Employee Business Expenses

Question 1

When are costs of travel deductible?

Answer 1

-When trip has a business purpose

Question 2

Is commute between residence and place of work deductible? What are the exceptions?

Answer 2

• No

- Travel to a second job/work area or a temporary work location

Question 3

When can meals and lodging be deducted? What % of each is deductible? What is the rule for business travel mixed w/ personal?

Answer 3

• When taxpayer is “away from home” overnight
• 50% of meals is deductible, 100% of lodging
• If business travel mixed with personal travel, travel to location only deductible if more than 50% of days are business day. Pass: All travel deductible. Fail: No travel deductible

Question 4

What are the restrictions on travel deductions?

Answer 4

• Travel cannot be a form of business education

- No deduction is allowed for travel to “investment seminars”

Question 5

What % of entertainment is deductible?

Answer 5

-50%

Question 6

What are the restrictions on entertainment deductions?

Answer 6

• Business must be associated with the entertainment
• Substantial business discussion must occur
• No deductions for facilities or club dues (pleasure clubs)
• Dues for public service clubs (eg Kiwanis), professional organizations, and trade associations are deductible
• Deduction for tickets to entertainment activity limited to face value of ticket before 50% disallowance
• Business gift deduction limited to $25 per donee per year
• No reduction for entertainment provided to employees as compensation or as a means of advertising or marketing

Question 7

When are education expenses not deductible?

Answer 7

When they are:

  - To meet minimum standards of current job
  - To qualify taxpayer for a new trade or business