You must allocate the costs between your business and other activities to determine your deductible amount. Because you spend most of your working time and earn most of your salary in Baltimore, that city is your tax home. You can’t deduct any expenses you have for meals and lodging there. However, when you return to work in Pittsburgh, you are away from your tax home even though you stay at your family home. You can deduct the cost of your round trip between Baltimore and Pittsburgh. You can also deduct your part of your family’s living expenses for non-entertainment-related meals and lodging while you are living and working in Pittsburgh.
You furnish your employee, Carol, who is a server working 7 a.m. You encourage but don’t require Carol to have breakfast on the business premises before starting work. Because Carol is a food service employee and works during the normal breakfast and lunch periods, you can exclude from her wages the value of her breakfast and lunch. If you provide free or discounted meals to volunteers at a hospital and you can reasonably determine the number of meals you provide, then you may disregard these costs and revenues. If you charge nonemployees a greater amount than employees, then you must disregard all costs and revenues attributable to these nonemployees.
If your plan is a self-insured medical reimbursement plan that favors highly compensated employees, you must include all or part of the amounts you pay to these employees in box 1 of Form W-2. You can’t exclude contributions to the cost of long-term care insurance from an employee’s wages subject to federal income tax withholding if the coverage is provided through a flexible spending or similar arrangement. This is a benefit program that reimburses specified expenses up to a maximum amount that is reasonably available to the employee and is less than five times the total cost of the insurance.
A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work. Generally, you can’t deduct any expense for an entertainment event. This includes expenses for entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; on yachts; or on hunting, fishing, vacation, and similar trips.
Generally, you figure depreciation on cars using the Modified Accelerated Cost Recovery (MACRS) discussed later in this chapter. You generally place a car in service when it is available for use in your work or business, in an income-producing activity, or in a personal activity. Depreciation begins when the car is placed in service for use in your work or business or for the production of income.
For an automobile you lease, you can use any of the following as the safe-harbor value. For automobiles with an FMV of more than $59,999, the annual lease value equals (0.25 × the FMV of the automobile) + $500. A control employee for a government employer for 2025 is either of the following. A tuition reduction for graduate education qualifies for this exclusion only if it is for the education of a graduate student who performs teaching or research activities for the eligible educational institutions. A transit pass is any pass, token, farecard, voucher, or similar item entitling a person to ride, free of charge or at a reduced rate, on one of the following. Meals you furnish to promote goodwill, boost morale, or attract prospective employees.
If you had a vacation or other nonbusiness activity at, near, or beyond your business destination, you must allocate part of your travel expenses to the nonbusiness activity. You can figure your meal expenses using either of the following methods. For tax years beginning after December 2017 and before January 2026, the deduction of certain moving expenses is suspended for nonmilitary taxpayers.
The standard meal allowance rates above don’t apply to travel in Alaska, Hawaii, or any other location outside the continental United States. The Department of Defense establishes per diem rates for Alaska, Hawaii, Puerto Rico, American Samoa, Guam, Midway, the Northern Mariana Islands, the U.S. Virgin Islands, Wake Island, and other non-foreign areas outside the continental United States.
Employers must ensure that the reimbursement is strictly for business purposes. This involves establishing a clear policy that outlines the criteria flight crew cell phone anddata plan tax deduction rules for cell phone use and reimbursement. Such a policy should specify the types of expenses that qualify for reimbursement and the documentation required to substantiate these expenses.
You can deduct the reimbursements or allowances as payment for services if they are ordinary and necessary business expenses. However, you must file Form 1099-MISC to report amounts paid to the independent contractor if the total of the reimbursements and any other fees is $600 or more during the calendar year. If the automobile is used by the employee in your business, you generally reduce the lease value by the amount that is excluded from the employee’s wages as a working condition benefit (discussed earlier in section 2).
For this fringe benefit, dependent child is a child or stepchild who is the employee’s dependent or who, if both parents are deceased, hasn’t attained the age of 25. Treat a child of divorced parents as a dependent of both parents. A commercial airline allows its employees to take personal flights on the airline at no charge and receive reserved seating. Because the employer gives up potential revenue by allowing the employees to reserve seats, employees receiving such free flights aren’t eligible for the no-additional-cost exclusion. Generally, meals furnished before or after the working hours of an employee aren’t considered as furnished for your convenience.
You’re the provider of a fringe benefit if it is provided for services performed for you. You’re considered the provider of a fringe benefit even if a third party, such as your client or customer, provides the benefit to your employee for services the employee performs for you. You can deduct eligible phone costs on your Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship) if you’re self-employed or run a small business LLC. Since the 2017 Tax Cuts and Jobs Act (TCJA), employees can no longer deduct unreimbursed job expenses—including cellphone costs—from their federal taxes.
