• Date placed in service.

• Mileage (total, business, commuting, and other personal mileage).

• Percentage of business use.

• After-work use.

• Use of other vehicles.

• Whether you have evidence to support the deduction.

• Whether or not the evidence is written.

1. Compute the inclusion amount without taking into account your business use percentage for the tax year.

2. Report the inclusion amount from (1) on Form 2106, Part II, line 24b.

3. Report on line 24c the net amount of car rental expenses (total car rental expenses minus the inclusion amount computed in (1)).

• Pays you a single amount that covers meals and/or entertainment, as well as other business expenses, and

• Does not clearly identify how much is for deductible meals and/or entertainment.

Example.

Rob's employer paid him an expense allowance of $12,000 this year under an accountable plan. The $12,000 payment consisted of $5,000 for airfare and $7,000 for meals, entertainment, and car expenses. The employer did not clearly show how much of the $7,000 was for the cost of deductible meals and entertainment. Rob actually spent $14,000 during the year ($5,500 for airfare, $4,500 for meals and entertainment, and $4,000 for car expenses).

Since the airfare allowance was clearly identified, Rob knows that $5,000 of the payment goes in Column A, line 7, of Form 2106. To allocate the remaining $7,000, Rob uses the worksheet from the instructions for Form 2106. His completed worksheet follows.

On line 7 of Form 2106, Rob enters $8,297 ($5,000 airfare and $3,297 of the $7,000) in Column A and $3,703 (of the $7,000) in Column B.

If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. See Per Diem and Car Allowances earlier for more information. Any expenses in excess of these amounts can be claimed only as a miscellaneous itemized deduction subject to the 2% limit.

Certain fee-basis officials can claim their employee business expenses whether or not they itemize their other deductions on Schedule A (Form 1040).

Fee-basis officials are persons who are employed by a state or local government and who are paid in whole or in part on a fee basis. They can deduct their business expenses in performing services in that job as an adjustment to gross income rather than as a miscellaneous itemized deduction.

If you are a fee-basis official, include your employee business expenses from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24.

If you are a performing artist, you may qualify to deduct your employee business expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. To qualify, you must meet all of the following requirements.

If you are an employee with a physical or mental disability, your impairment-related work expenses are not subject to the 2%-of-adjusted-gross-income limit that applies to most other employee business expenses. After you complete Form 2106 or 2106-EZ, enter your impairment-related work expenses from Form 2106, line 10, or Form 2106-EZ, line 6, on Schedule A (Form 1040), line 28, and identify the type and amount of this expense on the dotted line next to line 28. Enter your employee business expenses that are unrelated to your disability from Form 2106, line 10, or Form 2106-EZ, line 6, on Schedule A (Form 1040), line 21.

Impairment-related work expenses are your allowable expenses for attendant care at your workplace and other expenses in connection with your workplace that are necessary for you to be able to work.

You are disabled if you have:

You can deduct impairment-related expenses as business expenses if they are:

Example 1.

David Pine purchased a new car for $24,500 (not including sales tax) on January 5, 2009. In 2009, he used the car 70% for business purposes. A sample page from David's logbook is illustrated in Table 6-2. He records his business mileage (but not his personal miles) and expenses daily.

David uses Form 2106 to claim actual car expenses. He completes Part II, Section A, as shown later on his illustrated form. He does not claim the section 179 deduction but he does claim the special depreciation allowance. He uses the MACRS double declining balance method (200% DB) to determine his depreciation deduction.

David first figures his special depreciation allowance to be $8,575 ($24,500 x 70% x 50%). David's depreciation limit for 2009 is reduced because his business use is less than 100%. He figures his reduced limit to be $7,672 (2009 depreciation limit ($10,960 (from the Maximum Depreciation Deduction for Cars table shown in chapter 4) × 70%). David notes that his special allowance ($8,575) exceeds his depreciation limit ($7,672) for 2009. He then figures his unadjusted basis to be $9,478 ($24,500 × 70% – $7,672). David figures his MACRS depreciation deduction to be $1,896 ($9,478 (unadjusted basis) x 20%). David figures his total depreciation deduction to be $9,568 ($7,672 (special allowance) + $1,896 (MACRS depreciation)). However, David's depreciation deduction is limited to $7,672. He enters the appropriate amounts in Part II, Section D.

His other car expenses included $4,970 for gas, oil, repairs, and insurance. He enters this amount in Part II, Section C, and multiplies it by the 70% business use. He adds this amount ($3,479) to the depreciation deduction ($7,672) and reports the total ($11,151) on Part I, line 1.

His other transportation expenses for parking fees, tolls, and taxis were $1,320. He enters this amount on Part I, line 2. David's employer reimbursed him a total of $5,400 for his car and transportation expenses. This amount was paid from an accountable plan and was not shown on David's Form W-2. However, since he is claiming expenses that are more than his reimbursements, he must show the entire reimbursement amount on Part I, Column A, line 7. Since David had no meal or entertainment expenses, he enters his excess deductible expenses ($6,720) on Part I, line 10. He can deduct these expenses (subject to the 2%-of-adjusted-gross-income limit) on Schedule A (Form 1040), line 21, if he itemizes his deductions.

Example 2.

Bill Wilson is an employee of Fashion Clothing Co. in Manhattan, NY. In a typical travel week, Bill leaves his home on Long Island on Monday morning and drives to Albany to exhibit the Fashion line for 3 days to prospective customers. Then he drives to Troy to show Fashion's new line of merchandise to Town Department Store, an old customer. While in Troy, he talks with Tom Brown, purchasing agent for Town Department Store, to discuss the new line. He later takes John Smith of Attire Co. out to dinner to discuss Attire Co.'s buying Fashion's new line of clothing.

Bill purchased his car on January 3, 2006. He uses the standard mileage rate for car expense purposes. He records his total mileage, business mileage, parking fees, and tolls for the year. Bill records his expenses and other pertinent information in his Weekly Traveling Expense and Entertainment Record, shown in Table 6-3. He obtains receipts for his expenses for lodging and for any other expenses of $75 or more.

During the year, Bill drove a total of 25,000 miles of which 20,000 miles were for business. Following the instructions for Form 2106-EZ, Part II, he answers all the questions and figures his car expense to be $11,000 (20,000 × 55 cents per mile).

His total employee business expenses are shown in the following table.

Bill received an allowance of $33,000 ($2,750 per month) to help offset his expenses. Bill did not have to account to his employer for the reimbursement and the $33,000 was included as income in box 1 of his Form W-2.

Because Bill's reimbursement was included in his income and he is using the standard mileage rate for his car expenses, he files Form 2106-EZ with his tax return.