . . . . . . . .            $3,700
50% limit. . . . . . . . . . . . . . . . . . . . . . . .      × 0.50            You  can’t  deduct  expenses  for  attending  a  convention, 
Allowable non-entertainment meals &                                             seminar, or similar meeting held outside the North Ameri-
entertainment. . . . . . . . . . . . . . . . . . . . . .      $1,850            can area unless:
Other travel expenses. . . . . . . . . . . . . . . .          + 1,500
Allowable cost before the daily limit. . . . . . . . . . . . . . .    $3,350    • The meeting is directly related to the active conduct of 
                                                                                  your trade or business, and
Daily limit for May 2023  . . . . . . . . . . . . . . . .     $   796
Times number of days. . . . . . . . . . . . . . . .               × 6           • It is as reasonable to hold the meeting outside the 
Maximum luxury water travel                               . . . . . .             North American area as within the North American 
deduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $4,776      area. See Reasonableness test, later.
Amount of allowable deduction. . . . . . . . . . . . . . . .          $3,350    If  the  meeting  meets  these  requirements,  you  must  also 
                                                                                satisfy the rules for deducting expenses for business trips 
Your deduction for your cruise is limited to $3,350, even                       in general, discussed earlier under Travel Outside the Uni-
though the limit on luxury water travel is higher.                              ted States.

Not separately stated.                    If your meal or entertainment         North  American  area. The  North  American  area  in-
charges aren’t separately stated or aren’t clearly identifia-                   cludes the following locations.
ble,  you  don’t  have  to  allocate  any  portion  of  the  total 
charge to meals or entertainment.                                               American Samoa                 Jarvis Island
                                                                                Antigua and Barbuda            Johnston Island
                                                                                Aruba                          Kingman Reef
Exceptions                                                                      Bahamas                        Marshall Islands
                                                                                Baker Island                   Mexico
The daily  limit  on  luxury  water  travel  (discussed  earlier)               Barbados                       Micronesia
doesn’t apply to expenses you have to attend a conven-                          Bermuda                        Midway Islands
tion,  seminar,  or  meeting  on  board  a  cruise  ship.  See                  Canada                         Northern Mariana
                                                                                Costa Rica                     Islands
Cruise Ships, later, under Conventions.                                         Curaçao                        Palau
                                                                                Dominica                       Palmyra Atoll
Conventions                                                                     Dominican Republic             Panama
                                                                                Grenada                        Puerto Rico
                                                                                Guam                           Saint Lucia
You can deduct your travel expenses when you attend a                           Guyana                         Trinidad and Tobago
convention if you can show that your attendance benefits                        Honduras                       USA
your trade or business. You can’t deduct the travel expen-                      Howland Island                 U.S. Virgin Islands
ses for your family.                                                            Jamaica                        Wake Island
If  the  convention  is  for  investment,  political,  social,  or              The North American area also includes U.S. islands, cays, 
other  purposes  unrelated  to  your  trade  or  business,  you                 and reefs that are territories of the United States and not 
can’t deduct the expenses.                                                      part of the 50 states or the District of Columbia. See Reve-
                                                                                nue   Ruling       2016-16, available       at    IRS.gov/irb/
          Your  appointment  or  election  as  a  delegate 
                                                                                2016-26_IRB#RR-2016-16, for more information.
!         doesn’t, in itself, determine whether you can de-
CAUTION   duct travel expenses. You can deduct your travel 
                                                                                Reasonableness  test.  The  following  factors  are  taken 
expenses  only  if  your  attendance  is  connected  to  your                   into account to determine if it was as reasonable to hold 
own trade or business.                                                          the meeting outside the North American area as within the 
                                                                                North American area.
Convention agenda.                The convention agenda or program 
generally shows the purpose of the convention. You can                          • The purpose of the meeting and the activities taking 
                                                                                  place at the meeting.
show  your  attendance  at  the  convention  benefits  your 
trade or business by comparing the agenda with the offi-                        • The purposes and activities of the sponsoring organi-
cial  duties  and  responsibilities  of  your  position.  The                     zations or groups.
agenda doesn’t have to deal specifically with your official                       The homes of the active members of the sponsoring 
                                                                                •
duties and responsibilities; it will be enough if the agenda                      organizations and the places at which other meetings 
is so related to your position that it shows your attendance                      of the sponsoring organizations or groups have been 
was for business purposes.                                                        or will be held.
                                                                                • Other relevant factors you may present.

                                                                                Cruise Ships

                                                                                You can deduct up to $2,000 per year of your expenses of 
                                                                                attending conventions, seminars, or similar meetings held 

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on cruise ships. All ships that sail are considered cruise
ships.
Entertainment
You can deduct these expenses only if all of the follow-
ing requirements are met. Entertainment—Defined
1. The convention, seminar, or meeting is directly related
to the active conduct of your trade or business. Entertainment includes any activity generally considered
to provide entertainment, amusement, or recreation. Ex-
2. The cruise ship is a vessel registered in the United amples include entertaining guests at nightclubs; at so-
States. cial, athletic, and sporting clubs; at theaters; at sporting
3. All of the cruise ship's ports of call are in the United events; on yachts; or on hunting, fishing, vacation, and
States or in territories of the United States. similar trips. Entertainment may also include meeting per-
sonal, living, or family needs of individuals, such as pro-
4. You attach to your return a written statement signed viding meals, a hotel suite, or a car to customers or their
by you that includes information about: families.
a. The total days of the trip (not including the days of Deduction may depend on your type of business.
transportation to and from the cruise ship port), Your kind of business may determine if a particular activity
is considered entertainment. For example, if you are a
b. The number of hours each day that you devoted to
dress designer and have a fashion show to introduce your
scheduled business activities, and
new designs to store buyers, the show generally isn’t con-
c. A program of the scheduled business activities of sidered entertainment. This is because fashion shows are
the meeting. typical in your business. But, if you are an appliance dis-
tributor and hold a fashion show for the spouses of your
5. You attach to your return a written statement signed
retailers, the show is generally considered entertainment.
by an officer of the organization or group sponsoring
the meeting that includes: Separating costs. If you have one expense that in-
a. A schedule of the business activities of each day cludes the costs of entertainment and other services
of the meeting, and (such as lodging or transportation), you must allocate that
expense between the cost of entertainment and the cost
b. The number of hours you attended the scheduled of other services. You must have a reasonable basis for
business activities. making this allocation. For example, you must allocate
your expenses if a hotel includes entertainment in its
lounge on the same bill with your room charge.

Exceptions to the Rules

2. In general, entertainment expenses are nondeductible.
However, there are a few exceptions to the general rule,
including:
Meals and Entertainment Entertainment treated as compensation on your origi-
•
nally filed tax returns (and treated as wages to your
You can no longer take a deduction for any expense rela-
employees);
ted to activities generally considered entertainment,
amusement, or recreation. You can continue to deduct • Recreational expenses for employees such as a holi-
50% of the cost of business meals if you (or your em- day party or a summer picnic;
ployee) are present and the food or beverages aren't con- Expenses related to attending business meetings or
•
sidered lavish or extravagant. conventions of certain exempt organizations such as
If food or beverages are provided during or at an business leagues, chambers of commerce, professio-
TIP entertainment event, and the food and beverages nal associations, etc.; and
were purchased separately from the entertain- Entertainment sold to customers. For example, if you
•
ment or the cost of the food and beverages was stated run a nightclub, your expenses for the entertainment
separately from the cost of the entertainment on one or you furnish to your customers, such as a floor show,
more bills, invoices, or receipts, you may be able to deduct aren’t subject to the nondeductible rules.
the separately stated costs as a meal expense. For more
information, see Regulations section 1.274-11(d)(2), Ex-
ample 2. Examples of Nondeductible Entertainment

Entertainment events. Generally, you can't deduct any
expense for an entertainment event. This includes expen-
ses for entertaining guests at nightclubs; at social, athletic,

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and sporting clubs; at theaters; at sporting events; on Other rules for meals and entertainment expenses.
yachts; or on hunting, fishing, vacation, and similar trips. Any allowed expense must be ordinary and necessary. An
ordinary expense is one that is common and accepted in
Entertainment facilities. Generally, you can’t deduct your trade or business. A necessary expense is one that is
any expense for the use of an entertainment facility. This helpful and appropriate for your business. An expense
includes expenses for depreciation and operating costs doesn't have to be required to be considered necessary.
such as rent, utilities, maintenance, and protection. Expenses must not be lavish or extravagant. An expense
An entertainment facility is any property you own, rent, isn't considered lavish or extravagant if it is reasonable
or use for entertainment. Examples include a yacht, hunt- based on the facts and circumstances.
ing lodge, fishing camp, swimming pool, tennis court,
bowling alley, car, airplane, apartment, hotel suite, or Examples. For each example, assume that the food and
home in a vacation resort. beverage expenses are ordinary and necessary expenses
under section 162(a) paid or incurred during the tax year
Club dues and membership fees. You can’t deduct in carrying on a trade or business and are not lavish or ex-
dues (including initiation fees) for membership in any club travagant under the circumstances. Also assume that the
organized for business, pleasure, recreation, or other so- taxpayer and the business contact are not engaged in a
cial purposes. trade or business that has any relation to the entertain-
This rule applies to any membership organization if one ment activity.
of its principal purposes is either:
Example 1. Taxpayer A invites B, a business contact,
• To conduct entertainment activities for members or to a baseball game. A purchases tickets for A and B to at-
their guests; or tend the game. While at the game, A buys hot dogs and
• To provide members or their guests with access to en- drinks for A and B. The baseball game is entertainment as
tertainment facilities, discussed later. defined in Regulations section 1.274-11(b)(1)(i) and, thus,
the cost of the game tickets is an entertainment expense
The purposes and activities of a club, not its name, will
and is not deductible by A. The cost of the hot dogs and
determine whether or not you can deduct the dues. You
drinks, which are purchased separately from the game
can’t deduct dues paid to:
tickets, is not an entertainment expense and is not subject
• Country clubs, to the section 274(a)(1) disallowance. Therefore, A may
• Golf and athletic clubs, deduct 50% of the expenses associated with the hot dogs
and drinks purchased at the game.
• Airline clubs,
Example 2. Taxpayer C invites D, a business contact,
• Hotel clubs, and to a basketball game. C purchases tickets for C and D to
• Clubs operated to provide meals under circumstances attend the game in a suite, where they have access to
generally considered to be conducive to business dis- food and beverages. The cost of the basketball game tick-
cussions. ets, as stated on the invoice, includes the food and bever-
ages. The basketball game is entertainment as defined in
Gift or entertainment. Any item that might be consid- Regulations section 1.274-11(b)(1)(i) and, thus, the cost
ered either a gift or entertainment will generally be consid- of the game tickets is an entertainment expense and is not
ered entertainment. However, if you give a customer pack- deductible by C. The cost of the food and beverages,
aged food or beverages that you intend the customer to which are not purchased separately from the game tick-
use at a later date, treat it as a gift. ets, is not stated separately on the invoice. Thus, the cost
of the food and beverages is also an entertainment ex-
pense that is subject to the section 274(a)(1) disallow-
Meals ance. Therefore, C may not deduct any of the expenses
associated with the basketball game.
As discussed above, entertainment expenses are gener- Example 3. Assume the same facts as in Example 2,
ally nondeductible. However, you may continue to deduct except that the invoice for the basketball game tickets sep-
50% of the cost of business meals if you (or an employee) arately states the cost of the food and beverages. As in
is present and the food or beverages are not considered Example 2, the basketball game is entertainment as de-
lavish or extravagant. The meals may be provided to a cur- fined in Regulations section 1.274-2(b)(1)(i) and, thus, the
rent or potential business customer, client, consultant, or cost of the game tickets, other than the cost of the food
similar business contact. and beverages, is an entertainment expense and is not
Food and beverages that are provided during entertain- deductible by C. However, the cost of the food and bever-
ment events are not considered entertainment if pur- ages, which is stated separately on the invoice for the
chased separately from the entertainment, or if the cost of game tickets, is not an entertainment expense and is not
the food and beverages is stated separately from the cost subject to the section 274(a)(1) disallowance. Therefore,
of the entertainment on one or more bills, invoices, or re- C may deduct 50% of the expenses associated with the
ceipts. However, the entertainment disallowance rule may food and beverages provided at the game.
not be circumvented through inflating the amount charged
for food and beverages.

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Figure A. Does the 50% Limit Apply to Your Expenses?
There are exceptions to these rules. See Exceptions to the 50% Limit for Meals, later.
All employees and self-employed persons can use this chart.
Start Here
Were your meal and entertainment expenses reimbursed?
(Count only reimbursements your employer didn’t
include in box 1 of your Form W-2. If self-employed,
count only reimbursements from clients or customers that No
aren’t included on Form 1099-MISC, Miscellaneous
Income.)

Yes

If an employee, did you adequately account
to your employer under an accountable plan?
If self-employed, did you provide the payer No
with adequate records? (See chapter 6.)

Yes

Did your expenses exceed the reimbursement?
No Yes

For the amount reimbursed... For the excess amount...

Your meal and entertainment
expenses are NOT subject to Your meal expenses ARE
the limitations. However, since subject to the 50% limit.
the reimbursement wasn’t Your entertainment
treated as wages or as other expenses are nondeduct-
taxable income, you can’t ible.
deduct the expenses.

Costs to include or exclude. Taxes and tips relating to a
business meal are included as a cost of the meal and are
50% Limit subject to the 50% limit. However, the cost of transporta-
tion to and from the meal is not treated as part of the cost
In general, you can deduct only 50% of your business-re- and would not be subject to the limit.
lated meal expenses, unless an exception applies. (If you
are subject to the Department of Transportation's “hours of Application of 50% limit. The 50% limit on meal expen-
service” limits, you can deduct 80% of your business-rela- ses applies if the expense is otherwise deductible and
ted meal expenses. See Individuals subject to “hours of isn’t covered by one of the exceptions discussed later. Fig-
service” limits, later.) ure A can help you determine if the 50% limit applies to
The 50% limit applies to employees or their employers, you.
and to self-employed persons (including independent con- The 50% limit also applies to certain meal expenses
tractors) or their clients, depending on whether the expen- that aren’t business related. It applies to meal expenses
ses are reimbursed. you have for the production of income, including rental or
royalty income. It also applies to the cost of meals inclu-
Examples of meals might include: ded in deductible educational expenses.
• Meals while traveling away from home (whether eating
alone or with others) on business, or When to apply the 50% limit. The 50% limit will apply
after determining the amount that would otherwise qualify
• Meal at a business convention or business league for a deduction. You first have to determine the amount of
meeting. meal expenses that would be deductible under the other
rules discussed in this publication.

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Taking turns paying for meals. If a group of business 4—Recreational expenses for employees. You
acquaintances takes turns picking up each others' meal aren't subject to the 50% limit for expenses for recrea-
checks primarily for personal reasons, without regard to tional, social, or similar activities (including facilities) such
whether any business purposes are served, no member of as a holiday party or a summer picnic.
the group can deduct any part of the expense.
5—Advertising expenses. You aren’t subject to the
Example 1. You spend $200 (including tax and tip) for 50% limit if you provide meals to the general public as a
a business meal. If $110 of that amount isn’t allowable be- means of advertising or promoting goodwill in the com-
cause it is lavish and extravagant, the remaining $90 is munity. For example, neither the expense of sponsoring a
subject to the 50% limit. Your deduction can’t be more television or radio show nor the expense of distributing
than $45 (50% (0.50) × $90). free food and beverages to the general public is subject to
the 50% limit.
Example 2. You purchase two tickets to a concert for
6—Sale of meals. You aren’t subject to the 50% limit if
$200 for you and your client. Your deduction is zero be-
you actually sell meals to the public. For example, if you
cause no deduction is allowed for entertainment expen-
run a restaurant, your expense for the food you furnish to
ses.
your customers isn’t subject to the 50% limit.

Exception to the 50% Limit for Meals Individuals subject to “hours of service” limits. You
can deduct a higher percentage of your meal expenses
Your meal expense isn’t subject to the 50% limit if the ex- while traveling away from your tax home if the meals take
pense meets one of the following exceptions. place during or incident to any period subject to the De-
1—Expenses treated as compensation. In general, partment of Transportation's “hours of service” limits. The
expenses for goods, services, and facilities, to the extent percentage is 80%.
the expenses are treated by the taxpayer, with respect to Individuals subject to the Department of Transporta-
entertainment, amusement, or recreation, as compensa- tion's “hours of service” limits include the following per-
tion to an employee and as wages to the employee for tax sons.
purposes. • Certain air transportation workers (such as pilots,
crew, dispatchers, mechanics, and control tower oper-
2—Employee's reimbursed expenses. If you are an
ators) who are under Federal Aviation Administration
employee, you aren’t subject to the 50% limit on expenses
regulations.
for which your employer reimburses you under an ac-
countable plan. Accountable plans are discussed in chap- • Interstate truck operators and bus drivers who are un-
ter 6. der Department of Transportation regulations.
3—Self-employed reimbursed expenses. If you are • Certain railroad employees (such as engineers, con-
self-employed, your deductible meal expenses aren’t sub- ductors, train crews, dispatchers, and control opera-
ject to the 50% limit if all of the following requirements are tions personnel) who are under Federal Railroad Ad-
met. ministration regulations.
• You have these expenses as an independent contrac- • Certain merchant mariners who are under Coast
tor. Guard regulations.
• Your customer or client reimburses you or gives you The temporary 100-percent deduction for expen-
an allowance for these expenses in connection with ! ses that were paid or incurred after December 31,
services you perform. CAUTION 2020, and before January 1, 2023, for food or
beverages provided by a restaurant has expired. Gener-
• You provide adequate records of these expenses to
ally, the 50% deduction continues to apply. See 50% Limit,
your customer or client. (See chapter 5.)
earlier.
In this case, your client or customer is subject to the
50% limit on the expenses.

Example. You are a self-employed attorney who ade-
quately accounts for meal expenses to a client who reim-
burses you for these expenses. You aren’t subject to the
limitation on meal expenses. If the client can deduct the 3.
expenses, the client is subject to the 50% limit.
If you (as an independent contractor) have expenses
for meals related to providing services for a client but don’t Gifts
adequately account for and seek reimbursement from the
client for those expenses, you are subject to the 50% limit If you give gifts in the course of your trade or business,
on non-entertainment-related meals and the entertain- you may be able to deduct all or part of the cost. This
ment-related meal expenses are nondeductible to you. chapter explains the limits and rules for deducting the
costs of gifts.

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$25 limit. You can deduct no more than $25 for business If you are entitled to a reimbursement from your
gifts you give directly or indirectly to each person during ! employer but you don’t claim it, you can’t claim a
your tax year. A gift to a company that is intended for the CAUTION deduction for the expenses to which that un-
eventual personal use or benefit of a particular person or a claimed reimbursement applies. This type of deduction is
limited class of people will be considered an indirect gift to considered a miscellaneous deduction that is no longer al-
that particular person or to the individuals within that class lowable due to the suspension of miscellaneous itemized
of people who receive the gift. deductions subject to the 2% floor under section 67(a).
If you give a gift to a member of a customer's family, the
gift is generally considered to be an indirect gift to the cus-
tomer. This rule doesn’t apply if you have a bona fide, in-
dependent business connection with that family member
and the gift isn’t intended for the customer's eventual use.
If you and your spouse both give gifts, both of you are
treated as one taxpayer. It doesn’t matter whether you 4.
have separate businesses, are separately employed, or
whether each of you has an independent connection with
the recipient. If a partnership gives gifts, the partnership Transportation
and the partners are treated as one taxpayer.
This chapter discusses expenses you can deduct for busi-
Example. You sell products to a local company. You ness transportation when you aren’t traveling away from
and your spouse gave the local company three gourmet home, as defined in chapter 1. These expenses include
gift baskets to thank them for their business. You and your the cost of transportation by air, rail, bus, taxi, etc., and the
spouse paid $80 for each gift basket, or $240 total. Three cost of driving and maintaining your car.
of the local company's executives took the gift baskets Transportation expenses include the ordinary and neces-
home for their families' use. You and your spouse have no sary costs of all of the following.
independent business relationship with any of the execu-
tives' other family members. You and your spouse can de- • Getting from one workplace to another in the course of
duct a total of $75 ($25 limit × 3) for the gift baskets. your business or profession when you are traveling
within the city or general area that is your tax home.
Incidental costs. Incidental costs, such as engraving on Tax home is defined in chapter 1.
jewelry, or packaging, insuring, and mailing, are generally Visiting clients or customers.
•
not included in determining the cost of a gift for purposes
of the $25 limit. • Going to a business meeting away from your regular
A cost is incidental only if it doesn’t add substantial workplace.
value to the gift. For example, the cost of gift wrapping is • Getting from your home to a temporary workplace
an incidental cost. However, the purchase of an ornamen- when you have one or more regular places of work.
tal basket for packaging fruit isn’t an incidental cost if the These temporary workplaces can be either within the
value of the basket is substantial compared to the value of area of your tax home or outside that area.
the fruit.
Transportation expenses don’t include expenses you have
Exceptions. The following items aren’t considered gifts while traveling away from home overnight. Those expen-
for purposes of the $25 limit. ses are travel expenses discussed in chapter 1. However,
if you use your car while traveling away from home over-
1. An item that costs $4 or less and: night, use the rules in this chapter to figure your car ex-
a. Has your name clearly and permanently imprinted pense deduction. See Car Expenses, later.
on the gift, and Daily transportation expenses you incur while traveling
b. Is one of a number of identical items you widely from home to one or more regular places of business are
distribute. Examples include pens, desk sets, and generally nondeductible commuting expenses. However,
plastic bags and cases. there may be exceptions to this general rule. You can de-
duct daily transportation expenses incurred going be-
2. Signs, display racks, or other promotional material to tween your residence and a temporary work station out-
be used on the business premises of the recipient. side the metropolitan area where you live. Also, daily
transportation expenses can be deducted if (1) you have
one or more regular work locations away from your resi-
Gift or entertainment. Any item that might be consid- dence; or (2) your residence is your principal place of
ered either a gift or entertainment will generally be consid- business and you incur expenses going between the resi-
ered entertainment. However, if you give a customer pack- dence and another work location in the same trade or
aged food or beverages you intend the customer to use at business, regardless of whether the work is temporary or
a later date, treat it as a gift. permanent and regardless of the distance.

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Figure B. When Are Transportation Expenses Deductible?
Most employees and self-employed persons can use this chart. (Don’t use this chart if your home is your principal
place of business. See Office in the home, later.)

Always deductible

Temporary
Deductible if you have aregular or main job work location
at another location
Always
deductible

Never deductible

Home Regular or
main job

Never deductible Always
deductible

Second job

Home: The place where you reside. Transportation expenses between your home and
your main or regular place of work are personal commuting expenses.
Regular or main job: Your principal place of business. If you have more than one job,
you must determine which one is your regular or main job. Consider the time you
spend at each, the activity you have at each, and the income you earn at each.
Temporary work location: A place where your work assignment is realistically
expected to last (and does in fact last) one year or less. Unless you have a regular
place of business, you can only deduct your transportation expenses to a temporary
work location outside your metropolitan area.
Second job: If you regularly work at two or more places in one day, whether or not
for the same employer, you can deduct your transportation expenses of getting from
one workplace to another. If you don’t go directly from your rst job to your second
job, you can only deduct the transportation expenses of going directly from your rst
job to your second job. You can’t deduct your transportation expenses between
your home and a second job on a day off from your main job.

If you are entitled to a reimbursement from your to a temporary work location in the same trade or busi-
! employer but you don’t claim it, you can’t claim a ness, you can deduct the expenses of the daily round-trip
CAUTION deduction for the expenses to which that un- transportation between your home and the temporary lo-
claimed reimbursement applies. This type of deduction is cation, regardless of distance.
considered a miscellaneous deduction that is no longer al- If your employment at a work location is realistically ex-
lowable due to the suspension of miscellaneous itemized pected to last (and does in fact last) for 1 year or less, the
deductions subject to the 2% floor under section 67(a). employment is temporary unless there are facts and cir-
cumstances that would indicate otherwise.
Illustration of transportation expenses. Figure B above If your employment at a work location is realistically ex-
illustrates the rules that apply for deducting transportation pected to last for more than 1 year or if there is no realistic
expenses when you have a regular or main job away from expectation that the employment will last for 1 year or less,
your home. You may want to refer to it when deciding the employment isn’t temporary, regardless of whether it
whether you can deduct your transportation expenses. actually lasts for more than 1 year.
If employment at a work location initially is realistically
Temporary work location. If you have one or more regu- expected to last for 1 year or less, but at some later date
lar work locations away from your home and you commute the employment is realistically expected to last more than

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1 year, that employment will be treated as temporary (un- Commuting expenses. You can’t deduct the costs of
less there are facts and circumstances that would indicate taking a bus, trolley, subway, or taxi, or of driving a car be-
otherwise) until your expectation changes. It won’t be trea- tween your home and your main or regular place of work.
ted as temporary after the date you determine it will last These costs are personal commuting expenses. You can’t
more than 1 year. deduct commuting expenses no matter how far your home
If the temporary work location is beyond the general is from your regular place of work. You can’t deduct com-
area of your regular place of work and you stay overnight, muting expenses even if you work during the commuting
you are traveling away from home. You may have deducti- trip.
ble travel expenses, as discussed in chapter 1.
Example. You sometimes use your cell phone to make
No regular place of work. If you have no regular place business calls while commuting to and from work. Some-
of work but ordinarily work in the metropolitan area where times business associates ride with you to and from work,
you live, you can deduct daily transportation costs be- and you have a business discussion in the car. These ac-
tween home and a temporary work site outside that metro- tivities don’t change the trip from personal to business.
politan area. You can’t deduct your commuting expenses.
Generally, a metropolitan area includes the area within
Parking fees. Fees you pay to park your car at your
the city limits and the suburbs that are considered part of
place of business are nondeductible commuting expen-
that metropolitan area.
ses. You can, however, deduct business-related parking
You can’t deduct daily transportation costs between
fees when visiting a customer or client.
your home and temporary work sites within your metropol-
itan area. These are nondeductible commuting expenses. Advertising display on car. Putting display material
that advertises your business on your car doesn’t change
Two places of work. If you work at two places in 1 day, the use of your car from personal use to business use. If
whether or not for the same employer, you can deduct the you use this car for commuting or other personal uses,
expense of getting from one workplace to the other. How- you still can’t deduct your expenses for those uses.
ever, if for some personal reason you don’t go directly
from one location to the other, you can’t deduct more than Car pools. You can’t deduct the cost of using your car
the amount it would have cost you to go directly from the in a nonprofit car pool. Don’t include payments you re-
first location to the second. ceive from the passengers in your income. These pay-
Transportation expenses you have in going between ments are considered reimbursements of your expenses.
home and a part-time job on a day off from your main job However, if you operate a car pool for a profit, you must in-
are commuting expenses. You can’t deduct them. clude payments from passengers in your income. You can
then deduct your car expenses (using the rules in this
Armed Forces reservists. A meeting of an Armed publication).
Forces reserve unit is a second place of business if the
Hauling tools or instruments. Hauling tools or instru-
meeting is held on a day on which you work at your regular
ments in your car while commuting to and from work
job. You can deduct the expense of getting from one work-
doesn’t make your car expenses deductible. However, you
place to the other as just discussed under Two places of
can deduct any additional costs you have for hauling tools
work.
or instruments (such as for renting a trailer you tow with
You usually can’t deduct the expense if the reserve
your car).
meeting is held on a day on which you don’t work at your
regular job. In this case, your transportation is generally a Union members' trips from a union hall. If you get
nondeductible commuting expense. However, you can de- your work assignments at a union hall and then go to your
duct your transportation expenses if the location of the place of work, the costs of getting from the union hall to
meeting is temporary and you have one or more regular your place of work are nondeductible commuting expen-
places of work. ses. Although you need the union to get your work assign-
If you ordinarily work in a particular metropolitan area ments, you are employed where you work, not where the
but not at any specific location and the reserve meeting is union hall is located.
held at a temporary location outside that metropolitan
area, you can deduct your transportation expenses. Office in the home. If you have an office in your home
If you travel away from home overnight to attend a that qualifies as a principal place of business, you can de-
guard or reserve meeting, you can deduct your travel ex- duct your daily transportation costs between your home
penses. These expenses are discussed in chapter 1. and another work location in the same trade or business.
If you travel more than 100 miles away from home in (See Pub. 587, Business Use of Your Home, for informa-
connection with your performance of services as a mem- tion on determining if your home office qualifies as a prin-
ber of the reserves, you may be able to deduct some of cipal place of business.)
your reserve-related travel costs as an adjustment to
gross income rather than as an itemized deduction. For Examples of deductible transportation. The following
more information, see Armed Forces Reservists Traveling examples show when you can deduct transportation ex-
More Than 100 Miles From Home under Special Rules in penses based on the location of your work and your
chapter 6. home.

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Example 1. You regularly work in an office in the city Standard Mileage Rate
where you live. Your employer sends you to a 1-week
training session at a different office in the same city. You For 2023, the standard mileage rate for the cost of operat-
travel directly from your home to the training location and ing your car for business use is 65.5 cents ($0.655) per
return each day. You can deduct the cost of your daily mile.
round-trip transportation between your home and the
If you use the standard mileage rate for a year,
training location.
you can’t deduct your actual car expenses for that
Example 2. Your principal place of business is in your CAUTION! year. You can’t deduct depreciation, lease pay-
home. You can deduct the cost of round-trip transportation ments, maintenance and repairs, gasoline (including gas-
between your qualifying home office and your client's or oline taxes), oil, insurance, or vehicle registration fees.
customer's place of business. See Choosing the standard mileage rate and Standard
mileage rate not allowed, later.
Example 3. You have no regular office, and you don’t
have an office in your home. In this case, the location of You can generally use the standard mileage rate
your first business contact inside the metropolitan area is whether or not you are reimbursed and whether or not any
considered your office. Transportation expenses between reimbursement is more or less than the amount figured
your home and this first contact are nondeductible com- using the standard mileage rate. See chapter 6 for more
muting expenses. Transportation expenses between your information on reimbursements.
last business contact and your home are also nondeducti-
ble commuting expenses. While you can’t deduct the Choosing the standard mileage rate. If you want to
costs of these trips, you can deduct the costs of going use the standard mileage rate for a car you own, you must
from one client or customer to another. choose to use it in the first year the car is available for use
in your business. Then, in later years, you can choose to
use either the standard mileage rate or actual expenses.
If you want to use the standard mileage rate for a car
Car Expenses you lease, you must use it for the entire lease period. For
leases that began on or before December 31, 1997, the
If you use your car for business purposes, you may be standard mileage rate must be used for the entire portion
able to deduct car expenses. You can generally use one of of the lease period (including renewals) that is after 1997.
the two following methods to figure your deductible expen- You must make the choice to use the standard mileage
ses. rate by the due date (including extensions) of your return.
• Standard mileage rate. You can’t revoke the choice. However, in later years, you
can switch from the standard mileage rate to the actual ex-
• Actual car expenses. penses method. If you change to the actual expenses
If you qualify to use both methods, you may want method in a later year, but before your car is fully depreci-
TIP to figure your deduction both ways to see which ated, you have to estimate the remaining useful life of the
gives you a larger deduction. car and use straight line depreciation for the car’s remain-
ing estimated useful life, subject to depreciation limits (dis-
The cost of using your car as an employee, whether cussed later).
measured using actual expenses or the standard mileage For more information about depreciation included in the
rate, will no longer be allowed to be claimed as an unreim- standard mileage rate, see Exception under Methods of
bursed employee travel expense as a miscellaneous item- depreciation, later.
ized deduction due to the suspension of miscellaneous
itemized deductions that are subject to the 2% floor under Standard mileage rate not allowed. You can’t use the
section 67(a). The suspension applies to tax years begin- standard mileage rate if you:
ning after December 2017 and before January 2026. De- • Use five or more cars at the same time (such as in
ductions for expenses that are deductible in determining fleet operations);
adjusted gross income are not suspended. For example,
Armed Forces reservists, qualified performing artists, and • Claimed a depreciation deduction for the car using
any method other than straight line for the car’s esti-
fee-basis state or local government officials are allowed to
mated useful life;
deduct unreimbursed employee travel expenses as an ad-
justment to total income on Schedule 1 (Form 1040), • Used the Modified Accelerated Cost Recovery Sys-
line 12. tem (MACRS) (as discussed later under Depreciation
Deduction);
If you use actual expenses to figure your deduction for
a car you lease, there are rules that affect the amount of • Claimed a section 179 deduction (discussed later) on
your lease payments you can deduct. See Leasing a Car, the car;
later. • Claimed the special depreciation allowance on the
In this publication, “car” includes a van, pickup, or panel car; or
truck. For the definition of “car” for depreciation purposes, • Claimed actual car expenses after 1997 for a car you
see Car defined under Actual Car Expenses, later. leased.

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Note. You can elect to use the standard mileage rate if If you use a home equity loan to purchase your
you used a car for hire (such as a taxi) unless the standard TIP car, you may be able to deduct the interest. See
mileage rate is otherwise not allowed, as discussed Pub. 936, Home Mortgage Interest Deduction, for
above. more information.
Five or more cars. If you own or lease five or more
cars that are used for business at the same time, you can’t Personal property taxes. If you itemize your deductions
use the standard mileage rate for the business use of any on Schedule A (Form 1040), you can deduct on line 5c
car. However, you may be able to deduct your actual ex- state and local personal property taxes on motor vehicles.
penses for operating each of the cars in your business. You can take this deduction even if you use the standard
See Actual Car Expenses, later, for information on how to mileage rate or if you don’t use the car for business.
figure your deduction. If you are self-employed and use your car in your busi-
You aren’t using five or more cars for business at the ness, you can deduct the business part of state and local
same time if you alternate using (use at different times) personal property taxes on motor vehicles on Schedule C
the cars for business. (Form 1040), or Schedule F (Form 1040). If you itemize
The following examples illustrate the rules for when you your deductions, you can include the remainder of your
can and can’t use the standard mileage rate for five or state and local personal property taxes on the car on
more cars. Schedule A (Form 1040).

Example 1. A salesperson owns three cars and two Parking fees and tolls. In addition to using the standard
vans that they alternate using for calling on their custom- mileage rate, you can deduct any business-related park-
ers. The salesperson can use the standard mileage rate ing fees and tolls. (Parking fees you pay to park your car at
for the business mileage of the three cars and the two your place of work are nondeductible commuting expen-
vans because they don’t use them at the same time. ses.)

Example 2. You and your employees use your four Sale, trade-in, or other disposition. If you sell, trade in,
pickup trucks in your landscaping business. During the or otherwise dispose of your car, you may have a gain or
year, you traded in two of your old trucks for two newer loss on the transaction or an adjustment to the basis of
ones. You can use the standard mileage rate for the busi- your new car. See Disposition of a Car, later.
ness mileage of all six of the trucks you owned during the
year. Actual Car Expenses

Example 3. You own a repair shop and an insurance If you don’t use the standard mileage rate, you may be
business. You and your employees use your two pickup able to deduct your actual car expenses.
trucks and van for the repair shop. You alternate using
Actual car expenses include:
your two cars for the insurance business. No one else
uses the cars for business purposes. You can use the Depreciation Lease Registration
standard mileage rate for the business use of the pickup Licenses payments fees
trucks, the van, and the cars because you never have Gas Insurance Repairs
more than four vehicles used for business at the same Oil Garage rent Tires
time. Tolls Parking fees
If you have fully depreciated a car that you still use in
Example 4. You own a car and four vans that are used
your business, you can continue to claim your other actual
in your housecleaning business. Your employees use the
car expenses. Continue to keep records, as explained
vans, and you use the car to travel to various customers.
later in chapter 5.
You can’t use the standard mileage rate for the car or the
vans. This is because all five vehicles are used in your Business and personal use. If you use your car for both
business at the same time. You must use actual expenses business and personal purposes, you must divide your ex-
for all vehicles. penses between business and personal use. You can di-
vide your expense based on the miles driven for each pur-
Interest. If you are an employee, you can’t deduct any in-
pose.
terest paid on a car loan. This applies even if you use the
car 100% for business as an employee. Example. You are a contractor and drive your car
However, if you are self-employed and use your car in 20,000 miles during the year: 12,000 miles for business
your business, you can deduct that part of the interest ex- use and 8,000 miles for personal use. You can claim only
pense that represents your business use of the car. For 60% (12,000 ÷ 20,000) of the cost of operating your car as
example, if you use your car 60% for business, you can a business expense.
deduct 60% of the interest on Schedule C (Form 1040).
You can’t deduct the part of the interest expense that rep- Employer-provided vehicle. If you use a vehicle provi-
resents your personal use of the car. ded by your employer for business purposes, you can de-
duct your actual unreimbursed car expenses. You can’t
use the standard mileage rate. See Vehicle Provided by
Your Employer in chapter 6.

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Interest on car loans. If you are an employee, you can’t • A truck or van that is a qualified nonpersonal use vehi-
deduct any interest paid on a car loan. This interest is cle.
treated as personal interest and isn’t deductible. If you are
Qualified nonpersonal use vehicles. These are ve-
self-employed and use your car in that business, see Inter-
hicles that by their nature aren’t likely to be used more
est, earlier, under Standard Mileage Rate.
than a minimal amount for personal purposes. They in-
Taxes paid on your car. If you are an employee, you can clude trucks and vans that have been specially modified
deduct personal property taxes paid on your car if you so that they aren’t likely to be used more than a minimal
itemize deductions. Enter the amount paid on Schedule A amount for personal purposes, such as by installation of
(Form 1040), line 5c. permanent shelving and painting the vehicle to display ad-
vertising or the company's name. Delivery trucks with
Sales taxes. Generally, sales taxes on your car are seating only for the driver, or only for the driver plus a fold-
part of your car's basis and are recovered through depre- ing jump seat, are qualified nonpersonal use vehicles.
ciation, discussed later.
More information. See Depreciation Deduction, later,
Fines and collateral. You can’t deduct fines you pay or for more information on how to depreciate your vehicle.
collateral you forfeit for traffic violations.
Section 179 Deduction
Casualty and theft losses. If your car is damaged, de-
stroyed, or stolen, you may be able to deduct part of the You can elect to recover all or part of the cost of a car that
loss not covered by insurance. See Pub. 547, Casualties, is qualifying section 179 property, up to a limit, by deduct-
Disasters, and Thefts, for information on deducting a loss ing it in the year you place the property in service. This is
on your car. the section 179 deduction. If you elect the section 179 de-
Depreciation and section 179 deductions. Generally, duction, you must reduce your depreciable basis in the car
the cost of a car, plus sales tax and improvements, is a by the amount of the section 179 deduction.
capital expense. Because the benefits last longer than 1 There is a limit on the total section 179 deduction,
year, you generally can’t deduct a capital expense. How- TIP special depreciation allowance, and depreciation
ever, you can recover this cost through the section 179 de- deduction for cars, trucks, and vans that may re-
duction (the deduction allowed by section 179 of the Inter- duce or eliminate any benefit from claiming the section
nal Revenue Code), special depreciation allowance, and 179 deduction. See Depreciation Limits, later.
depreciation deductions. Depreciation allows you to re-
cover the cost over more than 1 year by deducting part of
You can claim the section 179 deduction only in the
it each year. The section 179 deduction special deprecia-,
year you place the car in service. For this purpose, a car is
tion allowance, and depreciation deductions are dis-
placed in service when it is ready and available for a spe-
cussed later.
cifically assigned use in a trade or business. Even if you
Generally, there are limits on these deductions. Special
aren’t using the property, it is in service when it is ready
rules apply if you use your car 50% or less in your work or
and available for its specifically assigned use.
business.
You can claim a section 179 deduction and use a de-
A car first used for personal purposes can’t qualify for
preciation method other than straight line only if you don’t
the deduction in a later year when its use changes to busi-
use the standard mileage rate to figure your business-rela-
ness.
ted car expenses in the year you first place a car in serv-
ice. Example. In 2022, you bought a new car and used it
If, in the year you first place a car in service, you claim for personal purposes. In 2023, you began to use it for
either a section 179 deduction or use a depreciation business. Changing its use to business use doesn’t qual-
method other than straight line for its estimated useful life, ify the cost of your car for a section 179 deduction in 2023.
you can’t use the standard mileage rate on that car in any However, you can claim a depreciation deduction for the
future year. business use of the car starting in 2023. See Depreciation
Deduction, later.
Car defined. For depreciation purposes, a car is any
four-wheeled vehicle (including a truck or van) made pri- More than 50% business use requirement. You must
marily for use on public streets, roads, and highways. Its use the property more than 50% for business to claim any
unloaded gross vehicle weight (for trucks and vans, gross section 179 deduction. If you used the property more than
vehicle weight) must not be more than 6,000 pounds. A 50% for business, multiply the cost of the property by the
car includes any part, component, or other item physically percentage of business use. The result is the cost of the
attached to it or usually included in the purchase price. property that can qualify for the section 179 deduction.
A car doesn’t include:
• An ambulance, hearse, or combination ambu- Example. You purchased a new car in April 2023 for
lance-hearse used directly in a business; $24,500 and used it 60% for business. Based on your
business usage, the total cost of your car that qualifies for
• A vehicle used directly in the business of transporting the section 179 deduction is $14,700 ($24,500 cost ×
persons or property for pay or hire; or 60% (0.60) business use). But see Limit on total section

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179, special depreciation allowance, and depreciation de- body section protruding more than 30 inches ahead of
duction, discussed later. the leading edge of the windshield.

Limits. There are limits on: Limit on total section 179 deduction, special de-
• The amount of the section 179 deduction; preciation allowance, and depreciation deduction.
The first-year limit on the depreciation deduction, special
• The section 179 deduction for sport utility and certain depreciation allowance, and section 179 deduction for ve-
other vehicles; and hicles acquired before September 28, 2017, and placed in
• The total amount of the section 179 deduction, special service during 2023, is $12,200. The first-year limit on de-
depreciation allowance, and depreciation deduction preciation, special depreciation allowance, and section
(discussed later) you can claim for a qualified prop- 179 deduction for vehicles acquired after September 27,
erty. 2017, and placed in service during 2023 increases to
$20,200. If you elect not to claim a special depreciation al-
Limit on the amount of the section 179 deduction. lowance for a vehicle placed in service in 2023, the
For tax years beginning in 2023, the total amount you can amount increases to $12,200. The limit is reduced if your
elect to deduct under section 179 can’t be more than business use of the vehicle is less than 100%. See Depre-
$1,160,000. ciation Limits, later, for more information.
If the cost of your section 179 property placed in serv-
ice in tax years beginning in 2023 is over $2,890,000, you Example. In the earlier example under More than 50%
must reduce the $1,160,000 dollar limit (but not below business use requirement, you had a car with a cost (for
zero) by the amount of cost over $2,890,000. If the cost of purposes of the section 179 deduction) of $14,700. How-
your section 179 property placed in service during tax ever, based on your business usage of the car, the total of
years beginning in 2023 is $4,050,000 or more, you can’t your section 179 deduction, special depreciation allow-
take a section 179 deduction. ance, and depreciation deductions is limited to $12,120
The total amount you can deduct under section 179 ($20,200 limit x 60% (0.60) business use) because the car
each year after you apply the limits listed above cannot be was acquired after September 27, 2017, and placed in
more than the taxable income from the active conduct of service during 2023.
any trade or business during the year.
If you are married and file a joint return, you and your Cost of car. For purposes of the section 179 deduction,
spouse are treated as one taxpayer in determining any re- the cost of the car doesn’t include any amount figured by
duction to the dollar limit, regardless of which of you pur- reference to any other property held by you at any time.
chased the property or placed it in service. For example, if you buy a car as a replacement for a car
If you and your spouse file separate returns, you are that was stolen or that was destroyed in a casualty loss,
treated as one taxpayer for the dollar limit. You must allo- and you use section 1033 to determine the basis in your
cate the dollar limit (after any reduction) between you. replacement vehicle, your cost for purposes of the section
For more information on the above section 179 deduc- 179 deduction doesn’t include your adjusted basis in the
tion limits, see Pub. 946, How To Depreciate Property. relinquished car. In that case, your cost includes only the
cash you paid.
Limit for sport utility and certain other vehicles.
You cannot elect to deduct more than $28,900 of the cost Basis of car for depreciation. The amount of the
of any heavy sport utility vehicle (SUV) and certain other section 179 deduction reduces your basis in your car. If
vehicles placed in service during the tax years beginning you choose the section 179 deduction, you must subtract
in 2023. This rule applies to any four-wheeled vehicle pri- the amount of the deduction from the cost of your car. The
marily designed or used to carry passengers over public resulting amount is the basis in your car you use to figure
streets, roads, or highways that isn’t subject to any of the your depreciation deduction.
passenger automobile limits explained under Depreciation
Limits, later, and that is rated at more than 6,000 pounds When to elect. If you want to take the section 179 deduc-
gross vehicle weight and not more than 14,000 pounds tion, you must make the election in the tax year you place
gross vehicle weight. However, the $28,900 limit doesn’t the car in service for business or work.

apply to any vehicle: How to elect. Employees use Form 2106, Employee
• Designed to have a seating capacity of more than nine Business Expenses, to make the election and report the
persons behind the driver's seat; section 179 deduction. All others use Form 4562, Depreci-
ation and Amortization, to make an election.
• Equipped with a cargo area of at least 6 feet in interior
length that is an open area or is designed for use as Form 2106 is only used by Armed Forces reserv-
an open area but is enclosed by a cap and isn’t readily ! ists, qualified performing artists, fee-basis state or
accessible directly from the passenger compartment; CAUTION local government officials, and employees with
or impairment-related work expenses. Due to the suspension
of miscellaneous itemized deductions subject to the 2%
• That has an integral enclosure, fully enclosing the
floor under section 67(a), employees who do not fit into
driver compartment and load carrying device, doesn’t
one of the listed categories may not use Form 2106.
have seating rearward of the driver's seat, and has no

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File the appropriate form with either of the following. more than 50% of the use of the car must be in a qualified
business use (as defined under Depreciation Deduction,
• Your original tax return filed for the year the property
later).
was placed in service (whether or not you file it
timely). Combined depreciation. The first-year limit on the de-
• An amended return filed within the time prescribed by preciation deduction, special depreciation allowance, and
law. An election made on an amended return must section 179 deduction for vehicles acquired before Sep-
specify the item of section 179 property to which the tember 28, 2017, and placed in service during 2023, is
election applies and the part of the cost of each such $12,200. Your combined section 179 depreciation, special
item to be taken into account. The amended return depreciation allowance, and regular MACRS depreciation
must also include any resulting adjustments to taxable deduction is limited to the maximum allowable deprecia-
income. tion deduction for vehicles acquired after September 27,
2017, and placed in service during 2023 is $20,200. If you
You must keep records that show the specific
elect not to claim a special depreciation allowance for a
! identification of each piece of qualifying section vehicle placed in service in 2023, the amount is $12,200.
CAUTION 179 property. These records must show how you
See Depreciation Limits, later in this chapter.
acquired the property, the person you acquired it from,
and when you placed it in service. Qualified car. To be qualified property, the car (including
the truck or van) must meet all of the following tests.
Revoking an election. An election (or any specifica-
tion made in the election) to take a section 179 deduction • You acquired the car after September 27, 2017, but
for 2023 can only be revoked with the Commissioner's ap- only if no written binding contract to acquire the car
proval. existed before September 28, 2017.
• You acquired the car new or used.
Recapture of section 179 deduction. To be eligible to
claim the section 179 deduction, you must use your car • You placed the car in service in your trade or business
more than 50% for business or work in the year you ac- before January 1, 2027.
quired it. If your business use of the car is 50% or less in a • You used the car more than 50% in a qualified busi-
later tax year during the recovery period, you have to re- ness use during the tax year.
capture (include in income) in that later year any excess
depreciation. Any section 179 deduction claimed on the Election not to claim the special depreciation allow-
car is included in figuring the excess depreciation. For in- ance. You can elect not to claim the special depreciation
formation on this calculation, see Excess depreciation, allowance for your car, truck, or van that is qualified prop-
later in this chapter under Car Used 50% or Less for Busi- erty. If you make this election, it applies to all 5-year prop-
ness. For more information on recapture of a section 179 erty placed in service during the year.
deduction, see Pub. 946. To make this election, attach a statement to your timely
filed return (including extensions) indicating the class of
Dispositions. If you dispose of a car on which you had property (5-year for cars) for which you are making the
claimed the section 179 deduction, the amount of that de- election and that you are electing not to claim the special
duction is treated as a depreciation deduction for recap- depreciation allowance for qualified property in that class
ture purposes. You treat any gain on the disposition of the of property.
property as ordinary income up to the amount of the sec-
tion 179 deduction and any allowable depreciation (unless Unless you elect not to claim the special depreci-
you establish the amount actually allowed). For informa- ! ation allowance, you must reduce the car's adjus-
tion on the disposition of a car, see Disposition of a Car, CAUTION ted basis by the amount of the allowance, even if
later. For more information on recapture of a section 179 the allowance wasn’t claimed.
deduction, see Pub. 946.
Depreciation Deduction
Special Depreciation Allowance
If you use actual car expenses to figure your deduction for
You may be able to claim the special depreciation allow- a car you own and use in your business, you can claim a
ance for your car, truck, or van if it is qualified property and depreciation deduction. This means you can deduct a cer-
was placed in service in 2023. The allowance for 2023 is tain amount each year as a recovery of your cost or other
an additional depreciation deduction for 100% of the car's basis in your car.
depreciable basis (after any section 179 deduction, but
before figuring your regular depreciation deduction under
You generally need to know the following things about
MACRS) if the vehicle was acquired after September 27,
the car you intend to depreciate.
2017, and placed in service during 2023. Further, while it
applies to a new vehicle, it also applies to a used vehicle • Your basis in the car.
only if the vehicle meets the used property requirements. • The date you place the car in service.
For more information on the used property requirements,
see section 168(k)(2)(E)(ii). To qualify for the allowance, • The method of depreciation and recovery period you
will use.

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Basis. Your basis in a car for figuring depreciation is gen- If your business use is 50% or less, you must use the
erally its cost. This includes any amount you borrow or pay straight line method to depreciate your car. This is ex-
in cash, other property, or services. plained later under Car Used 50% or Less for Business.
Generally, you figure depreciation on your car, truck, or
van using your unadjusted basis (see Unadjusted basis, Qualified business use. A qualified business use is any
later). However, in some situations, you will use your ad- use in your trade or business. It doesn’t include use for the
justed basis (your basis reduced by depreciation allowed production of income (investment use), or use provided
or allowable in earlier years). For one of these situations, under lease to, or as compensation to, a 5% owner or rela-
see Exception under Methods of depreciation, later. ted person. However, you do combine your business and
If you change the use of a car from personal to busi- investment use to figure your depreciation deduction for
ness, your basis for depreciation is the lesser of the fair the tax year.
market value or your adjusted basis in the car on the date Use of your car by another person. Don’t treat any
of conversion. Additional rules concerning basis are dis- use of your car by another person as use in your trade or
cussed later in this chapter under Unadjusted basis. business unless that use meets one of the following condi-
tions.
Placed in service. You generally place a car in service
when it is available for use in your work or business, in an • It is directly connected with your business.
income-producing activity, or in a personal activity. Depre- It is properly reported by you as income to the other
•
ciation begins when the car is placed in service for use in person (and, if you have to, you withhold tax on the in-
your work or business or for the production of income. come).
For purposes of figuring depreciation, if you first start
using the car only for personal use and later convert it to • It results in a payment of fair market rent. This includes
business use, you place the car in service on the date of any payment to you for the use of your car.
conversion.
Business use changes. If you used your car more than
Car placed in service and disposed of in the same 50% in qualified business use in the year you placed it in
year. If you place a car in service and dispose of it in the service, but 50% or less in a later year (including the year
same tax year, you can’t claim any depreciation deduction of disposition), you have to change to the straight line
for that car. method of depreciation. See Qualified business use 50%
or less in a later year under Car Used 50% or Less for
Methods of depreciation. Generally, you figure depreci- Business, later.
ation on cars using the Modified Accelerated Cost Recov-
ery (MACRS) discussed later in this chapter. Property doesn’t cease to be used more than
TIP 50% in qualified business use by reason of a
Exception. If you used the standard mileage rate in transfer at death.
the first year of business use and change to the actual ex-
penses method in a later year, you can’t depreciate your Use for more than one purpose. If you use your car for
car under the MACRS rules. You must use straight line de- more than one purpose during the tax year, you must allo-
preciation over the estimated remaining useful life of the cate the use to the various purposes. You do this on the
car. The amount you depreciate can’t be more than the basis of mileage. Figure the percentage of qualified busi-
depreciation limit that applies for that year. See Deprecia- ness use by dividing the number of miles you drive your
tion Limits, later. car for business purposes during the year by the total
To figure depreciation under the straight line method, number of miles you drive the car during the year for any
you must reduce your basis in the car (but not below zero) purpose.
by a set rate per mile for all miles for which you used the
standard mileage rate. The rate per mile varies depending Change from personal to business use. If you change
on the year(s) you used the standard mileage rate. For the the use of a car from 100% personal use to business use
rate(s) to use, see Depreciation adjustment when you during the tax year, you may not have mileage records for
used the standard mileage rate under Disposition of a the time before the change to business use. In this case,
Car, later. you figure the percentage of business use for the year as
This reduction of basis is in addition to those basis ad- follows.
justments described later under Unadjusted basis. You
must use your adjusted basis in your car to figure your de- 1. Determine the percentage of business use for the pe-
preciation deduction. For additional information on the riod following the change. Do this by dividing business
straight line method of depreciation, see Pub. 946. miles by total miles driven during that period.
2. Multiply the percentage in (1) by a fraction. The nu-
More-than-50%-use test. Generally, you must use your merator (top number) is the number of months the car
car more than 50% for qualified business use (defined is used for business, and the denominator (bottom
next) during the year to use MACRS. You must meet this number) is 12.
more-than-50%-use test each year of the recovery period
(6 years under MACRS) for your car. Example. You use a car only for personal purposes
during the first 6 months of the year. During the last 6
months of the year, you drive the car a total of 15,000

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miles of which 12,000 miles are for business. This gives plete Form 2106, Part II, Section D. This method is ex-
you a business use percentage of 80% (12,000 ÷ 15,000) plained later, beginning at Effect of trade-in on basis.
for that period. Your business use for the year is 40%
Form 2106 is only used by Armed Forces reserv-
(80% (0.80) × / ).6 12
ists, qualified performing artists, fee-basis state or
Limits. The amount you can claim for section 179, spe- CAUTION! local government officials, and employees with
cial depreciation allowance, and depreciation deductions impairment-related work expenses. Due to the suspension
may be limited. The maximum amount you can claim de- of miscellaneous itemized deductions subject to the 2%
pends on the year in which you placed your car in service. floor under section 67(a), employees who do not fit into
You have to reduce the maximum amount if you did not one of the listed categories may not use Form 2106.
use the car exclusively for business. See Depreciation
Limits, later. Effect of trade-in on basis. The discussion that fol-
lows applies to trade-ins of cars in 2023, where the elec-
Unadjusted basis. You use your unadjusted basis (often tion was made to treat the transaction as a disposition of
referred to as your basis or your basis for depreciation) to the old car and the purchase of the new car. For informa-
figure your depreciation using the MACRS depreciation tion on how to figure depreciation for cars involved in a
chart, explained later under Modified Accelerated Cost like-kind exchange (trade-in) in 2023, for which the elec-
Recovery System (MACRS). Your unadjusted basis for fig- tion wasn’t made, see Pub. 946 and Regulations section
uring depreciation is your original basis increased or de- 1.168(i)-6(d)(3).
creased by certain amounts.
To figure your unadjusted basis, begin with your car's Note. Like-kind exchanges completed after December
original basis, which is generally its cost. Cost includes 31, 2017, are generally limited to exchanges of real prop-
sales taxes (see Sales taxes, earlier), destination charges, erty not held primarily for sale. Regulations section
and dealer preparation. Increase your basis by any sub- 1.168(i)-6 doesn't reflect this change in law.
stantial improvements you make to your car, such as add- Traded car used only for business. If you trade in a
ing air conditioning or a new engine. Decrease your basis car you used only in your business for another car that will
by any section 179 deduction, special depreciation allow- be used only in your business, your original basis in the
ance, gas guzzler tax, and vehicle credits claimed. See new car is your adjusted basis in the old car, plus any ad-
Pub. 551, Basis of Assets, for further details. ditional amount you pay for the new car.
If your business use later falls to 50% or less, you
Example. You trade in a car that has an adjusted basis
! may have to recapture (include in your income) of $5,000 for a new car. In addition, you pay cash of
CAUTION any excess depreciation. See Car Used 50% or
$20,000 for the new car. Your original basis of the new car
Less for Business, later, for more information.
is $25,000 (your $5,000 adjusted basis in the old car plus
the $20,000 cash paid). Your unadjusted basis is $25,000
If you acquired the car by gift or inheritance, see Pub. unless you claim the section 179 deduction, special de-
551, Basis of Assets, for information on your basis in the preciation allowance, or have other increases or decrea-
car. ses to your original basis, discussed under Unadjusted
Improvements. A major improvement to a car is trea- basis, earlier.
ted as a new item of 5-year recovery property. It is treated Traded car used partly in business. If you trade in a
as placed in service in the year the improvement is made. car you used partly in your business for a new car you will
It doesn’t matter how old the car is when the improvement use in your business, you must make a “trade-in” adjust-
is added. Follow the same steps for depreciating the im- ment for the personal use of the old car. This adjustment
provement as you would for depreciating the original cost has the effect of reducing your basis in your old car, but
of the car. However, you must treat the improvement and not below zero, for purposes of figuring your depreciation
the car as a whole when applying the limits on the depre- deduction for the new car. (This adjustment isn’t used,
ciation deductions. Your car's depreciation deduction for however, when you determine the gain or loss on the later
the year (plus any section 179 deduction, special depreci- disposition of the new car. See Pub. 544, Sales and Other
ation allowance, and depreciation on any improvements) Dispositions of Assets, for information on how to report the
can’t be more than the depreciation limit that applies for disposition of your car.)
that year. See Depreciation Limits, later. To figure the unadjusted basis of your new car for de-
preciation, first add to your adjusted basis in the old car
Car trade-in. If you traded one car (the “old car”) for an-
any additional amount you pay for the new car. Then sub-
other car (the “new car”) in 2023, you must treat the trans-
tract from that total the excess, if any, of:
action as a disposition of the old car and the purchase of
the new car. You must treat the old car as disposed of at 1. The total of the amounts that would have been allowa-
the time of the trade-in. The depreciable basis of the new ble as depreciation during the tax years before the
car is the adjusted basis of the old car (figured as if 100% trade if 100% of the use of the car had been business
of the car’s use had been for business purposes) plus any and investment use, over
additional amount you paid for the new car. You then fig-
2. The total of the amounts actually allowed as deprecia-
ure your depreciation deduction for the new car beginning
tion during those years.
with the date you placed it in service. You must also com-

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For information about figuring depreciation, see Modified You must use the Depreciation Tables in Pub. 946
Accelerated Cost Recovery System (MACRS) next. rather than the 2023 MACRS Depreciation Chart in this
publication if any one of the following three conditions ap-
Modified Accelerated Cost Recovery System plies to you.
(MACRS). MACRS is the name given to the tax rules for
getting back (recovering) through depreciation deductions 1. You file your return on a fiscal year basis.
the cost of property used in a trade or business or to pro- 2. You file your return for a short tax year (less than 12
duce income. months).
The maximum amount you can deduct is limited, de-
pending on the year you placed your car in service. See 3. During the year, all of the following conditions apply.
Depreciation Limits, later. a. You placed some property in service from January
Recovery period. Under MACRS, cars are classified through September.
as 5-year property. You actually depreciate the cost of a b. You placed some property in service from October
car, truck, or van over a period of 6 calendar years. This is through December.
because your car is generally treated as placed in service
in the middle of the year, and you claim depreciation for c. Your basis in the property you placed in service
one-half of both the first year and the sixth year. from October through December (excluding non-
residential real property, residential rental property,
For more information on the qualifications for this and property placed in service and disposed of in
shorter recovery period and the percentages to use in fig- the same year) was more than 40% of your total
uring the depreciation deduction, see chapter 4 of Pub. bases in all property you placed in service during
946. the year.
Depreciation methods. You can use one of the fol- Depreciation in future years. If you use the percen-
lowing methods to depreciate your car. tages from the chart, you generally must continue to use
• The 200% declining balance method (200% DB) over them for the entire recovery period of your car. However,
a 5-year recovery period that switches to the straight you can’t continue to use the chart if your basis in your car
line method when that method provides an equal or is adjusted because of a casualty. In that case, for the year
greater deduction. of the adjustment and the remaining recovery period, fig-
ure the depreciation without the chart using your adjusted
• The 150% declining balance method (150% DB) over basis in the car at the end of the year of the adjustment
a 5-year recovery period that switches to the straight and over the remaining recovery period. See Figuring the
line method when that method provides an equal or Deduction Without Using the Tables in chapter 4 of Pub.
greater deduction. 946.
• The straight line method (SL) over a 5-year recovery In future years, don’t use the chart in this edition
period. TIP of the publication. Instead, use the chart in the
If you use Table 4-1 (discussed later) to determine publication or the form instructions for those future
TIP your depreciation rate for 2023, you don’t need to years.
determine in what year using the straight line
method provides an equal or greater deduction. This is Disposition of car during recovery period. If you
because the chart has the switch to the straight line dispose of the car before the last year of the recovery pe-
method built into its rates. riod, you are generally allowed a half-year of depreciation
in the year of disposition. This rule applies unless the
Before choosing a method, you may wish to consider mid-quarter convention applies to the vehicle being dis-
the following facts. posed of. See Depreciation deduction for the year of dis-
• Using the straight line method provides equal yearly position under Disposition of a Car, later, for information
deductions throughout the recovery period. on how to figure the depreciation allowed in the year of
disposition.
• Using the declining balance methods provides greater
deductions during the earlier recovery years with the How to use the 2023 chart. To figure your deprecia-
deductions generally getting smaller each year. tion deduction for 2023, find the percentage in the column
of Table 4-1 based on the date that you first placed the car
MACRS depreciation chart. A 2023 MACRS Deprecia- in service and the depreciation method that you are using.
tion Chart and instructions are included in this chapter as Multiply the unadjusted basis of your car (defined earlier)
Table 4-1. Using this table will make it easy for you to fig- by that percentage to determine the amount of your depre-
ure the 2023 depreciation deduction for your car. A similar ciation deduction. If you prefer to figure your depreciation
chart appears in the Instructions for Form 2106. deduction without the help of the chart, see Pub. 946.
You may have to use the tables in Pub. 946 in- Your deduction can’t be more than the maximum
! stead of using this MACRS Depreciation Chart. ! depreciation limit for cars. See Depreciation Lim-
CAUTION CAUTION its, later.

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 Example.  You bought a used truck in February 2022 to                                                                  Maximum
use  exclusively  in  your  landscape  business.  You  paid                                                Depreciation Deduction
$9,200 for the truck with no trade-in. You didn’t claim any                                  for Passenger Automobiles (Including 
section 179 deduction, the truck didn’t qualify for the spe-
                                                                                                                        Trucks and
cial  depreciation  allowance,  and  you  chose  to  use  the 
200% DB method to get the largest depreciation deduc-                                       Vans) Acquired After September 27, 2017, 
tion in the early years.                                                                                                        and
 You  used  the  MACRS  Depreciation  Chart  in  2022  to                                    Placed in Service During 2018 or Later
find  your  percentage.  The  unadjusted  basis  of  the  truck                              Date                                                                     4th &
equals  its  cost  because  you  used  it  exclusively  for  busi-                           Placed in              1st         2nd     3rd                           Later
ness.  You  multiplied  the  unadjusted  basis  of  the  truck,                              Service       Year                 Year    Year           Years
$9,200,  by  the  percentage  that  applied,  20%,  to  figure                               2023          $20,2001             $19,500 $11,700        $6,960
your 2022 depreciation deduction of $1,840.                                                  2022          19,2002              18,000  10,800                        6,460
 In 2023, you used the truck for personal purposes when                                      2021           18,2003              16,400  9,800                         5,860
you repaired your parent’s cabin. Your records show that                                     2019–2020      18,1004              16,100  9,700                         5,760
the business use of the truck was 90% in 2023. You used                                      2018           18,0005              16,000  9,600                         5,760
Table 4-1 to find your percentage. Reading down the first                                   1 $12,200 if the passenger automobile isn’t qualified property or if you elect not to claim 
column  for  the  date  placed  in  service  and  across  to  the                            the special depreciation allowance.
200% DB column, you locate your percentage, 32%. You                                        2 $11,200 if the passenger automobile isn’t qualified property or if you elect not to claim 
multiply the unadjusted basis of the truck, $8,280 ($9,200                                   the special depreciation allowance.
cost × 90% (0.90) business use), by 32% (0.32) to figure                                    3 $10,200 if the passenger automobile isn’t qualified property or if you elect not to claim 
your 2023 depreciation deduction of $2,650.                                                  the special depreciation allowance.
                                                                                            4 $10,100 if the passenger automobile isn’t qualified property or if you elect not to claim 
                                                                                             the special depreciation allowance.
Depreciation Limits                                                                         5 $10,000 if the passenger automobile isn’t qualified property or if you elect not to claim 
                                                                                             the special depreciation allowance.
There are limits on the amount you can deduct for depre-
ciation of your car, truck, or van. The section 179 deduc-                                   The  maximum  amount  you  can  deduct  each  year  de-
tion and special depreciation allowance are treated as de-                                  pends on the year you place the car in service. These lim-
preciation  for  purposes  of  the  limits.  The  maximum                                   its are shown in the following tables for prior years.
amount  you  can  deduct  each  year  depends  on  the  date 
you acquired the passenger automobile and the year you 
place  the  passenger  automobile  in  service.  These  limits                                                          Maximum
are shown in the following tables for 2023.                                                                Depreciation Deduction
                                                                                                       for Cars Placed in Service
                  Maximum                                                                                           Prior to 2018
           Depreciation Deduction                                                            Date                                                                     4th &
 for Passenger Automobiles (Including                                                        Placed                 1st         2nd     3rd                           Later
                                                                                             in Service             Year        Year    Year                          Years
                Trucks and
Vans) Acquired Before September 28, 2017,                                                    2012–2017     $11,1601             $5,100  $3,050                        $1,875
                                    and                                                      2010–2011      11,0602              4,900   2,950                        1,775
 Placed in Service During 2018–2023                                                          2008–2009      10,9603              4,800   2,850                         1,775
                                                                                             2007          3,060                 4,900   2,850                        1,775
 Date                                               4th &                                    2006          2,960                 4,800   2,850                        1,775
 Placed in 1st                      2nd     3rd     Later
 Service   Year                     Year    Year    Years                                    2005          2,960                 4,700   2,850                        1,675
 2023      $12,200                  $19,500 $11,700 $6,960                                   2004          10,6103               4,800   2,850                        1,675
 2022      11,200                   18,000  10,800  6,460                                    5/06/2003–    10,7104               4,900   2,950                        1,775
 2021      10,200                   16,400   9,800   5,860                                   12/31/2003
 2020       10,100                   16,100  9,700   5,760                                   1/01/2003–    7,6605                4,900   2,950                        1,775
                                                                                             5/05/2003
 2019       14,9001                  16,100  9,700   5,760                                  1 $3,160 if the car isn’t qualified property or if you elect not to claim the special 
 2018       16,4002                  16,000  9,600   5,760
                                                                                             depreciation allowance.
1 $10,100 if the passenger automobile isn’t qualified property or if you elect not to claim 2 $3,060 if the car isn’t qualified property or if you elect not to claim the special 
 the special depreciation allowance.
                                                                                             depreciation allowance.
2 $10,000 if the passenger automobile isn’t qualified property or if you elect not to claim 3 $2,960 if the car isn’t qualified property or if you elect not to claim the special 
 the special depreciation allowance.
                                                                                             depreciation allowance.
                                                                                            4 $7,660 if you acquired the car before 5/06/2003. $3,060 if the car isn’t qualified 
                                                                                             property or if you elect not to claim any special depreciation allowance.
                                                                                            5 $3,060 if you acquired the car before 9/11/2001, the car isn’t qualified property, or 
                                                                                             you elect not to claim the special depreciation allowance.

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 Trucks  and  vans.     For  tax  years  prior  to  2018,  the                        the  special  depreciation  allowance  and  depreciation  de-
maximum depreciation deductions for trucks and vans are                               duction for that vehicle for 2023 is limited to $20,200.
generally  higher  than  those  for  cars.  A  truck  or  van  is  a 
passenger  automobile  that  is  classified  by  the  manufac-                        Example.       On  September  4,  2023,  you  bought  and 
turer as a truck or van and rated at 6,000 pounds gross                               placed in service a used car for $15,000. You used it 80% 
vehicle weight or less.                                                               for your business, and you choose to take a section 179 
                  Maximum                                                             deduction  for  the  car.  The  car  isn’t  qualified  property  for 
                                                                                      purposes of the special depreciation allowance.
              Depreciation Deduction
                                                                                      Before applying the limit, you figure your maximum sec-
                  for Trucks and Vans                                                 tion 179 deduction to be $12,000. This is the cost of your 
                  Placed in Service                                                   qualifying  property  (up  to  the  maximum  $1,160,000 
                  Prior to 2018                                                       amount) multiplied by your business use ($15,000 × 80% 
 Maximum Depreciation Deduction for Trucks and                                        (0.80)).
         Vans Placed in Service Prior to 2018                                         You  then  figure  that  your  section  179  deduction  for 
                                                                                      2023 is limited to $9,760 (80% of $12,200). You then fig-
   Date                                         4th &                                 ure  your  unadjusted  basis  of  $2,440  (($15,000  ×  80% 
   Placed         1st            2nd    3rd     Later                                 (0.80)) − $9,760) for determining your depreciation deduc-
   in Service     Year           Year   Year    Years                                 tion.  You  have  reached  your  maximum  depreciation  de-
   2017           $11,5601       $5,700 $3,450  $2,075                                duction for 2023. For 2024, you will use your unadjusted 
   2016            11,5601       5,700    3,350 2,075                                 basis of $2,440 to figure your depreciation deduction.
   2015            11,4601       5,600    3,350 1,975
                                                                                      Deductions in years after the recovery period.          If the 
   2014            11,4601       5,500    3,350 1,975
                                                                                      depreciation  deductions  for  your  car  are  reduced  under 
   2013            11,3601       5,400    3,250 1,975
                                                                                      the passenger  automobile  limits  (discussed  earlier),  you 
   2012            11,3601       5,300    3,150 1,875                                 will have unrecovered basis in your car at the end of the 
   2011            11,2601       5,200    3,150 1,875                                 recovery period. If you continue to use your car for busi-
   2010            11,1601       5,100    3,050 1,875                                 ness, you can deduct that unrecovered basis (subject to 
   2009            11,0601       4,900    2,950 1,775                                 depreciation limits) after the recovery period ends.
   2008            11,1601       5,100    3,050 1,875
                                                                                      Unrecovered basis. This is your cost or other basis in 
   2007               3,260      5,200    3,050 1,875                                 the  car  reduced  by  any  clean-fuel  vehicle  deduction  (for 
   2005–2006          3,260      5,200    3,150 1,875                                 vehicles placed in service before January 1, 2006), alter-
   2004            10,9101       5,300    3,150 1,875                                 native motor vehicle credit, electric vehicle credit, gas guz-
   2003            11,0101, 2    5,400    3,250 1,975                                 zler tax, and depreciation (including any special deprecia-
1 If the special depreciation allowance doesn’t apply or you make the election not to tion allowance, discussed earlier, unless you elect not to 
 claim the special depreciation allowance, the first-year limit is $3,560 for 2017    claim it) and section 179 deductions that would have been 
 and 2016, $3,460 for 2015 and 2014, $3,360 for 2013 and 2012, $3,260 for             allowable if you had used the car 100% for business and 
 2011, $3,160 for 2010, $3,060 for 2009, $3,160 for 2008, $3,260 for 2004, and 
 $3,360 for 2003.                                                                     investment use.
2 If the truck or van was acquired before 5/06/2003, the truck or van is qualified    The recovery period. For 5-year property, your recov-
 property, and you claim the special depreciation allowance for the truck or van,     ery period is 6 calendar years. A part year's depreciation 
 the maximum deduction is $7,960.
                                                                                      is allowed in the first calendar year, a full year's deprecia-
 Car used less than full year.        The depreciation limits                         tion is allowed in each of the next 4 calendar years, and a 
aren’t  reduced  if  you  use  a  car  for  less  than  a  full  year.                part  year's  depreciation  is  allowed  in  the  6th  calendar 
This means that you don’t reduce the limit when you either                            year.
place a car in service or dispose of a car during the year.                           Under  MACRS,  your  recovery  period  is  the  same 
However, the depreciation limits are reduced if you don’t                             whether you use declining balance or straight line depreci-
use the car exclusively for business and investment purpo-                            ation.  You  determine  your  unrecovered  basis  in  the  7th 
ses. See Reduction for personal use next.                                             year after you placed the car in service.
                                                                                      How  to  treat  unrecovered  basis.      If  you  continue  to 
Reduction for personal use.      The depreciation limits are                          use  your  car  for  business  after  the  recovery  period,  you 
reduced based on your percentage of personal use. If you                              can  claim  a  depreciation  deduction  in  each  succeeding 
use a car less than 100% in your business or work, you                                tax year until you recover your basis in the car. The maxi-
must determine the depreciation deduction limit by multi-                             mum amount you can deduct each year is determined by 
plying the limit amount by the percentage of business and                             the  date  you  placed  the  car  in  service  and  your  busi-
investment use during the tax year.                                                   ness-use  percentage.  For  example,  no  deduction  is  al-
                                                                                      lowed for a year you use your car 100% for personal pur-
Section  179  deduction.         The  section  179  deduction  is 
                                                                                      poses.
treated as a depreciation deduction. If you acquired a pas-
senger automobile (including trucks and vans) after Sep-                              Example.       In  April  2017,  you  bought  and  placed  in 
tember 27, 2017, and placed it in service in 2023, use it                             service a car you used exclusively in your business. The 
only for business, and choose the section 179 deduction,                              car cost $31,500. You didn’t claim a section 179 deduction 

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or the special depreciation allowance for the car. You con- Qualified business use 50% or less in year placed in
tinued to use the car 100% in your business throughout service. If you use your car 50% or less for qualified busi-
the recovery period (2017 through 2022). For those years, ness use, the following rules apply.
you used the MACRS Depreciation Chart (200% DB
• You can’t take the section 179 deduction.
method), the Maximum Depreciation Deduction for Cars
Placed in Service Prior to 2018 table and Maximum De- • You can’t take the special depreciation allowance.
preciation Deduction for Passenger Automobiles (Includ- • You must figure depreciation using the straight line
ing Trucks and Vans) Acquired Before September 28, method over a 5-year recovery period. You must con-
2017, and Placed in Service During 2018–2023 table, ear- tinue to use the straight line method even if your per-
lier, for the applicable tax year to figure your depreciation centage of business use increases to more than 50%
deductions during the recovery period. Your depreciation in a later year.
deductions were subject to the depreciation limits, so you
will have unrecovered basis at the end of the recovery pe- Instead of making the computation yourself, you can
riod as shown in the following table. use column (c) of Table 4-1 to find the percentage to use.

Example. In May 2023, you bought and placed in
MACRS Deprec.
Year % Amount Limit Allowed service a car for $17,500. You used it 40% for your con-
2017 20.00 $6,300 $3,160 $3,160 sulting business. Because you didn’t use the car more
2018 32.00 10,080 5,100 5,100 than 50% for business, you can’t take any section 179 de-
2019 19.20 6,048 3,050 3,050 duction or special depreciation allowance, and you must
2020 11.52 3,629 1,875 1,875 use the straight line method over a 5-year recovery period
2021 11.52 3,629 1,875 1,875 to recover the cost of your car.
2022 5.76 1,814 1,875 1,814
Total $31,500 $16,874 You deduct $700 in 2023. This is the lesser of:
1. $700 (($17,500 cost × 40% (0.40) business use) ×
For the correct limit, see the Maximum Depreciation 10% (0.10) recovery percentage (from column (c) of
Deduction for Cars Placed in Service Prior to 2018 table Table 4-1)), or
and the Maximum Depreciation Deduction for Passenger
Automobiles (Including Trucks and Vans) Acquired Before 2. $4,880 ($12,200 maximum limit × 40% (0.40) busi-
September 28, 2017, and Placed in Service During 2018– ness use).
2023 table under Depreciation Limits , earlier, for the maxi-
Qualified business use 50% or less in a later year. If
mum amount of depreciation allowed each year.
you use your car more than 50% in qualified business use
At the end of 2022, you had an unrecovered basis in
in the tax year it is placed in service but the business use
the car of $14,626 ($31,500 – $16,874). If you continued
drops to 50% or less in a later year, you can no longer use
to use the car 100% for business in 2023 and later years,
an accelerated depreciation method for that car.
you can claim a depreciation deduction equal to the lesser
For the year the business use drops to 50% or less and
of $1,875 or your remaining unrecovered basis.
all later years in the recovery period, you must use the
If your business use of the car was less than 100% dur-
straight line depreciation method over a 5-year recovery
ing any year, your depreciation deduction would be less
period. In addition, for the year your business use drops to
than the maximum amount allowable for that year. How-
50% or less, you must recapture (include in your gross in-
ever, in determining your unrecovered basis in the car, you
come) any excess depreciation (discussed later). You also
would still reduce your original basis by the maximum
increase the adjusted basis of your car by the same
amount allowable as if the business use had been 100%.
amount.
For example, if you had used your car 60% for business
instead of 100%, your allowable depreciation deductions Example. In June 2020, you purchased a car for exclu-
would have been $10,124 ($16,874 × 60% (0.60)), but you sive use in your business. You met the
still would have to reduce your basis by $16,874 to deter- more-than-50%-use test for the first 3 years of the recov-
mine your unrecovered basis. ery period (2020 through 2022) but failed to meet it in the
fourth year (2023). You determine your depreciation for
Car Used 50% or Less 2023 using 20% (from column (c) of Table 4-1). You will
for Business also have to determine and include in your gross income
any excess depreciation, discussed next.
If you use your car 50% or less for qualified business use
(defined earlier under Depreciation Deduction) either in Excess depreciation. You must include any excess
the year the car is placed in service or in a later year, spe- depreciation in your gross income and add it to your car's
cial rules apply. The rules that apply in these two situa- adjusted basis for the first tax year in which you don’t use
tions are explained in the following paragraphs. (For this the car more than 50% in qualified business use. Use
purpose, “car” was defined earlier under Actual Car Ex- Form 4797, Sales of Business Property, to figure and re-
penses and includes certain trucks and vans.) port the excess depreciation in your gross income.
Excess depreciation is:
1. The amount of the depreciation deductions allowable
for the car (including any section 179 deduction

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Table 4-1. 2023 MACRS Depreciation Chart
(Use To Figure Depreciation for 2023)
If you claim actual expenses for your car, use the chart below to find the For cars placed in service before 2023, you must use the same
depreciation method and percentage to use for your 2023 return for cars method you used on last year's return unless a decline in your
placed in service in 2023. business use requires you to change to the straight line method. Refer
back to the MACRS Depreciation Chart for the year you placed the car
First, using the left column, find the date you first placed the car in service in in service. (See Car Used 50% or Less for Business, earlier.)
2023. Then select the depreciation method and percentage from column
(a), (b), or (c) following the rules explained in this chapter. Multiply the unadjusted basis of your car by your business-use
percentage. Multiply the result by the percentage you found in the
chart to find the amount of your depreciation deduction for 2023. (Also
see Depreciation Limits, earlier.)
If you placed your car in service after September of any year and you placed other business property in service during the same
year, you may have to use the Jan. 1–Sept. 30 percentage instead of the Oct. 1–Dec. 31 percentage for your car. To find out if this
CAUTION! applies to you, determine: 1) the basis of all business property (including other cars) you placed in service after September of that
year, and 2) the basis of all business property you placed in service during that entire year. If the basis of the property placed in
service after September isn’t more than 40% of the basis of all property (certain property is excluded) placed in service for the entire
year, use the percentage for Jan. 1–Sept. 30 for figuring depreciation for your car. See Which Convention Applies? in chapter 4 of
Pub. 946 for more details.

Example. You buy machinery (basis of $32,000) in May 2023 and a new van (basis of $20,000) in October 2023, both used 100% in your business.
You use the percentage for Jan. 1–Sept. 30, 2023, to figure the depreciation for your van. This is because the $20,000 basis of the property (van)
placed in service after September isn’t more than 40% of the basis of all property placed in service during the year (40% (0.40) × ($32,000 + 20,000)
= $20,800).

(a) (b) (c)
200% Declining 150% Declining Straight Line
Balance (200% DB)
Date Placed in Service 1 Balance (150% DB)1 (SL)
Oct. 1–Dec. 31, 2023 200 DB 5.0% 150 DB 3.75% SL 2.5%
Jan. 1–Sept. 30, 2023 200 DB 20.0 150 DB 15.0 SL 10.0
Oct. 1–Dec. 31, 2022 200 DB 38.0 150 DB 28.88 SL 20.0
Jan. 1–Sept. 30, 2022 200 DB 32.0 150 DB 25.5 SL 20.0
Oct. 1–Dec. 31, 2021 200 DB 22.8 150 DB 20.21 SL 20.0
Jan. 1–Sept. 30, 2021 200 DB 19.2 150 DB 17.85 SL 20.0
Oct. 1–Dec. 31, 2020 200 DB 13.68 150 DB 16.4 SL 20.0
Jan. 1–Sept. 30, 2020 200 DB 11.52 150 DB 16.66 SL 20.0
Oct. 1–Dec. 31, 2019 200 DB 10.94 150 DB 16.41 SL 20.0
Jan. 1–Sept. 30, 2019 200 DB 11.52 150 DB 16.66 SL 20.0
Oct. 1–Dec. 31, 2018 200 DB 9.58 150 DB 14.35 SL 17.5
Jan. 1–Sept. 30, 2018 200 DB 5.76 150 DB 8.33 SL 10.0
Prior to 20182
1 You can use this column only if the business use of your car is more than 50%.
2 If your car was subject to the maximum limits for depreciation and you have unrecovered basis in the car, you can continue to claim depreciation. See
Deductions in years after the recovery period under Depreciation Limits, earlier.

claimed and any special depreciation allowance 2019, 2020, 2021, and 2022. For those years, you used
claimed) for tax years in which you used the car more the appropriate MACRS Depreciation Chart to figure de-
than 50% in qualified business use, minus preciation deductions totaling $13,185 ($3,160 for 2019,
$5,100 for 2020, $3,050 for 2021, and $1,875 for 2022)
2. The amount of the depreciation deductions that would
under the 200% DB method.
have been allowable for those years if you hadn’t used
During 2023, you used the car 30% for business and
the car more than 50% in qualified business use for
70% for personal purposes. Since you didn’t meet the
the year you placed it in service. This means the
more-than-50%-use test, you must switch from the 200%
amount of depreciation figured using the straight line
DB depreciation method to the straight line depreciation
method.
method for 2023, and include in gross income for 2023
Example. In September 2019, you bought a car for your excess depreciation determined as follows.
$20,500 and placed it in service. You didn’t claim the sec-
tion 179 deduction or the special depreciation allowance.
You used the car exclusively in qualified business use for

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Total depreciation claimed: The inclusion amount is a percentage of part of the fair
(MACRS 200% DB method) . . . . . . . . . . . . . . . . . $13,185 market value of the leased vehicle multiplied by the per-
Minus total depreciation allowable: centage of business and investment use of the vehicle for
(Straight line method)
2019—10% of $20,500. . . . . . . . . . . . . . $2,050 the tax year. It is prorated for the number of days of the
(Limit: $3,160) lease term in the tax year.
2020—20% of $20,500. . . . . . . . . . . . . . 4,100
(Limit: $5,100) The inclusion amount applies to each tax year that you
2021—20% of $20,500. . . . . . . . . . . . . . 3,050 lease the vehicle if the fair market value (defined next)
(Limit: $3,050)
2022—20% of $20,500. . . . . . . . . . . . . . 1,875 –11,075 when the lease began was more than the amounts shown
(Limit: $1,875) in the following tables.
Excess depreciation. . . . . . . . . . . . . . . . $2,110
All vehicles are subject to a single inclusion amount
For the correct limit, see the Maximum Depreciation threshold for passenger automobiles leased and put into
Deduction for Cars Placed in Service Prior to 2018 table service in 2023. You may have an inclusion amount for a
and the Maximum Depreciation Deduction for Passenger passenger automobile if:
Automobiles (Including Trucks and Vans) Acquired Before Passenger Automobiles
September 28, 2017, and Placed in Service During (Including Trucks and Vans)
2018-2023 table under Depreciation Limits, earlier, for the
maximum amount of depreciation allowed each year. Year Lease Began Fair Market Value
In 2023, using Form 4797, you figure and report the 2023 $60,000
$2,110 excess depreciation you must include in your 2022 56,000
gross income. Your adjusted basis in the car is also in- 2021 51,000
2018 –2020
creased by $2,110. Your 2023 depreciation is $1,230 * 50,000
($20,500 (unadjusted basis) × 30% (0.30) (business-use *If the lease term began before 2018, see tables below to find out if you have an inclusion amount.
percentage) × 20% (0.20) (from column (c) of Table 4-1 on
the line for Jan. 1–Sept. 30, 2019)). However, your depre-
ciation deduction is limited to $563 ($1,875 x 30% (0.30) For years prior to 2018, see the inclusion tables below.
business use). You may have an inclusion amount for a passenger auto-
mobile if:
Leasing a Car Cars
(Except for Trucks and Vans)
If you lease a car, truck, or van that you use in your busi-
ness, you can use the standard mileage rate or actual ex- Year Lease Began Fair Market Value
penses to figure your deductible expense. This section ex- 2013–2017 $19,000
plains how to figure actual expenses for a leased car, 2010–2012 18,500
truck, or van.
Deductible payments. If you choose to use actual ex- Trucks and Vans
penses, you can deduct the part of each lease payment
Year Lease Began Fair Market Value
that is for the use of the vehicle in your business. You can’t
2014–2017 $19,500
deduct any part of a lease payment that is for personal 2010–2013 19,000
use of the vehicle, such as commuting.
You must spread any advance payments over the entire
lease period. You can’t deduct any payments you make to Fair market value. Fair market value is the price at which
buy a car, truck, or van even if the payments are called the property would change hands between a willing buyer
“lease payments.” and seller, neither having to buy or sell, and both having
If you lease a car, truck, or van for 30 days or more, you reasonable knowledge of all the necessary facts. Sales of
may have to reduce your lease payment deduction by an similar property around the same date may be helpful in
“inclusion amount,” explained next. figuring the fair market value of the property.
Figure the fair market value on the first day of the lease
Inclusion Amounts term. If the capitalized cost of a car is specified in the
lease agreement, use that amount as the fair market
If you lease a car, truck, or van that you use in your busi- value.
ness for a lease term of 30 days or more, you may have to
include an inclusion amount in your income for each tax Figuring the inclusion amount. Inclusion amounts for
year you lease the vehicle. To do this, you don’t add an tax years 2018–2023 are listed in Appendices A-1 through
amount to income. Instead, you reduce your deduction for A-6 for passenger vehicles (including trucks and vans). If
your lease payment. (This reduction has an effect similar the fair market value of the vehicle is $100,000 or less, use
to the limit on the depreciation deduction you would have the appropriate appendix (depending on the year you first
on the vehicle if you owned it.) placed the vehicle in service) to determine the inclusion
amount. If the fair market value is more than $100,000,

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see the revenue procedure(s) identified in the footnote of and reduced your deductions for lease payments by those
that year’s appendix for the inclusion amount. amounts.
For each tax year during which you lease the car for
business, determine your inclusion amount by following Inclusion
these three steps. Tax year Dollar amount Proration Business use amount
2022 $11 137/365 100% $4
1. Locate the appendix that applies to you. To find the in- 2023 11 309/365 100% 9
clusion amount, do the following.
a. Find the line that includes the fair market value of Leased car changed from personal to business use.
the car on the first day of the lease term. If you lease a car for personal use and, in a later year,
change it to business use, you must determine the car's
b. Go across the line to the column for the tax year in fair market value on the date of conversion. Then figure
which the car is used under the lease to find the the inclusion amount using the rules explained earlier un-
dollar amount. For the last tax year of the lease, der Figuring the inclusion amount. Use the fair market
use the dollar amount for the preceding year. value on the date of conversion.
2. Prorate the dollar amount from (1b) for the number of
days of the lease term included in the tax year. Example. In March 2021, you leased a truck for 4
years for personal use. On June 1, 2023, you started
3. Multiply the prorated amount from (2) by the percent- working as a self-employed advertising consultant and
age of business and investment use for the tax year. started using the leased truck for business purposes. Your
This is your inclusion amount. records show that your business use for June 1 through
December 31 was 60%. To figure your inclusion amount
Example. On January 17, 2023, you leased a car for 3 for 2023, you obtained an appraisal from an independent
years and placed it in service for use in your business. car leasing company that showed the fair market value of
The car had a fair market value of $62,500 on the first day your 2021 truck on June 1, 2023, was $62,650. Using Ap-
of the lease term. You use the car 75% for business and pendix A-6, you figured your inclusion amount for 2023 as
25% for personal purposes during each year of the lease. shown in the following table.
Assuming you continue to use the car 75% for business,
you use Appendix A-6 to arrive at the following inclusion Dollar Inclusion
amounts for each year of the lease. For the last tax year of Tax year amount Proration Business use amount
the lease, 2026, you use the amount for the preceding 2023 $13 214/365 60% $5
year.
Reporting inclusion amounts. For information on re-
Dollar Inclusion
Tax year amount Proration Business use amount porting inclusion amounts, employees should see Car
rentals under Completing Forms 2106 in chapter 6. Sole
2023 $13 348/365 75% $9 proprietors should see the Instructions for Schedule C
2024 29 366/366 75% 22
2025 43 365/365 75% 32 (Form 1040), and farmers should see the Instructions for
2026 43 16/365 75% 1 Schedule F (Form 1040).

Note. 2024 is a leap year and includes an extra calen-
dar day, February 29, 2024. Disposition of a Car
For each year of the lease that you deduct lease pay-
ments, you must reduce your deduction by the inclusion If you dispose of your car, you may have a taxable gain or
amount figured for that year. a deductible loss. The portion of any gain that is due to
depreciation (including any section 179 deduction,
Leased car changed from business to personal use. clean-fuel vehicle deduction (for vehicles placed in service
If you lease a car for business use and, in a later year, before January 1, 2006), and special depreciation allow-
change it to personal use, follow the rules explained ear- ance) that you claimed on the car will be treated as ordi-
lier under Figuring the inclusion amount. For the tax year nary income. However, you may not have to recognize a
in which you stop using the car for business, use the dollar gain or loss if you dispose of the car because of a casualty
amount for the previous tax year. Prorate the dollar or theft.
amount for the number of days in the lease term that fall
within the tax year. This section gives some general information about dis-
positions of cars. For information on how to report the dis-
Example. On August 16, 2022, you leased a car with a position of your car, see Pub. 544.
fair market value of $64,500 for 3 years. You used the car
exclusively in your data processing business. On Novem- Note. Like-kind exchanges completed after December
ber 6, 2023, you closed your business and went to work 31, 2017, are generally limited to exchanges of real prop-
for a company where you aren’t required to use a car for erty not held primarily for sale.
business. Using Appendix A-5, you figured your inclusion
amount for 2022 and 2023 as shown in the following table Casualty or theft. For a casualty or theft, a gain results
when you receive insurance or other reimbursement that

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is more than your adjusted basis in your car. If you then           portion  of  your  car  expense  deduction  is  figured  as  fol-
spend all of the proceeds to acquire replacement property           lows.
(a new car or repairs to the old car) within a specified pe-
riod  of  time,  you  don’t  recognize  any  gain.  Your  basis  in      Year                    Miles x Rate                      Depreciation
the  replacement  property  is  its  cost  minus  any  gain  that        2018                   14,100 × $0.25                     $3,525
isn’t recognized. See Pub. 547 for more information.                     2019                    16,300 × 0.26                      4,238
                                                                         2020                    15,600 × 0.27                      4,212
Trade-in. When you trade in an old car for a new one, the                2021                    16,700 × 0.26                      4,342
transaction is considered a like-kind exchange. Generally,               2022                    15,100 × 0.26                      3,926
                                                                         2023                    14,900 × 0.28                      4,172
no gain or loss is recognized. (For exceptions, see chap-
                                                                    Total depreciation                                             $24,415
ter 1 of Pub. 544.) In a trade-in situation, your basis in the 
new  property  is  generally  your  adjusted  basis  in  the  old   At  the  end  of  2023,  your  adjusted  basis  in  the  car  is 
property plus any additional amount you pay. (See Unad-             $1,085 ($25,500 − $24,415).
justed basis, earlier.)
                                                                    Depreciation deduction for the year of disposition.                        If 
Depreciation  adjustment  when  you  used  the  stand-              you deduct actual car expenses and you dispose of your 
ard mileage rate.   If you used the standard mileage rate           car before the end of the recovery period (years 2 through 
for the business use of your car, depreciation was inclu-           5),  you  are  allowed  a  reduced  depreciation  deduction  in 
ded in that rate. The rate of depreciation that was allowed         the year of disposition.
in the standard mileage rate is shown in the Rate of De-            Use the depreciation tables in Pub. 946 to figure the re-
preciation Allowed in Standard Mileage Rate table, later.           duced  depreciation  deduction  for  a  car  disposed  of  in 
You  must  reduce  your  basis  in  your  car  (but  not  below     2023.
zero) by the amount of this depreciation.                           The depreciation amounts computed using the depreci-
If  your  basis  is  reduced  to  zero  (but  not  below  zero)     ation tables in Pub. 946 for years 2 through 5 that you own 
through  the  use  of  the  standard  mileage  rate,  and  you      your car are for a full year’s depreciation. Years 1 and 6 
continue to use your car for business, no adjustment (re-           apply the half-year or mid-quarter convention to the com-
duction)  to  the  standard  mileage  rate  is  necessary.  Use     putation for you. If you dispose of the vehicle in years 2 
the  full  standard  mileage  rate  (65.5  cents  ($0.655)  per     through  5  and  the  half-year  convention  applies,  then  the 
mile from January 1–December 31 for 2023) for business              full year’s depreciation amount must be divided by 2. If the 
miles driven.                                                       mid-quarter convention applies, multiply the full year’s de-
    These rates don’t apply for any year in which the               preciation  by  the  percentage  from  the  following  table  for 
TIP actual expenses method was used.                                the quarter that you disposed of the car.

                                                                      Quarter                                                      Percentage
Rate of Depreciation Allowed in Standard Mileage                    First. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.5%
                       Rate                                         Second. . . . . . . . . . . . . . . . . . . . . . . . . . .    37.5
                                                                    Third. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.5
          Year(s)      Depreciation Rate per Mile                   Fourth. . . . . . . . . . . . . . . . . . . . . . . . . . . .  87.5
            2023            0.28
                                                                    If  the  car  is  subject  to  the               Depreciation  Limits,  dis-
          2021–2022         0.26                                    cussed earlier, reduce (but do not increase) the computed 
            2020            0.27                                    depreciation to this amount. See Sale or Other Disposition 
            2019            0.26                                    Before the Recovery Period Ends in chapter 4 of Pub. 946 
          2017–2018         0.25                                    for more information.
          2015–2016         0.24
            2014            0.22
          2012–2013         0.23
            2011            0.22
            2010            0.23
          2008–2009         0.21
            2007            0.19                                    5.
          2005–2006         0.17
          2003–2004         0.16
          2001–2002         0.15                                    Recordkeeping
            2000            0.14
                                                                    If you deduct travel, gift, or transportation expenses, you 
Example.      In 2018, you bought and placed in service a           must be able to prove (substantiate) certain elements of 
car  for  exclusive  use  in  your  business.  The  car  cost       expense. This chapter discusses the records you need to 
$25,500. From 2018 through 2023, you used the standard              keep to prove these expenses.
mileage  rate  to  figure  your  car  expense  deduction.  You 
drove  your  car  14,100  miles  in  2018,  16,300  miles  in 
2019, 15,600 miles in 2020, 16,700 miles in 2021, 15,100 
miles in 2022, and 14,900 miles in 2023. The depreciation 

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If you keep timely and accurate records, you will • Separate amounts for charges such as lodging,
have support to show the IRS if your tax return is meals, and telephone calls.
RECORDS ever examined. You will also have proof of expen-
A restaurant receipt is enough to prove an expense for
ses that your employer may require if you are reimbursed a business meal if it has all of the following information.
under an accountable plan. These plans are discussed in
chapter 6 under Reimbursements. • The name and location of the restaurant.
• The number of people served.
• The date and amount of the expense.
How To Prove Expenses If a charge is made for items other than food and bever-
ages, the receipt must show that this is the case.
Table 5-1 is a summary of records you need to prove each
expense discussed in this publication. You must be able to Canceled check. A canceled check, together with a
prove the elements listed across the top portion of the bill from the payee, ordinarily establishes the cost. How-
chart. You prove them by having the information and re- ever, a canceled check by itself doesn’t prove a business
ceipts (where needed) for the expenses listed in the first expense without other evidence to show that it was for a
column. business purpose.

You can’t deduct amounts that you approximate or Duplicate information. You don‘t have to record infor-
! estimate. mation in your account book or other record that dupli-
CAUTION cates information shown on a receipt as long as your re-
You should keep adequate records to prove your ex- cords and receipts complement each other in an orderly
penses or have sufficient evidence that will support your manner.
own statement. You must generally prepare a written re- You don’t have to record amounts your employer pays
cord for it to be considered adequate. This is because directly for any ticket or other travel item. However, if you
written evidence is more reliable than oral evidence alone. charge these items to your employer, through a credit card
However, if you prepare a record on a computer, it is con- or otherwise, you must keep a record of the amounts you
sidered an adequate record. spend.

Timely kept records. You should record the elements of
What Are Adequate Records? an expense or of a business use at or near the time of the
expense or use and support it with sufficient documentary
You should keep the proof you need in an account book, evidence. A timely kept record has more value than a
diary, log, statement of expense, trip sheets, or similar re- statement prepared later when there is generally a lack of
cord. You should also keep documentary evidence that, accurate recall.
together with your record, will support each element of an You don’t need to write down the elements of every ex-
expense. pense on the day of the expense. If you maintain a log on
a weekly basis that accounts for use during the week, the
Documentary evidence. You must generally have docu-
log is considered a timely kept record.
mentary evidence such as receipts, canceled checks, or
If you give your employer, client, or customer an ex-
bills, to support your expenses.
pense account statement, it can also be considered a
Exception. Documentary evidence isn’t needed if any timely kept record. This is true if you copy it from your ac-
of the following conditions apply. count book, diary, log, statement of expense, trip sheets,
• You have meals or lodging expenses while traveling or similar record.

away from home for which you account to your em- Proving business purpose. You must generally provide
ployer under an accountable plan, and you use a per a written statement of the business purpose of an ex-
diem allowance method that includes meals and/or pense. However, the degree of proof varies according to
lodging. (Accountable plans and per diem allowances the circumstances in each case. If the business purpose
are discussed in chapter 6.) of an expense is clear from the surrounding circumstan-
• Your expense, other than lodging, is less than $75. ces, then you don’t need to give a written explanation.

• You have a transportation expense for which a receipt Example. If you are a sales representative who calls
isn’t readily available. on customers on an established sales route, you don’t
Adequate evidence. Documentary evidence will ordi- have to give a written explanation of the business purpose
narily be considered adequate if it shows the amount, for traveling that route. You can satisfy the requirements by
date, place, and essential character of the expense. recording the length of the delivery route once, the date of
For example, a hotel receipt is enough to support ex- each trip at or near the time of the trips, and the total miles
penses for business travel if it has all of the following infor- you drove the car during the tax year. You could also es-
mation. tablish the date of each trip with a receipt, record of deliv-
ery, or other documentary evidence.
• The name and location of the hotel.
• The dates you stayed there.

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Table 5-1. How To Prove Certain Business Expenses
IF you have THEN you must keep records that show details of the following elements . . .
expenses
for . . .
Amount Time Place or Business Purpose
Description Business Relationship
Travel Cost of each separate Dates you left Destination or area of Purpose: Business purpose for the expense or the
expense for travel, and returned your travel (name of business benefit gained or expected to be gained.
lodging, and meals. for each trip city, town, or other
Incidental expenses and number designation). Relationship: N/A
may be totaled in of days spent
reasonable categories on business.
such as taxis, fees and
tips, etc.
Gifts Cost of the gift. Date of the Description of the gift.
gift.
Transportation Cost of each separate Date of the Your business Purpose: Business purpose for the expense.
expense. For car expense. For destination.
expenses, the cost of car Relationship: N/A
the car and any expenses, the
improvements, the date date of the
you started using it for use of the car.
business, the mileage
for each business use,
and the total miles for
the year.

Confidential information. You don’t need to put confi- Sampling. You can keep an adequate record for parts of
dential information relating to an element of a deductible a tax year and use that record to prove the amount of busi-
expense (such as the place, business purpose, or busi- ness or investment use for the entire year. You must dem-
ness relationship) in your account book, diary, or other re- onstrate by other evidence that the periods for which an
cord. However, you do have to record the information else- adequate record is kept are representative of the use
where at or near the time of the expense and have it throughout the tax year.
available to fully prove that element of the expense.
Example. You use your car to visit the offices of cli-
ents, meet with suppliers and other subcontractors, and
What if I Have Incomplete Records? pick up and deliver items to clients. There is no other busi-
ness use of the car, but you and your family use the car for
If you don’t have complete records to prove an element of personal purposes. You keep adequate records during the
an expense, then you must prove the element with: first week of each month that show that 75% of the use of
• Your own written or oral statement containing specific the car is for business. Invoices and bills show that your
information about the element, and business use continues at the same rate during the later
weeks of each month. Your weekly records are represen-
• Other supporting evidence that is sufficient to estab-
tative of the use of the car each month and are sufficient
lish the element.
evidence to support the percentage of business use for
If the element is the description of a gift, or the cost, the year.
time, place, or date of an expense, the supporting evi-
Exceptional circumstances. You can satisfy the sub-
dence must be either direct evidence or documentary evi-
stantiation requirements with other evidence if, because of
dence. Direct evidence can be written statements or the
the nature of the situation in which an expense is made,
oral testimony of your guests or other witnesses setting
you can’t get a receipt. This applies if all the following are
forth detailed information about the element. Documen-
true.
tary evidence can be receipts, paid bills, or similar evi-
dence. • You were unable to obtain evidence for an element of
the expense or use that completely satisfies the re-
If the element is either the business relationship of your quirements explained earlier under What Are Ade-
guests or the business purpose of the amount spent, the quate Records.
supporting evidence can be circumstantial rather than di-
rect. For example, the nature of your work, such as making • You are unable to obtain evidence for an element that
deliveries, provides circumstantial evidence of the use of completely satisfies the two rules listed earlier under
your car for business purposes. Invoices of deliveries es- What if I Have Incomplete Records.
tablish when you used the car for business.

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• You have presented other evidence for the element guests on a pro rata basis. To do so, you must establish
that is the best proof possible under the circumstan- the number of persons who participated in the event.
ces.
If your return is examined. If your return is examined,
Destroyed records. If you can’t produce a receipt be- you may have to provide additional information to the IRS.
cause of reasons beyond your control, you can prove a This information could be needed to clarify or to establish
deduction by reconstructing your records or expenses. the accuracy or reliability of information contained in your
Reasons beyond your control include fire, flood, and other records, statements, testimony, or documentary evidence
casualties. before a deduction is allowed.

Separating and Combining Expenses How Long To Keep
Records and Receipts
This section explains when expenses must be kept sepa-
rate and when expenses can be combined.
You must keep records as long as they may be needed for
Separating expenses. Each separate payment is gener- the administration of any provision of the Internal Revenue
ally considered a separate expense. For example, if you Code. Generally, this means you must keep records that
entertain a customer or client at dinner and then go to the support your deduction (or an item of income) for 3 years
theater, the dinner expense and the cost of the theater from the date you file the income tax return on which the
tickets are two separate expenses. You must record them deduction is claimed. A return filed early is considered
separately in your records. filed on the due date. For a more complete explanation of
how long to keep records, see Pub. 583, Starting a Busi-
Combining items. You can make one daily entry in your ness and Keeping Records.
record for reasonable categories of expenses. Examples
are taxi fares, telephone calls, or other incidental travel You must keep records of the business use of your car
costs. Nonentertainment meals should be in a separate for each year of the recovery period. See
category. You can include tips for meal-related services More-than-50%-use test in chapter 4 under Depreciation
with the costs of the meals. Deduction.
Expenses of a similar nature occurring during the
Reimbursed for expenses. Employees who give their
course of a single event are considered a single expense.
records and documentation to their employers and are re-
Car expenses. You can account for several uses of imbursed for their expenses generally don’t have to keep
your car that can be considered part of a single use, such copies of this information. However, you may have to
as a round trip or uninterrupted business use, with a single prove your expenses if any of the following conditions ap-
record. Minimal personal use, such as a stop for lunch on ply.
the way between two business stops, isn’t an interruption You claim deductions for expenses that are more than
•
of business use. reimbursements.
Example. You make deliveries at several different lo- • Your expenses are reimbursed under a nonaccounta-
cations on a route that begins and ends at your employer's ble plan.
business premises and that includes a stop at the busi-
• Your employer doesn’t use adequate accounting pro-
ness premises between two deliveries. You can account
cedures to verify expense accounts.
for these using a single record of miles driven.
• You are related to your employer as defined under Per
Gift expenses. You don’t always have to record the Diem and Car Allowances in chapter 6.
name of each recipient of a gift. A general listing will be
enough if it is evident that you aren’t trying to avoid the Reimbursements adequate accounting, , and nonaccount-
$25 annual limit on the amount you can deduct for gifts to able plans are discussed in chapter 6.
any one person. For example, if you buy a large number of
tickets to local high school basketball games and give one Examples of Records
or two tickets to each of many customers, it is usually
enough to record a general description of the recipients. Table 5-2 and Table 5-3 are examples of worksheets that
can be used for tracking business expenses.
Allocating total cost. If you can prove the total cost of
travel or entertainment but you can’t prove how much it
costs for each person who participated in the event, you
may have to allocate the total cost among you and your

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                           THIS IS NOT AN OFFICIAL INTERNAL REVENUE FORM

Table 5-2. Daily Business Mileage and Expense Log

Name: 

                                              Odometer Readings                    Expenses
               Destination                                                    Type
           (City, Town, or Business                               Miles      (Gas, oil, tolls, 
Date              Area)    Purpose   Start     Stop                this trip etc.)             Amount

               Weekly 
                  Total
          Total
      Year-to-Date

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                                  THIS IS NOT AN OFFICIAL INTERNAL REVENUE FORM

Table 5-3. Weekly Traveling Expense Record 

From:                To:    Name: 

         Expenses          Sunday                 Monday Tuesday Wednesday                    Thursday Friday        Saturday   Total
1. Travel Expenses:
   Airlines
   Excess Baggage
   Bus – Train
   Cab and Limousine
   Tips
   Porter
2.
Non-Entertainment-Related 
Meals and Lodging:
   Breakfast
   Lunch
   Dinner
    Hotel and Motel 
   (Detail in Schedule B)
3. Other Expenses: 
   Postage
   Telephone & Telegraph
   Stationery & Printing
   Stenographer
   Sample Room
   Advertising
   Assistant(s)
   Trade Shows
4. Car Expenses: (List all car expenses—the division between business and personal expenses may be made at the end of the year.)
   (Detail mileage in Schedule A (if applicable).)
   Gas, oil, lube, wash
   Repairs, parts
   Tires, supplies
   Parking fees, tolls
5. Other (Identify)
Total
Note: Attach receipted bills for (1) ALL lodging and (2) any other expenses of $75.00 or more.
Schedule A—Car
   Mileage: End
   Start
   Total
Business Mileage
Schedule B—Lodging
                      Name
   Hotel or Motel
                       City
                                                         WEEKLY REIMBURSEMENTS:
                                                                 Travel and transportation expenses. . . . . . .  
                                                                 Other reimbursements. . . . . . . . . . . . . .  
                                                                 TOTAL. . . . . . . . . . . . . . . . . . . . . . .  

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Form 2106 is only used by Armed Forces reserv-
ists, qualified performing artists, fee-basis state or
6. CAUTION! local government officials, and employees with
impairment-related work expenses. Due to the suspension
of miscellaneous itemized deductions subject to the 2%
How To Report floor under section 67(a), employees who do not fit into
one of the listed categories may not use Form 2106.
This chapter explains where and how to report the expen-
ses discussed in this publication. It discusses reimburse- Employees. If you are an employee, you must generally
ments and how to treat them under accountable and non- complete Form 2106 to deduct your travel and transporta-
accountable plans. It also explains rules for independent tion expenses.
contractors and clients, fee-basis officials, certain per-
• You are an employee deducting expenses attributable
forming artists, Armed Forces reservists, and certain disa-
to your job.
bled employees. The chapter ends with illustrations of
how to report travel, gift, and car expenses on Forms • You weren’t reimbursed by your employer for your ex-
2106. penses (amounts included in box 1 of your Form W-2
aren’t considered reimbursements).
• If you claim car expenses, you use the standard mile-
Where To Report age rate.
For more information on how to report your expenses
This section provides general information on where to re- on Form 2106, see Completing Form 2106, later.
port the expenses discussed in this publication.
Gifts. If you didn’t receive any reimbursements (or the
Self-employed. You must report your income and expen- reimbursements were all included in box 1 of your Form
ses on Schedule C (Form 1040) if you are a sole proprie- W-2), the only business expense you are claiming is for
tor, or on Schedule F (Form 1040) if you are a farmer. You gifts, and the special rules discussed later don’t apply to
don’t use Form 2106. you, don’t complete Form 2106.
If you claim car or truck expenses, you must provide
Statutory employees. If you received a Form W-2
certain information on the use of your vehicle. You provide
and the “Statutory employee” box in box 13 was checked,
this information on Schedule C (Form 1040) or Form 4562.
report your income and expenses related to that income
If you file Schedule C (Form 1040):
on Schedule C (Form 1040). Don’t complete Form 2106.
• Report your travel expenses, except meals, on Statutory employees include full-time life insurance
line 24a; salespersons, certain agent or commission drivers, travel-
• Report your deductible non-entertainment-related ing salespersons, and certain homeworkers.
meals (actual cost or standard meal allowance) on If you are entitled to a reimbursement from your
line 24b; ! employer but you don’t claim it, you can’t claim a
• Report your gift expenses and transportation expen- CAUTION deduction for the expenses to which that un-
ses, other than car expenses, on line 27a; and claimed reimbursement applies.
• Report your car expenses on line 9. Complete Part IV
Reimbursement for personal expenses. If your em-
of the form unless you have to file Form 4562 for de-
ployer reimburses you for nondeductible personal expen-
preciation or amortization.
ses, such as for vacation trips, your employer must report
If you file Schedule F (Form 1040), do the following. the reimbursement as wage income in box 1 of your Form
• Report your car expenses on line 10. Attach Form W-2. You can’t deduct personal expenses.
4562 and provide information on the use of your car in
Income-producing property. If you have travel or trans-
Part V of Form 4562.
portation expenses related to income-producing property,
• Report all other business expenses discussed in this report your deductible expenses on the form appropriate
publication on line 32. You can only include 50% of for that activity.
your non-entertainment-related meals on that line. For example, if you have rental real estate income and
See your form instructions for more information on how to expenses, report your expenses on Schedule E (Form
complete your tax return. 1040), Supplemental Income and Loss. See Pub. 527,
Residential Rental Property, for more information on the
Both self-employed and an employee. If you are both rental of real estate.
self-employed and an employee, you must keep separate
records for each business activity. Report your business
expenses for self-employment on Schedule C (Form
1040), or Schedule F (Form 1040), as discussed earlier.
Report your business expenses for your work as an em-
ployee on Form 2106, as discussed next.

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Vehicle Provided by your expenses depends on whether your employer reim-
bursed you under an accountable plan or a nonaccounta-
Your Employer ble plan.
If your employer provides you with a car, you may be able This section explains the two types of plans, how per
to deduct the actual expenses of operating that car for diem and car allowances simplify proving the amount of
business purposes. The amount you can deduct depends your expenses, and the tax treatment of your reimburse-
on the amount that your employer included in your income ments and expenses. It also covers rules for independent
and the business and personal miles you drove during the contractors.
year. You can’t use the standard mileage rate.
No reimbursement. You aren’t reimbursed or given an
Form 2106 is only used by Armed Forces reserv-
allowance for your expenses if you are paid a salary or
! ists, qualified performing artists, fee-basis state or commission with the understanding that you will pay your
CAUTION local government officials, and employees with
own expenses. In this situation, you have no reimburse-
impairment-related work expenses. Due to the suspension
ment or allowance arrangement, and you don’t have to
of miscellaneous itemized deductions subject to the 2%
read this section on reimbursements. Instead, see Com-
floor under section 67(a), employees who do not fit into
pleting Form 2106, later, for information on completing
one of the listed categories may not use Form 2106.
your tax return.
Value reported on Form W-2. Your employer can figure Form 2106 is only used by Armed Forces reserv-
and report either the actual value of your personal use of ! ists, qualified performing artists, fee-basis state or
the car or the value of the car as if you used it only for per- CAUTION local government officials, and employees with
sonal purposes (100% income inclusion). Your employer impairment-related work expenses. Due to the suspension
must separately state the amount if 100% of the annual of miscellaneous itemized deductions subject to the 2%
lease value was included in your income. If you are unsure floor under section 67(a), employees who do not fit into
of the amount included on your Form W-2, ask your em- one of the listed categories may not use Form 2106.
ployer.
Reimbursement, allowance, or advance. A reimburse-
Full value included in your income. You may be able to ment or other expense allowance arrangement is a system
deduct the value of the business use of an employer-pro- or plan that an employer uses to pay, substantiate, and re-
vided car if your employer reported 100% of the value of cover the expenses, advances, reimbursements, and
the car in your income. On your 2023 Form W-2, the amounts charged to the employer for employee business
amount of the value will be included in box 1, Wages, tips, expenses. Arrangements include per diem and car allow-
other compensation; and box 14, Other. ances.
To claim your expenses, complete Form 2106, Part II, A per diem allowance is a fixed amount of daily reim-
Sections A and C. Enter your actual expenses on line 23 bursement your employer gives you for your lodging and
of Section C and include the entire value of the em- M&IE when you are away from home on business. (The
ployer-provided car on line 25. Complete the rest of the term “incidental expenses” is defined in chapter 1 under
form. Standard Meal Allowance.) A car allowance is an amount
your employer gives you for the business use of your car.
Less than full value included in your income. If less Your employer should tell you what method of reim-
than the full annual lease value of the car was included on bursement is used and what records you must provide.
your Form W-2, this means that your Form W-2 only in-
cludes the value of your personal use of the car. Don’t en- Employers. If you are an employer and you reimburse
ter this value on your Form 2106 because it isn’t deducti- employee business expenses, how you treat this reim-
ble. bursement on your employee's Form W-2 depends in part
If you paid any actual costs (that your employer didn’t on whether you have an accountable plan. Reimburse-
provide or reimburse you for) to operate the car, you can ments treated as paid under an accountable plan, as ex-
deduct the business portion of those costs. Examples of plained next, aren’t reported as pay. Reimbursements
costs that you may have are gas, oil, and repairs. Com- treated as paid under nonaccountable plans, as explained
plete Form 2106, Part II, Sections A and C. Enter your ac- later, are reported as pay. See Pub. 15 (Circular E), Em-
tual costs on line 23 of Section C and leave line 25 blank. ployer's Tax Guide, for information on employee pay.
Complete the rest of the form.
Accountable Plans

Reimbursements To be an accountable plan, your employer's reimburse-
ment or allowance arrangement must include all of the fol-
This section explains what to do when you receive an ad- lowing rules.
vance or are reimbursed for any of the employee business
1. Your expenses must have a business connec-
expenses discussed in this publication.
tion—that is, you must have paid or incurred deducti-
If you received an advance, allowance, or reimburse- ble expenses while performing services as an em-
ment for your expenses, how you report this amount and ployee of your employer.

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2. You must adequately account to your employer for reimbursements you receive for the nondeductible expen-
these expenses within a reasonable period of time. ses don’t meet rule (1) for accountable plans, and they are
treated as paid under a nonaccountable plan.
3. You must return any excess reimbursement or allow-
ance within a reasonable period of time. Example. Your employer's plan reimburses you for
Adequate accounting and returning excess reimburse- travel expenses while away from home on business and
ments are discussed later. also for meals when you work late at the office, even
though you aren’t away from home. The part of the ar-
An excess reimbursement or allowance is any amount rangement that reimburses you for the nondeductible
you are paid that is more than the business-related expen- meals when you work late at the office is treated as paid
ses that you adequately accounted for to your employer. under a nonaccountable plan.
Reasonable period of time. The definition of reason- The employer makes the decision whether to re-
able period of time depends on the facts and circumstan- TIP imburse employees under an accountable plan or
ces of your situation. However, regardless of the facts and a nonaccountable plan. If you are an employee
circumstances of your situation, actions that take place who receives payments under a nonaccountable plan, you
within the times specified in the following list will be trea- can’t convert these amounts to payments under an ac-
ted as taking place within a reasonable period of time. countable plan by voluntarily accounting to your employer
for the expenses and voluntarily returning excess reim-
• You receive an advance within 30 days of the time you
bursements to the employer.
have an expense.
• You adequately account for your expenses within 60
days after they were paid or incurred. Adequate Accounting

• You return any excess reimbursement within 120 days One of the rules for an accountable plan is that you must
after the expense was paid or incurred. adequately account to your employer for your expenses.
• You are given a periodic statement (at least quarterly) You adequately account by giving your employer a state-
that asks you to either return or adequately account for ment of expense, an account book, a diary, or a similar re-
outstanding advances and you comply within 120 cord in which you entered each expense at or near the
days of the statement. time you had it, along with documentary evidence (such
as receipts) of your travel, mileage, and other employee
Employee meets accountable plan rules. If you meet business expenses. (See Table 5-1 in chapter 5 for details
the three rules for accountable plans, your employer you need to enter in your record and documents you need
shouldn’t include any reimbursements in your income in to prove certain expenses.) A per diem or car allowance
box 1 of your Form W-2. If your expenses equal your reim- satisfies the adequate accounting requirement under cer-
bursements, you don’t complete Form 2106. You have no tain conditions. See Per Diem and Car Allowances, later.
deduction since your expenses and reimbursements are
equal. You must account for all amounts you received from
If your employer included reimbursements in your employer during the year as advances, reimburse-
TIP box 1 of your Form W-2 and you meet all the rules ments, or allowances. This includes amounts you charged
for accountable plans, ask your employer for a to your employer by credit card or other method. You must
corrected Form W-2. give your employer the same type of records and support-
ing information that you would have to give to the IRS if the
IRS questioned a deduction on your return. You must pay
Accountable plan rules not met. Even though you are back the amount of any reimbursement or other expense
reimbursed under an accountable plan, some of your ex- allowance for which you don’t adequately account or that
penses may not meet all three rules. All reimbursements is more than the amount for which you accounted.
that fail to meet all three rules for accountable plans are
generally treated as having been reimbursed under a non-
accountable plan (discussed later). Per Diem and Car Allowances

Failure to return excess reimbursements. If you are If your employer reimburses you for your expenses using a
reimbursed under an accountable plan, but you fail to re- per diem or a car allowance, you can generally use the al-
turn, within a reasonable time, any amounts in excess of lowance as proof for the amount of your expenses. A per
the substantiated amounts, the amounts paid in excess of diem or car allowance satisfies the adequate accounting
the substantiated expenses are treated as paid under a requirements for the amount of your expenses only if all
nonaccountable plan. See Reasonable period of time, the following conditions apply.
earlier, and Returning Excess Reimbursements, later.
• Your employer reasonably limits payments of your ex-
Reimbursement of nondeductible expenses. You penses to those that are ordinary and necessary in the
may be reimbursed under your employer's accountable conduct of the trade or business.
plan for expenses related to that employer's business,
• The allowance is similar in form to and not more than
some of which would be allowable as employee business
the federal rate (defined later).
expense deductions and some of which would not. The

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• You prove the time (dates), place, and business pur- for higher rates. You can find this information at GSA.gov/
pose of your expenses to your employer (as explained travel/plan-book/per-diem-rates.
in Table 5-1) within a reasonable period of time. You receive an allowance only for M&IE when your em-
ployer does one of the following.
• You aren’t related to your employer (as defined next).
If you are related to your employer, you must be able • Provides you with lodging (furnishes it in kind).
to prove your expenses to the IRS even if you have al-
• Reimburses you, based on your receipts, for the ac-
ready adequately accounted to your employer and re-
tual cost of your lodging.
turned any excess reimbursement.
If the IRS finds that an employer's travel allowance practi- • Pays the hotel, motel, etc., directly for your lodging.
ces are not based on reasonably accurate estimates of • Doesn’t have a reasonable belief that you had (or will
travel costs (including recognition of cost differences in have) lodging expenses, such as when you stay with
different areas for per diem amounts), you won’t be con- friends or relatives or sleep in the cab of your truck.
sidered to have accounted to your employer. In this case, Figures the allowance on a basis similar to that used
•
you must be able to prove your expenses to the IRS. in figuring your compensation, such as number of
Related to employer. You are related to your employer if: hours worked or miles traveled.
1. Your employer is your brother or sister, half brother or High-low rate. This is a simplified method of figuring
half sister, spouse, ancestor, or lineal descendant; the federal per diem rate for travel within the continental
United States. It eliminates the need to keep a current list
2. Your employer is a corporation in which you own, di- of the per diem rates for each city.
rectly or indirectly, more than 10% in value of the out- Under the high-low method, the per diem amount for
standing stock; or travel during January through September of 2023 is $297
(which includes $74 for M&IE) for certain high-cost loca-
3. Certain relationships (such as grantor, fiduciary, or
tions. All other areas have a per diem amount of $204
beneficiary) exist between you, a trust, and your em-
(which includes $64 for M&IE). For more information, see
ployer.
Notice 2022-44, which can be found at IRS.gov/irb/
You may be considered to indirectly own stock for purpo- 2022-41_IRB#NOT-2022-44.
ses of (2) if you have an interest in a corporation, partner- Effective October 1, 2023, the per diem rate for certain
ship, estate, or trust that owns the stock or if a member of high-cost locations increased to $309 (which includes $74
your family or your partner owns the stock. for M&IE). The rate for all other locations increased to
$214 (which includes $64 for M&IE). For more information,
The federal rate. The federal rate can be figured using see Notice 2023-68, which can be found at IRS.gov/irb/
any one of the following methods. 2023-41_IRB#NOT-2023-68, and Revenue Procedure
1. For per diem amounts: 2019-48 at IRS.gov/irb/2019-51_IRB#REV-
PROC-2019-48.
a. The regular federal per diem rate.
Employers who didn’t use the high-low method
b. The standard meal allowance. ! during the first 9 months of 2023 can’t begin to
c. The high-low rate. CAUTION use it before 2024.

2. For car expenses: Prorating the standard meal allowance on partial
days of travel. The standard meal allowance is for a full
a. The standard mileage rate.
24-hour day of travel. If you travel for part of a day, such as
b. A fixed and variable rate (FAVR). on the days you depart and return, you must prorate the
full-day M&IE rate. This rule also applies if your employer
For per diem amounts, use the rate in effect for
uses the regular federal per diem rate or the high-low rate.
TIP the locality where you stop for sleep or rest.
You can use either of the following methods to figure
the federal M&IE for that day.
Regular federal per diem rate. The regular federal 1. Method 1:
per diem rate is the highest amount that the federal gov-
ernment will pay to its employees for lodging and M&IE (or a. For the day you depart, add / of the standard 3 4
M&IE only) while they are traveling away from home in a meal allowance amount for that day.
particular area. The rates are different for different locali- 3 4
b. For the day you return, add / of the standard
ties. Your employer should have these rates available. You
meal allowance amount for the preceding day.
can also find federal per diem rates at GSA.gov/travel/
plan-book/per-diem-rates. 2. Method 2: Prorate the standard meal allowance using
any method you consistently apply in accordance with
The standard meal allowance. The standard meal
reasonable business practice. For example, an em-
allowance is the federal M&IE rate. For travel in 2023, the
ployer can treat 2 full days of per diem (that includes
rate for most small localities in the United States is $59
M&IE) paid for travel away from home from 9 a.m. of
per day. Most major cities and many other localities qualify
one day to 5 p.m. of the next day as being no more

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than the federal rate. This is true even though a fed- Their living expenses in Denver aren’t more than $278 a
eral employee would be limited to a reimbursement of day.
M&IE for only 1 / days of the federal M&IE rate.1 2 Their employer doesn’t include any of the reimburse-
ment on their Form W-2 and they don’t deduct the expen-
The standard mileage rate. This is a set rate per mile
ses on their return.
that you can use to figure your deductible car expenses.
For 2023, the standard mileage rate for the cost of operat- Example 2. In June, a fee-basis local government offi-
ing your car for business use is 65.5 cents ($0.655) per cial takes a 2-day business trip to Boston. Their employer
mile. uses the high-low method to reimburse employees. Be-
Fixed and variable rate (FAVR). This is an allowance cause Boston is a high-cost area, they are given an ad-
your employer may use to reimburse your car expenses. vance of $297 (which includes $74 for M&IE) a day ($594
Under this method, your employer pays an allowance that total) for their lodging and M&IE. Their actual expenses to-
includes a combination of payments covering fixed and taled $700.
variable costs, such as a cents-per-mile rate to cover your Since their $700 of expenses are more than their $594
variable operating costs (such as gas, oil, etc.) plus a flat advance, they include the excess expenses when they
amount to cover your fixed costs (such as depreciation (or itemize their deductions. They complete Form 2106
lease payments), insurance, etc.). If your employer choo- (showing all of their expenses and reimbursements). They
ses to use this method, your employer will request the must also allocate their reimbursement between their
necessary records from you. meals and other expenses as discussed later under Com-
pleting Form 2106.
Reporting your expenses with a per diem or car al-
lowance. If your reimbursement is in the form of an allow- Example 3. A fee-basis state government official
ance received under an accountable plan, the following drives 10,000 miles during 2023 for business. Under their
facts affect your reporting. employer's accountable plan, they account for the time
(dates), place, and business purpose of each trip. Their
• The federal rate. employer pays them a mileage allowance of 40 cents
• Whether the allowance or your actual expenses were ($0.40) a mile.
more than the federal rate. Because their $6,550 expense figured under the stand-
ard mileage rate (10,000 miles x 65.5 cents ($0.655) per
The following discussions explain where to report your ex-
mile) is more than their $4,000 reimbursement (10,000
penses depending upon how the amount of your allow-
miles × 40 cents ($0.40)), they itemize their deductions to
ance compares to the federal rate.
claim the excess expense. They complete Form 2106
Allowance less than or equal to the federal rate. If (showing all their expenses and reimbursements) and en-
your allowance is less than or equal to the federal rate, the ter $2,550 ($6,550 − $4,000) as an itemized deduction.
allowance won’t be included in box 1 of your Form W-2.
Allowance more than the federal rate. If your allow-
You don’t need to report the related expenses or the allow-
ance is more than the federal rate, your employer must in-
ance on your return if your expenses are equal to or less
clude the allowance amount up to the federal rate under
than the allowance.
code L in box 12 of your Form W-2. This amount isn’t taxa-
However, if your actual expenses are more than your al-
ble. However, the excess allowance will be included in
lowance, you can complete Form 2106. If you are using
box 1 of your Form W-2. You must report this part of your
actual expenses, you must be able to prove to the IRS the
allowance as if it were wage income.
total amount of your expenses and reimbursements for the
If your actual expenses are less than or equal to the
entire year. If you are using the standard meal allowance
federal rate, you don’t complete Form 2106 or claim any of
or the standard mileage rate, you don’t have to prove that
your expenses on your return.
amount.
However, if your actual expenses are more than the
Form 2106 is only used by Armed Forces reserv- federal rate, you can complete Form 2106 and deduct
! ists, qualified performing artists, fee-basis state or those excess expenses. You must report on Form 2106
CAUTION local government officials, and employees with your reimbursements up to the federal rate (as shown un-
impairment-related work expenses. Due to the suspension der code L in box 12 of your Form W-2) and all your ex-
of miscellaneous itemized deductions subject to the 2% penses. You should be able to prove these amounts to the
floor under section 67(a), employees who do not fit into IRS.
one of the listed categories may not use Form 2106.
Form 2106 is only used by Armed Forces reserv-
ists, qualified performing artists, fee-basis state or
Example 1. In April, a member of a reserve compo- CAUTION! local government officials, and employees with
nent of the Armed Forces takes a 2-day business trip to impairment-related work expenses. Due to the suspension
Denver. The federal rate for Denver is $278 ($199 lodging of miscellaneous itemized deductions subject to the 2%
+ $79 M&IE) per day. As required by their employer's ac- floor under section 67(a), employees who do not fit into
countable plan, they account for the time (dates), place, one of the listed categories may not use Form 2106.
and business purpose of the trip. Their employer reimbur-
ses them $278 a day ($556 total) for living expenses.

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Example 1. Sasha, a performing artist, lives and works              Returning Excess Reimbursements
in Austin. In July, the employer sent Sasha to Albuquerque 
for  4  days  on  business.  The  employer  paid  the  hotel  di-   Under an accountable plan, you are required to return any 
rectly for Sasha’s lodging and reimbursed $80 a day ($320           excess  reimbursement  or  other  expense  allowances  for 
total)  for  M&IE.  Sasha’s  actual  meal  expenses  weren’t        your  business  expenses  to  the  person  paying  the  reim-
more than the federal rate for Albuquerque, which is $69            bursement  or  allowance.  Excess  reimbursement  means 
per day.                                                            any amount for which you didn’t adequately account within 
The employer included the $44 that was more than the                a reasonable period of time. For example, if you received 
federal  rate  (($80  −  $69)  ×  4)  in  box  1  of  Sasha’s  Form a  travel  advance  and  you  didn’t  spend  all  the  money  on 
W-2.  The  employer  shows  $276  ($69  a  day  ×  4)  under        business-related expenses or you don’t have proof of all 
code L in box 12 of Form W-2. This amount isn’t included            your expenses, you have an excess reimbursement.
in  income.  Sasha  doesn’t  have  to  complete  Form  2106; 
however, Sasha must include the $44 in gross income as              Adequate  accounting  and    reasonable  period  of  time 
wages  (by  reporting  the  total  amount  shown  in  box  1  of    were discussed earlier in this chapter.
their Form W-2).
                                                                    Travel advance. You receive a travel advance if your em-
Example 2. Another performing artist, Ari, also lives in            ployer provides you with an expense allowance before you 
Austin and works for the same employer as in Example 1.             actually have the expense, and the allowance is reasona-
In May, the employer sent Ari to San Diego for 4 days and           bly expected to be no more than your expense. Under an 
paid the hotel directly for the hotel bill. The employer reim-      accountable plan, you are required to adequately account 
bursed Ari $75 a day for M&IE. The federal rate for San             to your employer for this advance and to return any excess 
Diego is $74 a day.                                                 within a reasonable period of time.
Ari  can  prove  that  actual  non-entertainment-related            If you don’t adequately account for or don't return any 
meal expenses totaled $380. The employer's accountable              excess  advance  within  a  reasonable  period  of  time,  the 
plan  won’t  pay  more  than  $75  a  day  for  travel  to  San     amount you don’t account for or return will be treated as 
Diego, so Ari doesn’t give the employer the records that            having  been  paid  under  a nonaccountable  plan  (dis-
prove that the amount actually spent was $380. However,             cussed later).
Ari does account for the time (dates), place, and business 
purpose of the trip. This is Ari’s only business trip this year.    Unproven  amounts.  If  you  don’t  prove  that  you  ac-
Ari was reimbursed $300 ($75 × 4 days), which is $4                 tually traveled on each day for which you received a per 
more  than  the  federal  rate  of  $296  ($74  ×  4  days).  The   diem or car allowance (proving the elements described in 
employer  includes  the  $4  as  income  on  the  employee’s        Table  5-1),  you  must  return  this  unproven  amount  of  the 
Form W-2 in box 1. The employer also enters $296 under              travel advance within a reasonable period of time. If you 
code L in box 12 of the employee’s Form W-2.                        don’t do this, the unproven amount will be considered paid 
Ari completes Form 2106 to figure deductible expenses               under a nonaccountable plan (discussed later).
and enters the total of actual expenses for the year ($380)         Per diem allowance more than federal rate.           If your 
on  Form  2106.  Ari  also  enters  the  reimbursements  that       employer's accountable plan pays you an allowance that 
weren’t  included  in  income  ($296).  Ari’s  total  deductible    is higher than the federal rate, you don’t have to return the 
meals  and  beverages  expense,  before  the  50%  limit,  is       difference  between  the  two  rates  for  the  period  you  can 
$96. Ari will include $48 as an itemized deduction.                 prove business-related travel expenses. However, the dif-
                                                                    ference will be reported as wages on your Form W-2. This 
Example 3. Palmer, a fee-basis state government offi-
                                                                    excess amount is considered paid under a nonaccounta-
cial, drives 10,000 miles during 2023 for business. Under 
                                                                    ble plan (discussed later).
the employer's accountable plan, Palmer gets reimbursed 
70 cents ($0.70) a mile, which is more than the standard            Example.      Your  employer  sends  you  on  a  5-day  busi-
mileage rate. The total reimbursement is $7,000.                    ness trip to Phoenix in March 2023 and gives you a $400 
The employer must include the reimbursement amount                  ($80 × 5 days) advance to cover your M&IE. The federal 
up  to  the  standard  mileage  rate,  $6,550  (10,000  miles  x    per diem for M&IE for Phoenix is $69. Your trip lasts only 3 
65.5 cents ($0.655) per mile), under code L in box 12 of            days. Under your employer's accountable plan, you must 
the employee’s Form W-2. That amount isn’t taxable. The             return the $160 ($80 × 2 days) advance for the 2 days you 
employer  must  also  include  $450  ($7,000  −  $6,550)  in        didn’t travel. For the 3 days you did travel, you don’t have 
box 1 of the employee's Form W-2. This is the reimburse-            to return the $33 difference between the allowance you re-
ment that is more than the standard mileage rate.                   ceived and the federal rate for Phoenix (($80 − $69) × 3 
If the expenses are equal to or less than the standard              days).  However,  the  $33  will  be  reported  on  your  Form 
mileage rate, Palmer wouldn’t complete Form 2106. If the            W-2 as wages.
expenses  are  more  than  the  standard  mileage  rate, 
Palmer would complete Form 2106 and report total expen-
ses and reimbursement (shown under code L in box 12 of              Nonaccountable Plans
their Form W-2). Palmer would then claim the excess ex-
penses as an itemized deduction.                                    A nonaccountable plan is a reimbursement or expense al-
                                                                    lowance  arrangement  that  doesn’t  meet  one  or  more  of 
                                                                    the three rules listed earlier under Accountable Plans.

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In addition, even if your employer has an accountable Rules for Independent Contractors
plan, the following payments will be treated as being paid
under a nonaccountable plan. and Clients

• Excess reimbursements you fail to return to your em- This section provides rules for independent contractors
ployer. who incur expenses on behalf of a client or customer. The
• Reimbursement of nondeductible expenses related to rules cover the reporting and substantiation of certain ex-
your employer's business. See Reimbursement of penses discussed in this publication, and they affect both
nondeductible expenses, earlier, under Accountable independent contractors and their clients or customers.
Plans.
You are considered an independent contractor if you
An arrangement that repays you for business expenses by are self-employed and you perform services for a cus-
reducing the amount reported as your wages, salary, or tomer or client.
other pay will be treated as a nonaccountable plan. This is
because you are entitled to receive the full amount of your Accounting to Your Client
pay whether or not you have any business expenses.
If you aren’t sure if the reimbursement or expense al- If you received a reimbursement or an allowance for travel,
lowance arrangement is an accountable or nonaccounta- or gift expenses that you incurred on behalf of a client, you
ble plan, ask your employer. should provide an adequate accounting of these expen-
ses to your client. If you don’t account to your client for
Reporting your expenses under a nonaccountable these expenses, you must include any reimbursements or
plan. Your employer will combine the amount of any reim- allowances in income. You must keep adequate records of
bursement or other expense allowance paid to you under these expenses whether or not you account to your client
a nonaccountable plan with your wages, salary, or other for these expenses.
pay. Your employer will report the total in box 1 of your
Form W-2. If you don’t separately account for and seek reimburse-
You must complete Form 2106 and itemize your deduc- ment for meal and entertainment expenses in connection
tions to deduct your expenses for travel, transportation, or with providing services for a client, you are subject to the
non-entertainment-related meals. Your meal and enter- 50% limit on those expenses. See 50% Limit in chapter 2.
tainment expenses will be subject to the 50% Limit dis-
cussed in chapter 2. Adequate accounting. As a self-employed person, you
adequately account by reporting your actual expenses.
Form 2106 is only used by Armed Forces reserv-
You should follow the recordkeeping rules in chapter 5.
! ists, qualified performing artists, fee-basis state or
CAUTION local government officials, and employees with How to report. For information on how to report ex-
impairment-related work expenses. Due to the suspension penses on your tax return, see Self-employed at the be-
of miscellaneous itemized deductions subject to the 2% ginning of this chapter.
floor under section 67(a), employees who do not fit into
one of the listed categories may not use Form 2106. Required Records for
Clients or Customers
Example 1. Your employer gives you $1,000 a month
($12,000 total for the year) for your business expenses. If you are a client or customer, you generally don’t have to
You don’t have to provide any proof of your expenses to keep records to prove the reimbursements or allowances
your employer, and you can keep any funds that you don’t you give, in the course of your business, to an independ-
spend. ent contractor for travel or gift expenses incurred on your
You are a performing artist and are being reimbursed behalf. However, you must keep records if:
under a nonaccountable plan. Your employer will include
the $12,000 on your Form W-2 as if it were wages. If you • You reimburse the contractor for entertainment expen-
want to deduct your business expenses, you must com- ses incurred on your behalf, and
plete Form 2106 and itemize your deductions. • The contractor adequately accounts to you for these
expenses.
Example 2. You are paid $2,000 a month by your em-
ployer. On days that you travel away from home on busi- Contractor adequately accounts. If the contractor ade-
ness, your employer designates $50 a day of your salary quately accounts to you for non-entertainment-related
as paid to reimburse your travel expenses. Because your meal expenses, you (the client or customer) must keep re-
employer would pay your monthly salary whether or not cords documenting each element of the expense, as ex-
you were traveling away from home, the arrangement is a plained in chapter 5. Use your records as proof for a de-
nonaccountable plan. No part of the $50 a day designated duction on your tax return. If non-entertainment-related
by your employer is treated as paid under an accountable meal expenses are accounted for separately, you are sub-
plan. ject to the 50% limit on meals. If the contractor adequately
accounts to you for reimbursed amounts, you don’t have
to report the amounts on an information return.

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Contractor doesn’t adequately account. If the contrac- High-low method. If you use the high-low substantiation
tor doesn’t adequately account to you for allowances or method, when new rates become effective (generally, Oc-
reimbursements of non-entertainment-related meal ex- tober 1), you can either continue with the rates you used
penses, you don’t have to keep records of these items. for the first part of the year or change to the new rates.
You aren’t subject to the 50% limit on meals in this case. However, you must continue using the high-low method
You can deduct the reimbursements or allowances as pay- for the rest of the calendar year (through December 31). If
ment for services if they are ordinary and necessary busi- you are an employer, you must use the same rates for all
ness expenses. However, you must file Form 1099-MISC employees reimbursed under the high-low method during
to report amounts paid to the independent contractor if the that calendar year.
total of the reimbursements and any other fees is $600 or The new rates and localities for the high-low method
more during the calendar year. are included each year in a notice that is generally pub-
lished in mid to late September. You can find the notice in
the weekly Internal Revenue Bulletin (IRB) at IRS.gov/IRB,
or visit IRS.gov and enter “Special Per Diem Rates” in the
How To Use Per Diem
search box.
Rate Tables
Federal per diem rate method. New CONUS per diem
rates become effective on October 1 of each year and re-
This section contains information about the per diem rate
main in effect through September 30 of the following year.
substantiation methods available and the choice of rates
Employees being reimbursed under the per diem rate
you must make for the last 3 months of the year.
method during the first 9 months of a year (January 1–
September 30) must continue under the same method
The Two Substantiation Methods through the end of that calendar year (December 31).
However, for travel by these employees from October 1
High-low method. IRS Notices list the localities that are
through December 31, you can choose to continue using
treated under the high-low substantiation method as
the same per diem rates or use the new rates.
high-cost localities for all or part of the year. Notice
The new federal CONUS per diem rates are published
2022-44, available at IRS.gov/irb/
each year, generally early in September. Go to GSA.gov/
2022-41_IRB#NOT-2022-44, lists the high-cost localities
travel/plan-book/per-diem-rates.
that are eligible for $297 (which includes $74 for meals
and incidental expenses (M&IE)) per diem, effective Octo- Per diem rates for localities listed for FY2024 may
ber 1, 2022. For travel on or after October 1, 2022, all ! change at any time. To be sure you have the most
other localities within the continental United States CAUTION current rate, check GSA.gov/travel/plan-book/per-
(CONUS) are eligible for $204 (which includes $64 for diem-rates.
M&IE) per diem under the high-low method.
Notice 2023-68, available at IRS.gov/irb/
2023-41_IRB#NOT-2023-68, lists the high-cost localities
that are eligible for $309 (which includes $74 for M&IE) Completing Form
per diem, effective October 1, 2023. For travel on or after
October 1, 2023, the per diem for all other localities in- 2106
creased to $214 (which includes $64 for M&IE).
For tax years beginning after 2017, the Form 2106 will be
Regular federal per diem rate method. Regular federal used by Armed Forces reservists, qualified performing ar-
per diem rates are published by the General Services Ad- tists, fee-basis state or local government officials, and em-
ministration (GSA). Both tables include the separate rate ployees with impairment-related work expenses. Due to
for M&IE for each locality. The rates listed for FY2023 at the suspension of miscellaneous itemized deductions
GSA.gov/travel/plan-book/per-diem-rates are effective Oc- subject to the 2% floor under section 67(a), employees
tober 1, 2022, and those listed for FY2024 are effective who do not fit into one of the listed categories may not use
October 1, 2023. The standard rate for all locations within Form 2106.
CONUS not specifically listed for FY2023 is $157 ($98 for This section briefly describes how employees complete
lodging and $59 for M&IE). For FY2024, this rate increa- Forms 2106. Table 6-1 explains what the employer reports
ses to $166 ($107 for lodging and $59 for M&IE). on Form W-2 and what the employee reports on Form
2106. The instructions for the forms have more information
Transition Rules on completing them.
If you are self-employed, don’t file Form 2106. Re-
The transition period covers the last 3 months of the cal-
port your expenses on Schedule C (Form 1040)
endar year, from the time that new rates are effective (gen- CAUTION!
or Schedule F (Form 1040). See the instructions
erally, October 1) through December 31. During this pe-
for the form that you must file.
riod, you may generally change to the new rates or finish
out the year with the rates you had been using.

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Table 6-1. Reporting Travel, Nonentertainment Meal, Gift, and Car Expenses and
Reimbursements

IF the type of reimbursement (or THEN the employer reports on Form AND the employee
other expense allowance) W-2: reports on
arrangement is under: Form 2106:
An accountable plan with:
Actual expense reimbursement: Adequate accounting No amount. No amount.
made and excess returned.
Actual expense reimbursement: Adequate accounting and The excess amount as wages in box 1. No amount.
return of excess both required but excess not returned.
Per diem or mileage allowance up to the federal rate: No amount. All expenses and reimbursements only if
Adequate accounting made and excess returned. excess expenses are claimed. Otherwise,
form is not filed.
Per diem or mileage allowance up to the federal rate: The excess amount as wages in box 1. No amount.
Adequate accounting and return of excess both required The amount up to the federal rate is
but excess not returned. reported only under code L in box 12 of
Form W-2—it isn’t reported in box 1.
Per diem or mileage allowance exceeds the federal rate: The excess amount as wages in box 1. All expenses (and reimbursements
Adequate accounting up to the federal rate only and The amount up to the federal rate is reported under code L in box 12 of Form
excess not returned. reported only under code L in box 12 of W-2) only if expenses in excess of the
Form W-2—it isn’t reported in box 1. federal rate are claimed. Otherwise, form
isn’t filed.
A nonaccountable plan with:
Either adequate accounting or return of excess, or both, The entire amount as wages in box 1. All expenses.
not required by plan.
No reimbursement plan: The entire amount as wages in box 1. All expenses.

Car expenses. If you used a car to perform your job as Actual expenses. If you claim a deduction based on
an employee, you may be able to deduct certain car ex- actual car expenses, you must complete Form 2106, Part
penses. These are generally figured on Form 2106, Part II, II, Section C. In addition, unless you lease your car, you
and then claimed on Form 2106, Part I, line 1, column A. must complete Section D to show your depreciation de-
duction and any section 179 deduction you claim.
Information on use of cars. If you claim any deduc-
If you are still using a car that is fully depreciated, con-
tion for the business use of a car, you must answer certain
tinue to complete Section C. Since you have no deprecia-
questions and provide information about the use of the
tion deduction, enter zero on line 28. In this case, don’t
car. The information relates to the following items.
complete Section D.
• Date placed in service.
Car rentals. If you claim car rental expenses on Form
• Mileage (total, business, commuting, and other per- 2106, line 24a, you may have to reduce that expense by
sonal mileage). an inclusion amount, as described in chapter 4. If so, you
• Percentage of business use. can show your car expenses and any inclusion amount as
follows.
• After-work use.
1. Figure the inclusion amount without taking into ac-
• Use of other vehicles. count your business-use percentage for the tax year.
• Whether you have evidence to support the deduction.
2. Report the inclusion amount from (1) on Form 2106,
• Whether or not the evidence is written. Part II, line 24b.
Employees must complete Form 2106, Part II, Section A, 3. Report on line 24c the net amount of car rental expen-
to provide this information. ses (total car rental expenses minus the inclusion
Standard mileage rate. If you claim a deduction amount figured in (1)).
based on the standard mileage rate instead of your actual The net amount of car rental expenses will be adjusted on
expenses, you must complete Form 2106, Part II, Sec- Form 2106, Part II, line 27, to reflect the percentage of
tion B. The amount on line 22 (Section B) is carried to business use for the tax year.
Form 2106, Part I, line 1. In addition, on Part I, line 2, you
can deduct parking fees and tolls that apply to the busi- Transportation expenses. Show your transportation ex-
ness use of the car. See Standard Mileage Rate in chap- penses that didn’t involve overnight travel on Form 2106,
ter 4 for information on using this rate.

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line 2, column A. Also include on this line business expen- Since the airfare allowance was clearly identified, you
ses you have for parking fees and tolls. Don’t include ex- know that $5,000 of the payment goes in column A, line 7,
penses of operating your car or expenses of commuting of Form 2106. To allocate the remaining $7,000, you use
between your home and work. the worksheet from the Instructions for Form 2106. Your
completed worksheet follows.
Employee business expenses other than nonenter-
tainment meals. Show your other employee business Reimbursement Allocation Worksheet
expenses on Form 2106, lines 3 and 4, column A. Don’t (Keep for your records.)
include expenses for nonentertainment meals on those
lines. Line 4 is for expenses such as gifts, educational ex- 1. Enter the total amount of reimbursements your
employer gave you that weren’t reported to you
penses (tuition and books), office-in-the-home expenses, in box 1 of Form W-2. . . . . . . . . . . . . . . . $7,000
and trade and professional publications. 2. Enter the total amount of your expenses for the
periods covered by this reimbursement. . . . . 8,500
If line 4 expenses are the only ones you are claim- 3. Enter the part of the amount on line 2 that was
TIP ing, you received no reimbursements (or the reim- your total expense for
bursements were all included in box 1 of your non-entertainment-related meals. . . . . . . . . 4,500
Form W-2), and the special rules discussed later don’t ap- 4. Divide line 3 by line 2. Enter the result as a
ply to you, don’t complete Form 2106. decimal (rounded to at least three places). . . . 0.529
5. Multiply line 1 by line 4. Enter the result here
and in column B, line 7. . . . . . . . . . . . . . . 3,703
Non-entertainment-related meal expenses. Show the 6. Subtract line 5 from line 1. Enter the result here
full amount of your expenses for nonentertainment busi- and in column A, line 7. . . . . . . . . . . . . . . $3,297
ness-related meals on Form 2106, line 5, column B. In- On line 7 of Form 2106, you enter $8,297 ($5,000 airfare
clude meals while away from your tax home overnight and and $3,297 of the $7,000) in column A and $3,703 (of the
other business meals. Enter 50% of the line 8, column B, $7,000) in column B.
meal expenses on line 9, column B.
“Hours of service” limits. If you are subject to the After you complete the form. If you are a government
Department of Transportation's “hours of service” limits official paid on a fee basis, a performing artist, an Armed
(as explained earlier under Individuals subject to “hours of Forces reservist, or a disabled employee with impair-
service” limits in chapter 2), use 80% instead of 50% for ment-related work expenses, see Special Rules, later.
meals while away from your tax home.
Limits on employee business expenses. Your em-
Reimbursements. Enter on Form 2106, line 7, the ployee business expenses may be subject to either of the
amounts your employer (or third party) reimbursed you limits described next. They are figured in the following or-
that weren’t reported to you in box 1 of your Form W-2. der on the specified form.
This includes any amount reported under code L in box 12 1. Limit on meals and entertainment. Certain
of Form W-2. non-entertainment-related meal expenses are subject to a
Allocating your reimbursement. If you were reim- 50% limit. Generally, entertainment expenses are nonde-
bursed under an accountable plan and want to deduct ex- ductible if paid or incurred after December 2017. If you are
cess expenses that weren’t reimbursed, you may have to an employee, you figure this limit on line 9 of Form 2106.
allocate your reimbursement. This is necessary when your (See 50% Limit in chapter 2.)
employer pays your reimbursement in the following man- 2. Limit on total itemized deductions. Limitations on
ner. itemized deductions are suspended for tax years begin-
• Pays you a single amount that covers non-entertain- ning after 2017 and before tax year January 2026, per
ment-related meals and/or entertainment, as well as section 68(g).
other business expenses.
• Doesn’t clearly identify how much is for deductible Special Rules
non-entertainment-related meals.
This section discusses special rules that apply only to
You must allocate that single payment so that you know Armed Forces reservists, government officials who are
how much to enter on Form 2106, line 7, column A and paid on a fee basis, performing artists, and disabled em-
column B. ployees with impairment-related work expenses. For tax
Example. Your employer paid you an expense allow- years beginning after 2017, they are the only taxpayers
ance of $12,000 this year under an accountable plan. The who can use Form 2106.
$12,000 payment consisted of $5,000 for airfare and
$7,000 for non-entertainment-related meals, and car ex- Armed Forces Reservists Traveling More
penses. Your employer didn’t clearly show how much of Than 100 Miles From Home
the $7,000 was for the cost of deductible non-entertain-
ment-related meals. You actually spent $14,000 during the If you are a member of a reserve component of the Armed
year ($5,500 for airfare, $4,500 for non-entertainment-re- Forces of the United States and you travel more than 100
lated meals, and $4,000 for car expenses). miles away from home in connection with your

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performance of services as a member of the reserves, you Special rules for married persons. If you are married,
can deduct your travel expenses as an adjustment to you must file a joint return unless you lived apart from your
gross income rather than as a miscellaneous itemized de- spouse at all times during the tax year. If you file a joint re-
duction. The amount of expenses you can deduct as an turn, you must figure requirements (1), (2), and (3) sepa-
adjustment to gross income is limited to the regular federal rately for both you and your spouse. However, requirement
per diem rate (for lodging and M&IE) and the standard (4) applies to your and your spouse's combined adjusted
mileage rate (for car expenses) plus any parking fees, gross income.
ferry fees, and tolls. See Per Diem and Car Allowances,
earlier, for more information. Where to report. If you meet all of the above require-
ments, you should first complete Form 2106. Then you in-
Member of a reserve component. You are a member of clude your performing-arts-related expenses from Form
a reserve component of the Armed Forces of the United 2106, line 10, in the total on Schedule 1 (Form 1040),
States if you are in the Army, Navy, Marine Corps, Air line 12.
Force, or Coast Guard Reserve; the Army National Guard If you don’t meet all of the above requirements, you
of the United States; the Air National Guard of the United don’t qualify to deduct your expenses as an adjustment to
States; or the Reserve Corps of the Public Health Service. gross income.

How to report. If you have reserve-related travel that Impairment-Related Work Expenses of
takes you more than 100 miles from home, you should first
Disabled Employees
complete Form 2106. Then include your expenses for re-
serve travel over 100 miles from home, up to the federal
If you are an employee with a physical or mental disability,
rate, from Form 2106, line 10, in the total on Schedule 1
your impairment-related work expenses aren’t subject to
(Form 1040), line 12.
the 2%-of-adjusted-gross-income limit that applies to
You can’t deduct expenses of travel that doesn’t take
most other employee business expenses. After you com-
you more than 100 miles from home as an adjustment to
plete Form 2106, enter your impairment-related work ex-
gross income.
penses from Form 2106, line 10, on Schedule A (Form
1040), line 16, and identify the type and amount of this ex-
Officials Paid on a Fee Basis pense on the line next to line 16.

Certain fee-basis officials can claim their employee busi- Impairment-related work expenses are your allowable
ness expenses on Form 2106. expenses for attendant care at your workplace and other
expenses in connection with your workplace that are nec-
Fee-basis officials are persons who are employed by a
essary for you to be able to work.
state or local government and who are paid in whole or in
part on a fee basis. They can deduct their business ex-
You are disabled if you have:
penses in performing services in that job as an adjustment
to gross income rather than as a miscellaneous itemized • A physical or mental disability (for example, blindness
deduction. or deafness) that functionally limits your being em-
ployed; or
If you are a fee-basis official, include your employee
• A physical or mental impairment (for example, a sight
business expenses from Form 2106, line 10, in the total on
or hearing impairment) that substantially limits one or
Schedule 1 (Form 1040), line 12.
more of your major life activities, such as performing
manual tasks, walking, speaking, breathing, learning,
Expenses of Certain or working.
Performing Artists
You can deduct impairment-related expenses as busi-
If you are a performing artist, you may qualify to deduct ness expenses if they are:
your employee business expenses as an adjustment to
gross income. To qualify, you must meet all of the following • Necessary for you to do your work satisfactorily;
requirements. • For goods and services not required or used, other
than incidentally, in your personal activities; and
1. During the tax year, you perform services in the per-
forming arts as an employee for at least two employ- • Not specifically covered under other income tax laws.
ers.
Example 1. You are blind. You must use a reader to do
2. You receive at least $200 each from any two of these your work. You use the reader both during your regular
employers. working hours at your place of work and outside your reg-
3. Your related performing-arts business expenses are ular working hours away from your place of work. The
more than 10% of your gross income from the per- reader's services are only for your work. You can deduct
formance of those services. your expenses for the reader as business expenses.

4. Your adjusted gross income isn’t more than $16,000 Example 2. You are deaf. You must use a sign lan-
before deducting these business expenses. guage interpreter during meetings while you are at work.

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The interpreter's services are used only for your work. You          Using online tools to help prepare your return.     Go to 
can deduct your expenses for the interpreter as business             IRS.gov/Tools for the following.
expenses.
                                                                     • The Earned Income Tax Credit Assistant IRS.gov/ (
                                                                       EITCAssistant) determines if you’re eligible for the 
                                                                       earned income credit (EIC).
How To Get Tax Help                                                    The Online EIN Application IRS.gov/EIN ( ) helps you 
                                                                     •
                                                                       get an employer identification number (EIN) at no 
If you have questions about a tax issue; need help prepar-
                                                                       cost.
ing your tax return; or want to download free publications, 
forms, or instructions, go to IRS.gov to find resources that         • The Tax Withholding Estimator IRS.gov/W4App (     ) 
can help you right away.                                               makes it easier for you to estimate the federal income 
                                                                       tax you want your employer to withhold from your pay-
Preparing and filing your tax return. After receiving all              check. This is tax withholding. See how your withhold-
your wage and earnings statements (Forms W-2, W-2G,                    ing affects your refund, take-home pay, or tax due.
1099-R,  1099-MISC,  1099-NEC,  etc.);  unemployment 
compensation statements (by mail or in a digital format) or          • The First Time Homebuyer Credit Account Look-up 
                                                                       (IRS.gov/HomeBuyer) tool provides information on 
other  government  payment  statements  (Form  1099-G); 
                                                                       your repayments and account balance.
and  interest,  dividend,  and  retirement  statements  from 
banks and investment firms (Forms 1099), you have sev-               • The Sales Tax Deduction Calculator IRS.gov/ (
eral options to choose from to prepare and file your tax re-           SalesTax) figures the amount you can claim if you 
turn.  You  can  prepare  the  tax  return  yourself,  see  if  you    itemize deductions on Schedule A (Form 1040).
qualify for free tax preparation, or hire a tax professional to 
                                                                             Getting  answers  to  your  tax  questions.  On 
prepare your return.
                                                                             IRS.gov,  you  can  get  up-to-date  information  on 
Free options for tax preparation.    Your options for pre-                   current events and changes in tax law.
paring  and  filing  your  return  online  or  in  your  local  com- • Go to IRS.gov/Help: A variety of tools to help you get 
munity, if you qualify, include the following.                         answers to some of the most common tax questions.
•  Free File. This program lets you prepare and file your            • Go to IRS.gov/ITA: The Interactive Tax Assistant, a 
   federal individual income tax return for free using soft-           tool that will ask you questions and, based on your in-
   ware or Free File Fillable Forms. However, state tax                put, provide answers on a number of tax topics.
   preparation may not be available through Free File. Go 
   to IRS.gov/FreeFile to see if you qualify for free online         • Go to IRS.gov/Forms: Find forms, instructions, and 
                                                                       publications. You will find details on the most recent 
   federal tax preparation, e-filing, and direct deposit or 
                                                                       tax changes and interactive links to help you find an-
   payment options.
                                                                       swers to your questions.
•  VITA. The Volunteer Income Tax Assistance (VITA) 
   program offers free tax help to people with                       • You may also be able to access tax information in your 
                                                                       e-filing software.
   low-to-moderate incomes, persons with disabilities, 
   and limited-English-speaking taxpayers who need 
   help preparing their own tax returns. Go to IRS.gov/              Need someone to prepare your tax return?            There are 
   VITA, download the free IRS2Go app, or call                       various  types  of  tax  return  preparers,  including  enrolled 
   800-906-9887 for information on free tax return prepa-            agents, certified public accountants (CPAs), accountants, 
   ration.                                                           and many others who don’t have professional credentials. 
•  TCE. The Tax Counseling for the Elderly (TCE) pro-                If  you  choose  to  have  someone  prepare  your  tax  return, 
   gram offers free tax help for all taxpayers, particularly         choose that preparer wisely. A paid tax preparer is:
   those who are 60 years of age and older. TCE volun-               • Primarily responsible for the overall substantive accu-
   teers specialize in answering questions about pen-                  racy of your return,
   sions and retirement-related issues unique to seniors. 
   Go to IRS.gov/TCE or download the free IRS2Go app                 • Required to sign the return, and
   for information on free tax return preparation.                   • Required to include their preparer tax identification 
                                                                       number (PTIN).
•  MilTax. Members of the U.S. Armed Forces and quali-
   fied veterans may use MilTax, a free tax service of-                      Although the tax preparer always signs the return, 
   fered by the Department of Defense through Military                !      you're  ultimately  responsible  for  providing  all  the 
   OneSource. For more information, go to                            CAUTION information required for the preparer to accurately 
   MilitaryOneSource MilitaryOneSource.mil/MilTax ( ).               prepare your return and for the accuracy of every item re-
Also, the IRS offers Free Fillable Forms, which can be               ported on the return. Anyone paid to prepare tax returns 
completed online and then e-filed regardless of income.              for  others  should  have  a  thorough  understanding  of  tax 
                                                                     matters. For more information on how to choose a tax pre-
                                                                     parer, go to Tips for Choosing a Tax Preparer on IRS.gov.

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Employers can register to use Business Services On- Disasters. Go to IRS.gov/DisasterRelief to review the
line. The Social Security Administration (SSA) offers on- available disaster tax relief.
line service at SSA.gov/employer for fast, free, and secure
W-2 filing options to CPAs, accountants, enrolled agents, Getting tax forms and publications. Go to IRS.gov/
and individuals who process Form W-2, Wage and Tax Forms to view, download, or print all the forms, instruc-
Statement, and Form W-2c, Corrected Wage and Tax tions, and publications you may need. Or, you can go to
Statement. IRS.gov/OrderForms to place an order.

IRS social media. Go to IRS.gov/SocialMedia to see the Getting tax publications and instructions in eBook
various social media tools the IRS uses to share the latest format. Download and view most tax publications and in-
information on tax changes, scam alerts, initiatives, prod- structions (including the Instructions for Form 1040) on
ucts, and services. At the IRS, privacy and security are our mobile devices as eBooks at IRS.gov/eBooks.
highest priority. We use these tools to share public infor- IRS eBooks have been tested using Apple's iBooks for
mation with you. Don’t post your social security number iPad. Our eBooks haven’t been tested on other dedicated
(SSN) or other confidential information on social media eBook readers, and eBook functionality may not operate
sites. Always protect your identity when using any social as intended.
networking site.
The following IRS YouTube channels provide short, in- Access your online account (individual taxpayers
formative videos on various tax-related topics in English, only). Go to IRS.gov/Account to securely access infor-
Spanish, and ASL. mation about your federal tax account.
• Youtube.com/irsvideos. • View the amount you owe and a breakdown by tax
• Youtube.com/irsvideosmultilingua. year.
• Youtube.com/irsvideosASL. • See payment plan details or apply for a new payment
plan.
Watching IRS videos. The IRS Video portal • Make a payment or view 5 years of payment history
(IRSVideos.gov) contains video and audio presentations and any pending or scheduled payments.
for individuals, small businesses, and tax professionals.
• Access your tax records, including key data from your
Online tax information in other languages. You can most recent tax return, and transcripts.
find information on IRS.gov/MyLanguage if English isn’t View digital copies of select notices from the IRS.
•
your native language.
• Approve or reject authorization requests from tax pro-
Free Over-the-Phone Interpreter (OPI) Service. The fessionals.
IRS is committed to serving taxpayers with limited-English
proficiency (LEP) by offering OPI services. The OPI Serv- • View your address on file or manage your communica-
tion preferences.
ice is a federally funded program and is available at Tax-
payer Assistance Centers (TACs), most IRS offices, and Get a transcript of your return. With an online account,
every VITA/TCE tax return site. The OPI Service is acces- you can access a variety of information to help you during
sible in more than 350 languages. the filing season. You can get a transcript, review your
most recently filed tax return, and get your adjusted gross
Accessibility Helpline available for taxpayers with
income. Create or access your online account at IRS.gov/
disabilities. Taxpayers who need information about ac-
Account.
cessibility services can call 833-690-0598. The Accessi-
bility Helpline can answer questions related to current and Tax Pro Account. This tool lets your tax professional
future accessibility products and services available in al- submit an authorization request to access your individual
ternative media formats (for example, braille, large print, taxpayer IRS online account. For more information, go to
audio, etc.). The Accessibility Helpline does not have ac- IRS.gov/TaxProAccount.
cess to your IRS account. For help with tax law, refunds, or
account-related issues, go to IRS.gov/LetUsHelp. Using direct deposit. The safest and easiest way to re-
ceive a tax refund is to e-file and choose direct deposit,
Note. Form 9000, Alternative Media Preference, or which securely and electronically transfers your refund di-
Form 9000(SP) allows you to elect to receive certain types rectly into your financial account. Direct deposit also
of written correspondence in the following formats. avoids the possibility that your check could be lost, stolen,
• Standard Print. destroyed, or returned undeliverable to the IRS. Eight in
10 taxpayers use direct deposit to receive their refunds. If
• Large Print. you don’t have a bank account, go to IRS.gov/
• Braille. DirectDeposit for more information on where to find a bank
or credit union that can open an account online.
• Audio (MP3).
• Plain Text File (TXT).
• Braille Ready File (BRF).

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Reporting and resolving your tax-related identity • Same-Day Wire: You may be able to do same-day
theft issues. wire from your financial institution. Contact your finan-
• Tax-related identity theft happens when someone cial institution for availability, cost, and time frames.
steals your personal information to commit tax fraud. Note. The IRS uses the latest encryption technology to
Your taxes can be affected if your SSN is used to file a ensure that the electronic payments you make online, by
fraudulent return or to claim a refund or credit. phone, or from a mobile device using the IRS2Go app are
safe and secure. Paying electronically is quick, easy, and
• The IRS doesn’t initiate contact with taxpayers by
faster than mailing in a check or money order.
email, text messages (including shortened links), tele-
phone calls, or social media channels to request or What if I can’t pay now? Go to IRS.gov/Payments for
verify personal or financial information. This includes more information about your options.
requests for personal identification numbers (PINs),
passwords, or similar information for credit cards, • Apply for an online payment agreement IRS.gov/ (
banks, or other financial accounts. OPA) to meet your tax obligation in monthly install-
ments if you can’t pay your taxes in full today. Once
• Go to IRS.gov/IdentityTheft, the IRS Identity Theft you complete the online process, you will receive im-
Central webpage, for information on identity theft and mediate notification of whether your agreement has
data security protection for taxpayers, tax professio- been approved.
nals, and businesses. If your SSN has been lost or
stolen or you suspect you’re a victim of tax-related • Use the Offer in Compromise Pre-Qualifier to see if
identity theft, you can learn what steps you should you can settle your tax debt for less than the full
take. amount you owe. For more information on the Offer in
Compromise program, go to IRS.gov/OIC.
• Get an Identity Protection PIN (IP PIN). IP PINs are
six-digit numbers assigned to taxpayers to help pre- Filing an amended return. Go to IRS.gov/Form1040X
vent the misuse of their SSNs on fraudulent federal in- for information and updates.
come tax returns. When you have an IP PIN, it pre-
vents someone else from filing a tax return with your Checking the status of your amended return. Go to
SSN. To learn more, go to IRS.gov/IPPIN. IRS.gov/WMAR to track the status of Form 1040-X amen-
ded returns.
Ways to check on the status of your refund.
It can take up to 3 weeks from the date you filed
• Go to IRS.gov/Refunds. ! your amended return for it to show up in our sys-
• Download the official IRS2Go app to your mobile de- CAUTION tem, and processing it can take up to 16 weeks.
vice to check your refund status.
• Call the automated refund hotline at 800-829-1954. Understanding an IRS notice or letter you’ve re-
ceived. Go to IRS.gov/Notices to find additional informa-
The IRS can’t issue refunds before mid-February tion about responding to an IRS notice or letter.
! for returns that claimed the EIC or the additional
CAUTION child tax credit (ACTC). This applies to the entire Responding to an IRS notice or letter. You can now
refund, not just the portion associated with these credits. upload responses to all notices and letters using the
Document Upload Tool. For notices that require additional
Making a tax payment. Payments of U.S. tax must be action, taxpayers will be redirected appropriately on
remitted to the IRS in U.S. dollars. Digital assets are not IRS.gov to take further action. To learn more about the
accepted. Go to IRS.gov/Payments for information on how tool, go to IRS.gov/Upload.
to make a payment using any of the following options.
Note. You can use Schedule LEP (Form 1040), Re-
• IRS Direct Pay: Pay your individual tax bill or estimated quest for Change in Language Preference, to state a pref-
tax payment directly from your checking or savings ac- erence to receive notices, letters, or other written commu-
count at no cost to you. nications from the IRS in an alternative language. You may
• Debit Card, Credit Card, or Digital Wallet: Choose an not immediately receive written communications in the re-
approved payment processor to pay online or by quested language. The IRS’s commitment to LEP taxpay-
phone. ers is part of a multi-year timeline that began providing
translations in 2023. You will continue to receive communi-
• Electronic Funds Withdrawal: Schedule a payment cations, including notices and letters, in English until they
when filing your federal taxes using tax return prepara- are translated to your preferred language.
tion software or through a tax professional.
• Electronic Federal Tax Payment System: Best option Contacting your local TAC. Keep in mind, many ques-
for businesses. Enrollment is required. tions can be answered on IRS.gov without visiting a TAC.
Go to IRS.gov/LetUsHelp for the topics people ask about
• Check or Money Order: Mail your payment to the ad- most. If you still need help, TACs provide tax help when a
dress listed on the notice or instructions. tax issue can’t be handled online or by phone. All TACs
• Cash: You may be able to pay your taxes with cash at now provide service by appointment, so you’ll know in ad-
a participating retail store. vance that you can get the service you need without long

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wait times. Before you visit, go to IRS.gov/TACLocator to • Download Pub. 1546, The Taxpayer Advocate Service
find the nearest TAC and to check hours, available serv- Is Your Voice at the IRS, available at IRS.gov/pub/irs-
ices, and appointment options. Or, on the IRS2Go app, pdf/p1546.pdf;
under the Stay Connected tab, choose the Contact Us op-
• Call the IRS toll free at 800-TAX-FORM
tion and click on “Local Offices.”
(800-829-3676) to order a copy of Pub. 1546;
The Taxpayer Advocate Service (TAS) • Check your local directory; or
Is Here To Help You • Call TAS toll free at 877-777-4778.

What Is TAS? How Else Does TAS Help Taxpayers?

TAS is an independent organization within the IRS that TAS works to resolve large-scale problems that affect
helps taxpayers and protects taxpayer rights. TAS strives many taxpayers. If you know of one of these broad issues,
to ensure that every taxpayer is treated fairly and that you report it to TAS at IRS.gov/SAMS. Be sure to not include
know and understand your rights under the Taxpayer Bill any personal taxpayer information.
of Rights.
Low Income Taxpayer Clinics (LITCs)
How Can You Learn About Your Taxpayer
Rights? LITCs are independent from the IRS and TAS. LITCs rep-
resent individuals whose income is below a certain level
The Taxpayer Bill of Rights describes 10 basic rights that and who need to resolve tax problems with the IRS. LITCs
all taxpayers have when dealing with the IRS. Go to can represent taxpayers in audits, appeals, and tax collec-
TaxpayerAdvocate.IRS.gov to help you understand what tion disputes before the IRS and in court. In addition,
these rights mean to you and how they apply. These are LITCs can provide information about taxpayer rights and
your rights. Know them. Use them. responsibilities in different languages for individuals who
speak English as a second language. Services are offered
What Can TAS Do For You? for free or a small fee. For more information or to find an
LITC near you, go to the LITC page at
TAS can help you resolve problems that you can’t resolve TaxpayerAdvocate.IRS.gov/LITC or see IRS Pub. 4134,
with the IRS. And their service is free. If you qualify for Low Income Taxpayer Clinic List, at IRS.gov/pub/irs-pdf/
their assistance, you will be assigned to one advocate p4134.pdf.
who will work with you throughout the process and will do
everything possible to resolve your issue. TAS can help
you if:
Appendices
• Your problem is causing financial difficulty for you,
your family, or your business; Appendices A-1 through A-6 show the lease inclusion
• You face (or your business is facing) an immediate amounts that you may need to report if you first leased a
threat of adverse action; or passenger automobile (including a truck and van) in 2018
through 2023 for 30 days or more.
• You’ve tried repeatedly to contact the IRS but no one
has responded, or the IRS hasn’t responded by the If any of these apply to you, use the appendix for the
date promised. year you first leased the car. (See Leasing a Car in chap-
ter 4.)
How Can You Reach TAS?

TAS has offices in every state, the District of Columbia,
and Puerto Rico. To find your advocate’s number:
• Go to TaxpayerAdvocate.IRS.gov/Contact-Us;

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Appendix A-1. Inclusion Amounts for Passenger Automobiles First Leased in 2018
        Fair Market Value                                                               Tax Year of Lease1
   Over       Not Over    1st                                                      2nd                                     3rd 4th                                        5th and Later
    $50,000    $51,000     $1                                                       $3                                      $5  $5                                         $6
    51,000     52,000     4                                                        9                                       13  16                                         19
    52,000     53,000     7                                                        15                                      22  27                                         31
    53,000     54,000     10                                                       21                                      31  37                                         44
    54,000     55,000     12                                                       27                                      40  48                                         56
    55,000     56,000     15                                                       33                                      49  59                                         68
    56,000     57,000     18                                                       39                                      58  69                                         81
    57,000     58,000     20                                                       45                                      67  80                                         93
    58,000     59,000     23                                                       51                                      76  91                                         105
    59,000     60,000     26                                                       57                                      85  101                                        117
    60,000     62,000     30                                                       66                                      98  118                                        135
    62,000     64,000     36                                                       78                                      116 139                                        160
    64,000     66,000     41                                                       90                                      134 160                                        185
    66,000     68,000     46                                                       102                                     152 181                                        210
    68,000     70,000     52                                                       114                                     169 203                                        235
    70,000     72,000     57                                                       126                                     187 225                                        259
    72,000     74,000     63                                                       138                                     205 246                                        284
    74,000     76,000     68                                                       150                                     223 267                                        309
    76,000     78,000     74                                                       162                                     241 288                                        333
    78,000     80,000     79                                                       174                                     259 310                                        357
    80,000     85,000     89                                                       195                                     290 347                                        401
    85,000     90,000     102                                                      225                                     335 400                                        463
    90,000     95,000     116                                                      255                                     379 454                                        525
    95,000     100,0002   130                                                      285                                     423 508                                        586
1 For the last tax year of the lease, use the dollar amount for the preceding year.
2 If the fair market value of the vehicle is more than $100,000, see Rev. Proc. 2018-25 (2018-18 I.R.B. 543), available at https://www.irs.gov/pub/irs-drop/rp-18-25.pdf.
Appendix A-2. Inclusion Amounts for Passenger Automobiles First Leased in 2019
        Fair Market Value                                                               Tax Year of Lease1
   Over       Not Over    1st                                                      2nd                                     3rd 4th                                        5th and Later
    $50,000    $51,000     $0                                                       $1                                      $1  $3                                         $3
    51,000     52,000      4                                                        11                                      15  20                                         23
    52,000     53,000      9                                                        20                                      30  36                                         43
    53,000     54,000      13                                                       30                                      44  53                                         63
    54,000     55,000      17                                                       40                                      58  70                                         83
    55,000     56,000      22                                                       49                                      72  88                                         102
    56,000     57,000      26                                                       59                                      86  105                                        122
    57,000     58,000      31                                                       68   101                                    122                                        142
    58,000     59,000      35                                                       78   115                                    139                                        161
    59,000     60,000      39                                                       88   129                                    156                                        181
    60,000     62,000      46                                                       102  151                                    181                                        211
    62,000     64,000      55                                                       121  179                                    216                                        250
    64,000     66,000      63                                                       140  208                                    251                                        289
    66,000     68,000      72                                                       160  236                                    284                                        329
    68,000     70,000      81                                                       179  265                                    318                                        369
    70,000     72,000      90                                                       198  293                                    353                                        408
    72,000     74,000      98                                                       217  322                                    387                                        448
    74,000     76,000      107                                                      236  351                                    421                                        487
    76,000     78,000      116                                                      255  379                                    456                                        526
    78,000     80,000      125                                                      275  407                                    489                                        567
    80,000     85,000      140                                                      308  458                                    549                                        635
    85,000     90,000      162                                                      356  529                                    635                                        734
    90,000     95,000      184                                                      404  600                                    720                                        833
    95,000     100,0002    206                                                      452  671                                    806                                        931
1 For the last tax year of the lease, use the dollar amount for the preceding year.
2 If the fair market value of the vehicle is more than $100,000, see Rev. Proc. 2019-26 (2019-24 I.R.B. 1323), available at https://www.irs.gov/pub/irs-drop/rp-19-26.pdf.

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Appendix A-3. Inclusion Amounts for Passenger Automobiles First Leased in 2020
      Fair Market Value                                                                Tax Year of Lease1
 Over         Not Over  1st                                                        2nd                                     3rd 4th                                       5th and Later
  $50,000      $51,000   $0                                                         $1                                      $0  $2                                        $2
 51,000       52,000    2                                                          6                                       9   10                                        13
 52,000       53,000    5                                                          11                                      17  20                                        24
 53,000       54,000    7                                                          17                                      24  30                                        35
 54,000       55,000    10                                                         22                                      32  39                                        46
 55,000       56,000    12                                                         27                                      41  48                                        57
 56,000       57,000    15                                                         32                                      49  58                                        68
 57,000       58,000    17                                                         38                                      56  68                                        79
 58,000       59,000    19                                                         44                                      64  77                                        90
 59,000       60,000    22                                                         49                                      72  87                                        100
 60,000       62,000    26                                                         56                                      84  102                                       117
 62,000       64,000    30                                                         68                                      99  121                                       139
 64,000       66,000    35                                                         78                                      116 139                                       161
 66,000       68,000    40                                                         89                                      131 159                                       183
 68,000       70,000    45                                                         99                                      148 177                                       205
 70,000       72,000    50                                                         110                                     163 197                                       227
 72,000       74,000    55                                                         121                                     179 215                                       249
 74,000       76,000    60                                                         131                                     195 235                                       271
 76,000       78,000    64                                                         142                                     211 254                                       293
 78,000       80,000    69                                                         153                                     227 272                                       315
 80,000       85,000    78                                                         172                                     254 306                                       353
 85,000       90,000    90                                                         198                                     295 353                                       408
 90,000       95,000    102                                                        225                                     334 401                                       463
 95,000       100,0002  114                                                        252                                     373 449                                       518
1 For the last tax year of the lease, use the dollar amount for the preceding year.
2 If the fair market value of the vehicle is more than $100,000, see Rev. Proc. 2020-37 (2020-33 I.R.B. 381), available at https://www.irs.gov/pub/irs-drop/rp-20-37.pdf.
Appendix A-4. Inclusion Amounts for Passenger Automobiles First Leased in 2021
      Fair Market Value                                                                Tax Year of Lease1
 Over         Not Over  1st                                                        2nd                                     3rd 4th                                       5th and Later
  $51,000      $52,000   $0                                                         $0                                      $1  $0                                        $1
 52,000       53,000    1                                                          1                                       1   2                                         2
 53,000       54,000    1                                                          2                                       2   3                                         4
 54,000       55,000    1                                                          3                                       3   5                                         5
 55,000       56,000    2                                                          3                                       5   6                                         6
 56,000       57,000    2                                                          4                                       6   7                                         8
 57,000       58,000    2                                                          5                                       7   8                                         10
 58,000       59,000    3                                                          5                                       8   10                                        11
 59,000       60,000    3                                                          6                                       9   11                                        13
 60,000       62,000    3                                                          7                                       11  13                                        15
 62,000       64,000    4                                                          9                                       13  15                                        18
 64,000       66,000    5                                                          10                                      15  18                                        21
 66,000       68,000    5                                                          12                                      17  21                                        24
 68,000       70,000    6                                                          13                                      20  23                                        27
 70,000       72,000    7                                                          14                                      22  26                                        30
 72,000       74,000    7                                                          16                                      24  29                                        33
 74,000       76,000    8                                                          18                                      26  31                                        36
 76,000       78,000    9                                                          19                                      28  34                                        39
 78,000       80,000    9                                                          21                                      30  37                                        42
 80,000       85,000    11                                                         23                                      34  41                                        48
 85,000       90,000    12                                                         27                                      40  47                                        55
 90,000       95,000    14                                                         30                                      45  55                                        62
 95,000       100,0002  16                                                         34                                      50  61                                        70
1 For the last tax year of the lease, use the dollar amount for the preceding year.
2 If the fair market value of the vehicle is more than $100,000, see Rev. Proc. 2021-31 (2021-34 I.R.B. 324), available at https://www.irs.gov/pub/irs-drop/rp-21-31.pdf.

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Appendix A-5. Inclusion Amounts for Passenger Automobiles First Leased in 2022
        Fair Market Value                                                              Tax Year of Lease1
   Over       Not Over    1st                                                      2nd 3rd                                 4th 5th and Later
    $56,000    $57,000     $1                                                       $1  $1                                  $2                                $2
   57,000     58,000      2                                                        4   5                                   7                                 7
   58,000     59,000      3                                                        7   9                                   11                                13
   59,000     60,000      4                                                        9   14                                  16                                19
   60,000     62,000      6                                                        13  20                                  23                                28
   62,000     64,000      9                                                        19  27                                  34                                38
   64,000     66,000      11                                                       24  36                                  43                                50
   66,000     68,000      14                                                       30  43                                  53                                61
   68,000     70,000      16                                                       35  52                                  63                                72
   70,000     72,000      19                                                       40  61                                  72                                83
   72,000     74,000      21                                                       46  68                                  82                                95
   74,000     76,000      24                                                       51  77                                  91                                106
   76,000     78,000      26                                                       57  85                                  101                               117
   78,000     80,000      29                                                       62  93                                  111                               128
   80,000     85,000      33                                                       72  107                                 128                               148
   85,000     90,000      39                                                       86  127                                 152                               176
   90,000     95,000      45                                                       100 147                                 177                               204
   95,000     100,0002    52                                                       113 167                                 201                               233
1 For the last tax year of the lease, use the dollar amount for the preceding year.
2 If the fair market value of the vehicle is more than $100,000, see Rev. Proc. 2022-17 (2022-13 I.R.B. 930), available at IRS.gov/pub/irs-drop/rp-22-17.pdf.

Appendix A-6. Inclusion Amounts for Passenger Automobiles First Leased in 2023
        Fair Market Value                                                              Tax Year of Lease1
   Over       Not Over    1st                                                      2nd 3rd                                 4th 5th and Later
   60,000     62,000      0                                                        0   1                                   3                                 5
   62,000     64,000      13                                                       29  43                                  54                                63
   64,000     66,000      26                                                       57  86                                  104                               122
   66,000     68,000      39                                                       86  128                                 154                               181
   68,000     70,000      52                                                       114 170                                 206                               239
   70,000     72,000      65                                                       143 212                                 256                               297
   72,000     74,000      78                                                       171 255                                 306                               356
   74,000     76,000      91                                                       200 296                                 358                               414
   76,000     78,000      104                                                      228 339                                 408                               473
   78,000     80,000      117                                                      257 381                                 459                               531
   80,000     85,000      140                                                      306 455                                 548                               634
   85,000     90,000      172                                                      378 560                                 674                               780
   90,000     95,000      204                                                      449 666                                 801                               926
   95,000     100,0002    237                                                      520 772                                 927                               1,073
1 For the last tax year of the lease, use the dollar amount for the preceding year.
2 If the fair market value of the vehicle is more than $100,000, see Rev. Proc. 2023-14 (2023-6 I.R.B. 466), available at https://www.irs.gov/pub/irs-drop/rp-23-14.pdf.

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                     To help us develop a more useful index, please let us know if you have ideas for index entries.
Index                See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.
 
                                      Casualty and theft losses:          Form 1040, Schedule C         41
"Hours of service" limits   17         Cars 23                            Form 1040, Schedule F         41
  Form 2106   50                        Depreciation    34                Form 2106    24 41 42 47 48, , , , 
50% limit on meals   7                Club dues 15                        Form 4562    41
                                      Commuting expenses       20         Form 4797    31
A
                                      Conventions  13                     Form W-2:
Accountable plans    42 46-           Country clubs 15                     Employer-provided vehicles                     42
Accounting to employer   42           Cruise ships 13                      Reimbursement of personal 
Adequate accounting      43                                                expenses      41
  Independent contractors   47        D                                    Statutory employees          41
Adequate records     36               Daily business mileage and 
Advertising:                           expense log (Table 5-2)     39     G
  Car display 20                      Depreciation of car  23             Gifts 15 17, 
  Expenses   17                       (See also Section 179 deductions)    $25 limit 18
  Signs, display racks, or other       Adjustment for using standard       Combining for recordkeeping 
  promotional material to be used       mileage rate    35                 purposes      38
  on recipient's business              Basis 26                            Reporting requirements         41
  premises    18                        Sales taxes   23                  Golf clubs 15
Airline clubs 15                        Unrecovered basis      30
Allocating costs  6 38,                Casualty or theft, effect 34       H
Allowance (See Reimbursements)         Deduction  23 35,                  Hauling tools  20
Armed forces:                          Excess depreciation 31             High-low method:
  Assigned overseas   4                Modified Accelerated Cost           Introduction  48
Assistance (See Tax help)               Recovery System (MACRS)        28  Transition rules 48
Athletic clubs 15                      Trade-in, effect 27 35,            High-low rate method          44
                                       Trucks and vans  30                Home office  20
B                                     Depreciation of Car:                Hotel clubs  15
Basis of car 26                        Section 179 deduction   30
 (See also Depreciation of car)       Disabled employees:                 I
Bona fide business purpose      7      Impairment-related work            Identity theft 54
Business travel   9                     expenses   51
                                                                          Impairment-related work 
  Outside U.S.    10                  Documentary evidence       36        expenses    51
Business use of car   22
                                                                          Incidental expenses:
  More-than-50%-use test.   26        E
                                                                           Defined   8
  Qualified business use 26           Employer-provided vehicles     22    Gifts 18
                                       Reporting requirements    42        No meals, incidentals only                    8
C                                     Entertainment expenses     18       Income-producing property                       41
Canceled checks:                       50% limit:                         Incomplete records  37
  As evidence of business               Determination of applicability    Indefinite job assignment                      5
  expenses     36                       (Figure A)      16
                                                                          Independent contractors         47
Car expenses   21 34-                  Entertainment, defined    14
                                                                          Interest on car loans 23
  Actual expenses    22                Form 2106   50
                                                                          Itinerants 4
  Allowances for  43 46-              Estimates of expenses    36
  Business and personal use    22     Exceptions to the 50% Limit    17   L
  Combining expenses     38           Excess reimbursements 
  Disposition of car 34                (See Reimbursements)               Leasing a car, truck, or van                    33 34, 
  Fixed and variable rate (FAVR)                                          Luxury water travel 12
  allowance       45                  F
                                                                          M
  Form 2106   49                      Fair market value of car   33
  Leasing a car, truck, or van 33 34, Farmers:                            MACRS (Modified Accelerated Cost 
                                                                           Recovery System)     28
  Mileage rate (See Standard mileage   Form 1040, Schedule F     41
                                                                           2023 chart (Table 4-1)       32
  rate)                               Federal crime investigations or 
  Taxes paid on car  23                prosecutions:                      Main place of business or work                    4
  Traffic tickets 23                   Federal employees engaged in    5  Married taxpayers:
Car pools  20                         Federal rate for per diem  8 44,     Performing artists 51
Car rentals 34                        Fee-basis officials 51              Meal expenses  7
  Form 2106   49                      Fees you pay 20                      50% limit   16
Car, defined 23                       Fixed and variable rate (FAVR)       Determination of applicability 
Car, truck, or van rentals  33 34,     allowance   45                           (Figure A)  16

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   Exceptions   17                           Separating and combining             Maximum depreciation deduction 
  Actual cost method   7                     expenses     38                      for Passenger Automobiles 
  Form 2106   50                             Three-year period of retention 38    (Including Trucks and Vans) 
  Major cities with higher                   Weekly traveling expense record      acquired before September 28, 
   allowances    8                           (Table 5-3)  40                      2017, and placed in service 
  Standard meal allowance     7 8 44,  ,   Regular federal method:                during 2018–2023        29
Meals and Entertainment                      Introduction 48                      Modified Accelerated Cost 
                                                                                  Recovery System (MACRS) 2023 
  expenses    14                             Transition rules 48                  chart (Table 4-1)     32
Mileage rate (See Standard mileage         Reimbursements     42 48-              Proving expenses (Table 5-1)             37
  rate)                                      Accountable plans   42               Reporting reimbursements 
Military (See Armed forces)                  Excess 46 47,                        (Table 6-1)    49
Missing children, photographs of         2   Form 2106 50                         Transportation expenses, 
Modified Accelerated Cost                    Nonaccountable plans    46           determination of deductibility 
  Recovery System (MACRS)        28          Nondeductible expenses   43          (Figure B)     18 19, 
  2023 chart (Table 4-1) 32                  Personal expenses   41               Travel expenses, determination of 
                                             Recordkeeping    38                  deductibility (Table 1-1)              7
N                                            Reporting (Table 6-1) 49             Weekly traveling expense record 
Nonaccountable plans     46                  Unclaimed 41                         (Table 5-3)    40
                                           Reporting requirements    41          Tax help 52
O                                            Per diem or car allowance  45       Tax home, determination of              4
Office in the home   20                      Reimbursements   42 48-             Temporary job assignments                5
Officials paid on fee basis   51           Reservists:                           Temporary work location    19
Overseas travel:                             Transportation expenses  20         Tickets:
  Conventions  13                            Traveling more than 100 miles from   Traffic violations 23
  Meal allowance   8                         home    50                          Tools:
  Part of trip outside U.S. 9              Returning excess                       Hauling tools  20
                                             reimbursements    46                Trade-in of car 27 35, 
P                                                                                Traffic tickets 23
Parking fees  20 22,                       S                                     Transients 4
Per diem allowances    43 46-              Section 179 deduction:                Transition rules 48
  Defined 42                                 Amended return   25                  Example:
  Federal rate for 44                        Deduction 23                         High-low method       48
Per diem rates:                              Limits 24                            High-low method    48
  High-cost localities 48                  Self-employed persons     17           Regular federal method    48
  High-low method  48                        Reporting requirements  41          Transportation expenses    18
  Regular federal method    48             Spouse, expenses for    6              Car expenses    21 34-
  Standard rate for unlisted               Standard meal allowance    7 8 44,  ,  Deductible (Figure B)   18 19, 
   localities 48                           Standard mileage rate   2 21 45, ,     five or more cars  22
  Transition rules 48                        Depreciation adjustment for          Form 2106  49
Performing artists 51                        using   35                          Transportation workers    8 17, 
Personal property taxes     22 23,           Form 2106 49                        Travel advance  42 46, 
Personal trips 9                           Statutory employees   41              (See also Reimbursements)
  Outside U.S. 12                                                                Travel expenses   3 14-
Placed in service, cars  26                T                                      Another individual accompanying 
Probationary work period      6            Tables and figures:                    taxpayer   6
Proving business purpose      36             50% limit determination (Figure      Away from home     4 5, 
Public transportation:                       A) 16                                Deductible 6 14, 
  Outside of U.S. travel 9                   Daily business mileage and           Summary of (Table 1-1)                 7
Publications (See Tax help)                  expense log (Table 5-2)    39        Defined  3
                                             Maximum depreciation deduction       Going home on days off    6
R                                            for cars placed in service prior to  In U.S. 9
                                             2018 table   29                      Lodging  8
Recordkeeping requirements       35 38-      Maximum depreciation deduction       Luxury water travel   12
  Adequate records   36                      for Passenger Automobiles            Outside U.S.   10
  Daily business mileage and                 (Including Trucks and Vans) 
   expense log (Table 5-2)    39             acquired after September 27,         Travel to family home   5
  Destroyed records   38                     2017, and placed in service         Trucks and vans:
  How to prove expenses                      during 2018 or later    29           Depreciation   30
   (Table 5-1)  37                                                                Transportation workers   17
  Incomplete records   37                                                         Transportation workers' expenses           8
  Reimbursed expenses      38                                                    Two places of work  20
  Sampling to prove expenses    37

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                                  Unrecovered basis of car 30
U                                                             W
Unclaimed reimbursements 41       V                           Weekly traveling expense record 
Unions:                           Volunteers 3                 (Table 5-3) 40
Trips from union hall to place of 
  work  20

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