Income Tax Guide for State Legislators
2014
2015
Compliments of
Truth. Strength. Fortitude.
January 30, 2015
2400 Veterans Boulevard
Suite 500
Kenner, LA 70062-4739
504.464.1040
800.288.5272
Fax 504.469.7930
lcpa.org
The Society of Louisiana Certified Public Accountants is pleased to
present this “2014-2015 Income Tax Guide for State Legislators”
prepared specifically for members of the Louisiana Legislature. This
income tax guide will be helpful to you in answering some frequently
raised questions concerning income tax laws as they relate to your unique
position as an elected official.
Rules governing taxation are continually changing and evolving because
they are affected not only by legislation, but also by the decisions
of courts and pronouncements by the Internal Revenue Service.
Consequently, the material contained in this income tax guide may be
considered current only as of the publication date.
For tax issues not addressed in this guide, for consultation on other tax or
accounting questions and for assistance in the preparation of your various
income tax returns we suggest that you contact your certified public
accountant.
THOMAS PHILLIPS JR., PhD, CPA, CGMA RONALD GITZ II, CPA, CGMA
President
Executive Director
JIM HARRIS
Legislative Liaison
Chair
CARRIE W. GRINNELL, CPA
Federal Taxation Committee
Published January 30, 2015.
For additional copies contact:
LCPA • 2400 Veterans Memorial Blvd., Suite 500 • Kenner, LA 70062
504.464.1040 • 800.288.5272 • lcpa.org • facebook.com/lcpa.org • @LouisianaCPAs
lcpa.org • 800.288.5272
2
America Counts on CPAs.®
TABLE OF CONTENTS
Preface: “The CPA Profession Today” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Introduction:
As a Legislator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
Automobile & Travel Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Living Expenses:
Meals & Lodging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Living Expenses:
Per Diem Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
State Legislator’s Election to Treat Residence as Tax Home . . . . . . . . 14
Health Insurance:
Taxation of Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Office Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Entertainment & Business Meal Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 18
Telephone & Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Personal Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Campaign Expenses & Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Contribution Limits and Campaign Reporting Deadlines . . . . . . . . . . . 27
Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2106
IRS Form 2106 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2106EZ
IRS Form 2106-EZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
A
IRS Schedule A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
2014 – 2015 Income Tax Guide for State Legislators
3
PREFACE
“The CPA Profession Today”
CPAs act as advisers to individuals, business, financial institutions, nonprofit organizations and government
agencies on a wide range of financial matters. Today, many turn to CPAs for help with: tax preparation
and planning; estate, trust and retirement planning; personal financial planning; budgeting; management
advisory services; computing services; financial management and financial forecasting; and auditing, review
and compilation of financial statements.
CPAs also serve in management at companies of all sizes. As corporate managers, they perform many of the
same services that “outside” CPAs do. They also bring special expertise and insight to management issues,
helping to reengineer company finance functions, structure transactions for the capital markets; manage
employee benefit plans and prepare and analyze financial and operational information for management
decision-making. Whether chief financial officer, controller or head of human resources, CPAs are trusted
members of many successful companies’ senior management teams.
The highest professional standards and integrity in the practice of accountancy are maintained by holders of
the certified public accountant certificate issued by the State of Louisiana or by other states.
To qualify for certification and a state license to practice public accounting, a CPA must:
•
•
•
•
Have fulfilled stringent education requirements;
Have passed the comprehensive Uniform CPA Examination covering accounting practice and theory, taxes, commercial law and auditing;
Obtain a minimum of 120 hours of continuing professional education during each
three-year period;
Abide by the Code of Professional Conduct, one of the most exacting of any profession, which stresses independence, integrity, objectivity, technical competence and adherence to professional standards and emphasizes the CPA’s commitment to serving and
protecting the public interest.
The Society of Louisiana Certified Public Accountants, organized in 1911, is a non-profit association with
more than 7,000 members and has nine active chapters throughout the state. It is considered the state’s
premier organization of accountants.
The following are the members of the Louisiana Legislator’s Tax Guide Subcommittee of the Society’s
Federal Taxation Committee:
• Frank J. Holzenthal, CPA
• Roger M. Cunningham, CPA
• Dennis W. Dillon, CPA
• Jeffrey W. Koonce, CPA
• Scott LaCaze, CPA
• William A. Paddie, CPA
• Henry A. Riser, Jr., CPA
Special thanks to Donna Budenski, Controller/House Accounting for her assistance in the preparation of
this tax guide.
4
America Counts on CPAs.®
Introduction
As a Legislator. . .
As a legislator, you are considered to be an employee of the state of Louisiana for federal and state income
tax purposes, and you will receive a W-2 form from the state. This W-2 will reflect your salary, session per
diem, interim committee per diem and special travel per diem. You may also receive mileage and district
office reimbursements that are not included in your W-2.
Certain expenses incurred by you while serving in your capacity as a legislator may be deductible for tax
purposes. These expenses are referred to as employee business expenses and are reportable on Form 2106
or 2106-EZ of your individual income tax return (a copy of Forms 2106 and 2106-EZ are included in this
booklet). Employee business expenses include automobile and other travel, entertainment and certain other
expenses related to your employment as a legislator, such as dues, subscriptions and office expenses. Form
2106 expenses and other such expenses, in excess of reimbursement, are deductible only as miscellaneous
itemized deductions on Schedule A, subject to a 2 percent of adjusted gross income floor and also subject
to a phase-out for adjusted gross income in excess of certain thresholds (a copy of Schedule A is included in
this booklet).
Travel expenses include automobile expenses, transportation fares, meals, lodging and other related
expenses incurred while away from home. For the purpose of this deduction, your “tax home” is considered
to be your principal place of employment or business headquarters which, of course, may be different from
your place of residence. Whether the geographical area you represent is your principal place of business
(“tax home”), or a minor post of duty, is determined by a review of all of the facts and circumstances relative
to your particular situation.
Regardless of the facts and circumstances, you may elect to treat your residence in your legislative district
as your “tax home.” The election is made by attaching a statement to your income tax return, and your
deductions are determined, in part, by reference to federal and Louisiana per diem allowances. This election
is not available if you live within 50 miles of the Capitol building. The election is more fully explained on
Page 17 of this booklet.
Throughout this income tax guide you will note an emphasis on the importance of recordkeeping. The
burden of proving the appropriateness and extent of deductibility is on you, the taxpayer. Therefore, it is
imperative that sufficiently detailed records be kept by you. Failure to adequately support a deduction can
result in its disallowance.
A question-and-answer format is used to provide specific answers to questions regarding income tax laws
as they relate to your unique position as a member of the Legislature. The answers generally assume that
Baton Rouge is not your “tax home.”
This income tax guide represents an overview of the income tax laws as they affect you. You should consult
your certified public accountant, or other tax adviser, who can assess your particular situation and determine
appropriate treatment. A discussion of the Affordable Care Act is beyond the scope of this income tax guide.
2014 – 2015 Income Tax Guide for State Legislators
5
Automobile &
Travel Expenses
Q.
How much may I deduct for the auto mileage I incur to and from Baton Rouge?
A.
You may deduct either the standard mileage rate for all business miles, including mileage driven to
and from Baton Rouge, or you may itemize your actual automobile expenses. The standard mileage rates for 2014 and 2015 are as follows:
2014 $.560 per mile
2015 $.575 per mile
If you itemize your expenses, you may deduct that portion of total expenses allocable to business mileage, including mileage for traveling to and from Baton Rouge. The business use percentage is computed by dividing total business miles by total miles, business and personal, driven during the year. Allowable itemized expenses include depreciation, gas and oil, repairs and maintenance, insurance and other costs of operating and maintaining your automobile. Parking fees, tolls and property taxes may be deducted as separate additional items, but only to the extent otherwise allowable (see subsequent sections). Personal interest paid on car loans by an employee is not deductible unless it qualifies as home equity indebtedness.
Since the state of Louisiana reimburses you for mileage between your home and Baton Rouge, your deductible automobile expenses must be reduced by the total amount of reimbursement received by you during the year. Expenses in excess of reimbursement may be deducted on Schedule A subject to the 2 percent of adjusted gross income floor. In some cases, the deduction for these expenses may be further limited if adjusted gross income exceeds certain threshold amounts (Page 23).
Q.
What other mileage expenses may I deduct?
A.
Most members of the Legislature incur a great deal of mileage expenses while in their home districts. All travel to club meetings, speaking engagements and meetings you attend because of your position as a legislator is considered business mileage and should be included with the mileage traveled between your home and Baton Rouge. This mileage can become substantial, particularly if your district covers a large geographical area. A memorandum of this mileage should be recorded in a diary or an appropriate mileage log.
Q.
What about mileage expenses incurred while going to meetings during a political campaign for myre-election? Although I am running for re-election, I still feel it is incumbent upon me to attend these meetings to explain to my constituents the activities of the Legislature, and the disposition of legislative measures.
A.
The Internal Revenue Code specifically states that none of your campaign expenses are tax deductible (see section on campaign expenses). Because of this, it is very important for you to distinguish between those expenses that are directly related to a campaign for re-election and those expenses that can be directly attributed to serving your constituency. However, your campaign account can reimburse you or pay directly for any legitimate campaign expenses.
6
America Counts on CPAs.®
Q.
If my campaign account reimburses me for legislative or campaign expenses can I still deduct the mileage on my return?
A.
If your campaign account reimburses you at the above-referenced per mile rates, you may not
deduct the mileage. If you do not give the campaign account specific mileage detail to justify the reimbursement then you must pick up the reimbursement amount as income and deduct the per mile amount on your individual income tax return as a miscellaneous itemized deduction.
Q.
If I use another mode of transportation to get to Baton Rouge, such as the bus or airplane, may I deduct these expenses in addition to my mileage expenses?
A.
You cannot claim both the mileage you would have incurred had you driven your automobile to Baton Rouge and the cost of the bus fare or airplane ticket. If you use a bus, airplane or other means of transportation to Baton Rouge, these expenses should be detailed on Form 2106, along with any reimbursement you received for the travel. The expenses incurred in excess of reimbursement will be deductible subject to the limitations discussed on Page 23. If your reimbursement exceeds your expenses, the excess may be taxable income to you to the extent not offset by other non-reimbursed deductible employee business expenses.
Q.
On occasion I ride with another legislator to Baton Rouge. Do I still claim a tax deduction for the mileage for that particular day, even though I did not drive my car?
A.
No. When you ride with someone else and do not directly incur any travel expense yourself, you may not claim any mileage expense for that day’s travel. Of course, you may still deduct other expenses incurred, such as meals and lodging, subject to the requirements discussed in the next section, “Living Expenses – Meals and Lodging.”
Q.
I received a traffic violation because I was rushing to get to Baton Rouge to be on time for a session or a committee meeting. Is the fine a tax deductible expense?
A.
No. A traffic fine is a penalty and is therefore not a deductible expense.
Q.
I travel to Baton Rouge for each legislative session. I stay at a motel, and I am required to drive to the state Capitol each day. May I deduct this mileage as a business expense?
A.
Yes. You may deduct as a travel expense the mileage you incur going from your living quarters in Baton Rouge to either the state Capitol or any other location, as long as the purpose of the travel is directly related to your position as a member of the Louisiana Legislature. Additionally, the IRS has ruled that you may deduct daily transportation expenses incurred in going between your residence and a temporary work location outside the metropolitan area where you live and normally work. A temporary work location is defined as any location where employment at the location is realistically expected to last (and does in fact last) for one year or less.
You should note that if Baton Rouge were treated as your “tax home,” the mileage would be treated as a non-deductible commuting expense. However, if you have one or more regular work locations away from your residence, you may deduct daily transportation expenses incurred in going between your residence and a temporary work location in the same trade or business. It appears likely that the state Capitol would be considered a regular work place. Therefore, if Baton Rouge is your “tax home,” mileage from your residence to a meeting or function at a location other than the state Capitol is deductible.
2014 – 2015 Income Tax Guide for State Legislators
7
Q.
I have an office in my home district. May I deduct mileage expense from my home to this office?
A.
No. The mileage from your residence to one or more regular places of business within the geographical area considered your “tax home” is deemed a non-deductible commuting expense. However, any business mileage traveled between your residence and any other temporary place of business would give rise to a deduction, as would mileage between the office and another temporary place of business. One deductible example would be the trip between a legislator’s law office and his legislative office.
Q.
The IRS allows me to deduct a flat rate expense per mile or to itemize all of my automobile expenses and then to take a portion of those expenses based on a percentage of my business miles to the total miles traveled during the year. Which method results in the greatest deduction for me?
A.
If you want to use the standard mileage rate, you must choose to use it in the first year the car is available for use. Then in later years you can choose to use either the standard mileage rate or actual expenses. You cannot use the standard mileage rate if you claimed an accelerated depreciation deduction in an earlier year. In order to determine which gives you the greatest deduction, it is necessary to itemize your automobile expenses and then compare that amount to your tax deduction under the standard mileage allowance. Generally the greater the total business mileage, the more beneficial the mileage deduction becomes. A mileage log should be kept regardless of the method selected.
Q.
If I don’t use the standard mileage rate method for computing automobile expenses, specifically what expenses am I allowed to deduct?
A.
Deductible expenses include depreciation, gasoline, oil, repairs, insurance, tires, license plates, registration fees and similar items. The cost of the car itself, including accessories or improvements, must be capitalized and deducted via depreciation.
Sales taxes incurred due to the purchase of the vehicle must be added to the cost of the car, and manufacturer rebates, if applicable, must be subtracted from the cost of the car for depreciation purposes. Specific dollar amount limits apply to annual depreciation deductions, except for SUVs, large autos, larger passenger trucks, and other vehicles weighing more than 6,000 pounds. Any truck or van
that is a qualified nonpersonal use vehicle is also exempt from depreciation limits. A qualified
nonpersonal use vehicle is modified in a way that makes it unlikely to be suitable for more than a deminimus amount of personal use. For vehicles subject to the depreciation limitations on passenger automobiles, the depreciation depends on the tax year in which a car is placed in service. The annual depreciation for autos placed in service in 2014 is limited to $3,160. The 2014 depreciation limit for trucks or vans (passenger autos built on a truck chassis, including minivans and sport-utility vehicles (SUVs) built on a truck chassis) is $3,460.
This maximum limit is reduced proportionately if business use of the auto is less than 100 percent. If the
business use of the auto is 50 percent or less, you must use straight-line depreciation. Fifty percent bonus
depreciation is available for vehicles purchased through December 31, 2014 and will increase the regular
1st year dollar limit by $8,000. Accurate records of business use are important to ensure the full deduction allowable under the law. You should consult with your tax advisor.
8
America Counts on CPAs.®
Q.
Are there expenses I may deduct for the use of my automobile in addition to the standard mileage rate?
A.
Yes. Parking fees and tolls and personal property taxes may be deducted. As discussed later, personal interest related to the purchase of a car is not deductible by an employee unless it qualifies as home equity indebtedness. These deductions are available only as itemized deductions and are subject to the adjusted gross income limitations discussed on Page 23.
Q.
Since I am reimbursed by the state for actual mileage for personal, legislative and committee travel, would it be best to just disregard the reimbursement entirely and assume that it is completely offset by mileage expenses and therefore not report anything?
A.
If you are fully reimbursed for actual mileage driven at a rate not exceeding $.560 for mileage in 2014, or $.575 for mileage in 2015, it is not necessary to report automobile expense in your federal income tax return. This assumes that the state has an accountable plan (requires employee substantiation and return of amounts received in excess of substantiation) and does not include the reimbursement as taxable wages in your Form W-2. If you incur travel expenses for which you are partially reimbursed, you must report all of the reimbursements and related expenses in order to deduct the unreimbursed portion of the expense. You may also have driven other miles that were not reimbursed by the state at all.
L.A.R.S. 24:31:1 provides Louisiana legislative members with a mileage allowance for trips to and from the State Capitol during legislative sessions, based on the standard mileage rate under IRC §162(a). The regulations under IRC §274 provide that gross income does not include automobile reimbursements to employees which are provided under a mileage reimbursement plan and are based on mileage rates that do not exceed the rate allowed by the IRS, provided that the expenses be substantiated. For these purposes, a mileage reimbursement plan is an accountable reimbursement plan that meets the requirements of an accountable plan under IRC §62(c) (See Rev. Proc. 96-63). IRC §1.62-2(c) states that an accountable plan must meet the following three requirements:
1.
2.
3.
The reimbursement under the plan must be for expenses incurred by the employee in
connection with his performance of services as an employee of the employer.
The expenses must be substantiated; and
Amounts reimbursed in excess of actual expenses must be returned to the employer.
For purposes of a mileage reimbursement plan, the amount of actual expenses incurred is equal to the lesser of (1) the amount paid under the plan, or (2) the standard mileage rate multiplied by the number of miles substantiated by the employee.
In connection with the plan for the Louisiana legislators, the amount reimbursed for mileage should meet the business purpose test as they are in connection with travel to and from legislative sessions. To substantiate the mileage, the legislators should once again substantiate the business purpose, as well as provide the number of miles, the destination points, and the date of travel. Finally, in order to be excluded from the gross income of the legislator, reimbursements should be limited to the amount incurred as figured under the standard mileage rate. These payments are not subject to federal income or employment tax withholding.
2014 – 2015 Income Tax Guide for State Legislators
9
Q.
If I itemize my automobile expenses one year, may I use the standard mileage rate the following year?
A.
Yes, but within the following guidelines. The standard mileage election may be made yearly (not just in the first year) if the car was depreciated using the straight-line method in the first year it was placed in service.
Q.
Must I maintain a complete log of all use of my auto in order to be able to deduct auto expense?
A.
Adequate records or sufficient evidence are required to support auto expense deductions. Written evidence recorded close in time to the actual expense will be much stronger support than oral evidence or evidence recorded much later in time. (See “Recordkeeping” section.)
2014 income tax returns will ask the following questions, which should be answered (see Forms 2106 and 2106-EZ).
1. Date vehicle was placed in service.
2. Total mileage vehicle was used for 2014.
3. Total business miles for 2014.
4. Average daily round-trip commuting distance (miles) for 2014.
5. Miles vehicle was used for commuting for 2014.
6. Other personal mileage.
7. Do you or your spouse have another vehicle available for personal use?
❑YES
❑ NO
8. Was your vehicle available for personal use during off-duty hours?
❑YES
❑ NO
9. Do you have evidence to support your deduction?
❑YES
❑ NO
If yes, is the evidence written?
❑YES
❑ NO
Q.
What is home equity indebtedness? How does this make personal interest on car loans deductible?
A.
Home equity indebtedness is defined as all debt other than acquisition debt (debt incurred in acquiring, constructing or substantially improving a qualified residence and secured by such residence) that is secured by a qualified residence to the extent it does not exceed the fair market value of the residence reduced by any acquisition indebtedness. A qualified residence includes the principal residence of the taxpayer and one other residence (other than rental property) used by the taxpayer as a personal residence (for example, a vacation home). Acquisition indebtedness may not exceed $1 million, and home equity indebtedness may not exceed $100,000. Interest on home equity indebtedness is deductible even if the proceeds are used for personal expenditures (for example, the purchase of an automobile). This may not be deductible for alternative minimum
tax purposes.
10
America Counts on CPAs.®
Living Expenses
Meals and Lodging
Q.
What expenses may I deduct for meals and lodging while in Baton Rouge attending a legislative session or committee meeting or performing general legislative duties?
A.
During 1997, the Legislature voted to change the per diem rate from a flat amount to the reimbursement rate allowable for Baton Rouge for federal employees. This rate could change when the government (GSA) periodically reviews expenses of various locations. The federal per diem rate for Baton Rouge is based on the following schedule:
Per Diem 10/1/14 – 9/30/15
$150
10/1/13 – 9/30/14
$153
Per Diem Schedule
Lodging
$94
$97
Meals
$56
$56
Q.
May I deduct the expense of meals I have purchased for constituents and other persons who have come to Baton Rouge for a meeting involving legislative business?
A.
Yes, the cost of meals paid by you is an allowable deduction, but only if directly related or associated with the active conduct of legislative business. Business must be discussed during the meal, or the meal must occur either before or after a substantial and bona fide business discussion. An exception to this would allow a deduction for your meal when you are traveling away from home and overnight on business even if you dine alone. In general, reimbursed meals will be 100 percent deductible but unreimbursed meals are only 50 percent deductible and subject to the adjusted gross income limitations discussed on Page 23. In support of the deduction you should secure a receipt for the amount paid by you with your notation showing the names of the persons present and the business discussed. Your personal meal may not be separately deductible if the per diem deduction allowance election is made by you. Also, you or your representative must be present at the meal in order to deduct the cost.
Q.
Because we are in Baton Rouge for long periods of time, I find it necessary and desirable to have my spouse and children come to Baton Rouge on occasion. May I deduct the cost of their travel to Baton Rouge and their expenses for motel and meals?
A.
No, unless you can establish that your spouse’s presence served a bona fide business purpose. The spouse’s performance of some incidental service does not cause that spouse’s expenses to qualify as deductible business expenses. This same rule applies if your spouse accompanies you on a trip for a legislative conference.
Q.
After some committee meetings that last late into the evening (until 11 or 12), I go out and grab a sandwich or some refreshments. Is this a deductible business expense?
A.
Yes, to the extent that these expenses are in excess of the per diem amount reimbursed by the state and if the per diem deduction election has not been made. Again, only 50 percent of business meals are deductible subject to the adjusted gross income limitations discussed on Page 23.
2014 – 2015 Income Tax Guide for State Legislators
11
Q.
While in Baton Rouge on certain special occasions, such as Independence Day, I will have a gathering for fellow legislators and other individuals connected with the Legislature. May I deduct the expense of this gathering as a business expense?
A.
Entertainment expenses must meet the same “directly related” or “associated with” criteria as business meals to be deductible. Unreimbursed entertainment expenses are only 50 percent deductible subject to the adjusted gross income limitations discussed on Page 23. To establish a deduction for entertainment there must be a record of the cost, date of entertainment, place of entertainment, description of entertainment (if not apparent from the name of the place), the business purpose and the nature of the business benefit expected to be derived and the business relationship (name, occupation, title) of the persons entertained. If there are a large number of people entertained and they are readily identifiable as a class, you may record such class (e.g., senators) rather than all their names. Where the entertainment expense is incurred before or after a substantial business discussion, you must document the date and duration of the business discussion, the place, nature and business reason for the business discussion and the names of those who participated in the business discussion.
Q.
Sometimes administrative assistants work long hours during the legislative session. If a fellow
legislator and I take them out to dinner or if we buy them candy, etc., would this be a deductible expense?
A.
Yes, such an employee meal is a deductible expense because it is related to a business purpose. Once again, unreimbursed expenses for meals or entertainment are only 50 percent deductible subject to the adjusted gross income limitations discussed on Page 23. Other deductible items, not includable in the employee’s income, would be occasional supper money or taxi fare due to overtime work; traditional holiday gifts or property (not cash) with a small fair market value; tickets that are occasionally given out for entertainment events (football games, theater); coffee and doughnuts furnished to employees under special circumstances, such as illness, outstanding performance or family crises. However, under the Ethics Code, administrative assistants who are public employees are limited to accepting only food, drink, or refreshments consumed in the presence of their host.
12
America Counts on CPAs.®
Living Expenses
Per Diem Allowance
Q.
May I elect to deduct a per diem amount for meals and lodging while in Baton Rouge attending a legislative session, committee meeting, etc.?
A.
Yes. For a legislator whose residence in his legislative district is more than 50 miles from the State Capitol building, an election may be made to treat this residence as his “tax home.” If the election is made, the legislator is deemed to have expended, for living expenses at the State Capitol, an amount equal to the greater of the daily per diem allowed federal employees for travel to Baton Rouge ($153 for travel on or after January 1, 2014 through September 30, 2014; $150 for travel on or after October 1, 2014 through September 30, 2015) or an amount allowable to state employees for travel to Baton Rouge (not in excess of 110% of the federal rate)
The state per diem rate for legislators now piggybacks the federal per diem reimbursement rate for each legislative day. A legislative day is defined, for purposes of the election, as any day on which the Legislature was in session including any day in which the Legislature wasn’t in session for a period of four consecutive days or less. A legislative day also includes a day the Legislature wasn’t in session, but the legislator’s physical presence was formally recorded at a meeting of a committee of the Legislature. A committee of the Legislature is any group that includes one or more legislators and is charged with conducting the business of the Legislature. It also includes committees the Legislature authorized to conduct inquiries into matters of public concern.
If a state legislator makes the IRC §162(h) election to deduct a per diem amount for lodging and meals, the amount allowable as a deduction for travel expenses away from home must be allocated in accordance with the ratio of meals and lodging under the federal per diem reimbursement rules applicable to Baton Rouge at the end of year. For this purpose, the amount allowable for meals is the
federal per diem for meals and incidentals ($56) reduced by $5 per day. This meal amount is then reduced by 50% to arrive at the deductible amount under §274(n). For example, the legislator would receive a deduction of $25.50 per day for meals [($56 – $5) x 50%]. In addition, he or she would receive a
deduction of $97 ($153 – $56) per day per diem for lodging before October 1, 2014 and $94 ($150 – $56) for lodging after September 30, 2014.
Deductible living expenses include meals, lodging and related incidental expenses such as laundry and fees and tips for services (e.g., those given to waiters and baggage handlers). Not included are travel fares, telegrams, telephone expense or local transportation (e.g., taxicabs) for business. Amounts not treated as living expenses are deductible as travel expenses in addition to the elected per diem amount.
The per diem allowance paid by the state is reported on Form W-2 as part of your salary and is not treated as travel reimbursement.
A sample election to treat your residence as a tax home is illustrated on Page 17.
2014 – 2015 Income Tax Guide for State Legislators
13
STATE LEGISLATOR’S
Election to Treat Residence as Tax Home
If taxpayers travel away from their “home” in pursuit of a trade or business, travel expenses may be
deductible. For tax purposes, travel expenses are ordinary and necessary expenses of traveling away from
home for business. An individual’s “home” for tax purposes is his place of business, employment, station, post
of duty, even though his family residence is located in a different place.
A state legislator would normally not be able to deduct expenses for travel away from home during the
legislative session because the state capitol would be considered his principal place of business. However, an
individual who is a state legislator at any time during the taxable year can make an election for tax purposes
to treat his place of residence within his legislative district to be considered his home for tax purposes. He will
thus be considered to be away from home on any day that the legislature is in session or on any day when
the legislature is not in session but the legislator’s presence is formally recorded at a committee meeting. The
election is available to a legislator if his residence is (1) within his legislative district and (2) is more than 50
miles away from the state Capitol building.
How to make the election:
The election to treat a legislator’s place of residence within his legislative district to be considered his tax home
for tax purposes must be made by the due date (taking into account extensions) of the tax return for the tax
year at issue. The election is made by attaching a statement to the return that:
(1) contains the taxpayer’s name, address and TIN;
(2) identifies the election;
(3) indicates that the election is being made under Internal Revenue Code Section 162(h);
(4) specifies the period for which the election is being made; and
(5) contains any information required by the Internal Revenue Code or necessary to show that the taxpayer is entitled to make the election.
Authorities: Internal Revenue Code Section 162(h) and Treasury Regulation Section 301.9100-4T
STATE LEGISLATOR’S ELECTION TO TREAT RESIDENCE AS TAX HOME
John C. Smith
120 Somewhere Street
Nowhere Near Baton Rouge, Louisiana 70433
Social Security No.: 123-45-6789
Taxpayer, a state legislator, hereby elects to treat his residence as his tax home pursuant to Internal Revenue Code
Section 162(h) for the tax year ended December 31, 2014. His place of residence is within the 123rd district, which is
the legislative district that he represents. The residence is more than 50 miles from the Capitol building of the state.
14
America Counts on CPAs.®
Health insurance
Taxation of Health Insurance Premiums Paid by the State
Q.
Are health insurance premiums paid by the state on my behalf taxable to me?
A.
LA R.S. 42:851 provides that state employees are eligible for health insurance coverage. The state’s legal staff determined that elected officials may choose to participate in the State Employees Group Benefits Program or another health insurance program available to employees, under which the premiums are paid as provided by law.
Because the premiums would be paid directly to the insurer (and not to the official to remit to the
insurer), the premium payments would not be included in the gross income of the employee. Similarly,
these amounts would not be subject to federal income or employment taxes (IRC §3121(a)(2)).
Q.
Do health insurance plans offered by the State Employees Group Benefits Program meet
the definition of "minimum essential coverage" under the Affordable Care Act in order to
avoid paying a penalty for not having health insurance coverage?
A.
Yes, for 2014 and 2015 these plans do meet the requirements of "minimum essential coverage".
Q.
The Legislature provides both a $500 monthly allowance and a $1,500 monthly supplemental allowance for home district office expenses and a $500 (unvouchered) monthly expense allowance. How do these amounts affect my taxable income and my deductions for expenses incurred on my personal income tax return?
A.
First, the home district office reimbursement is for rental of office space in a building located in the
parish the member represents and other costs of maintaining a district office. Each legislator must file an itemized statement of expenses including supporting invoices or receipts for each month, prior to receiving reimbursement of actual expenses. It cannot be used for home office expenses in the legislator’s residence or in any other property owned wholly or in part by the legislator or a member of the legislator's family.
Rents, utilities, maintenance and other office expenses incurred exceeding the reimbursed amounts are deductible on Form 2106. These expenses are subject to the adjusted gross income limitations discussed on page 23.
Second, the unvouchered expense allowance of $500 per month is subject to withholding and income taxes and is included in income as Form W-2 wages. It is paid to each member for undesignated expenses incurred in connection with the holding or conduct of their office.
Q.
May I deduct any cost of my home as a business expense?
A.
Deductions for office-in-home expenses are subject to strict limitations. In general, unless you can show that deductions claimed for the cost of a home office (other than those deductions allowed to everyone, such as home mortgage interest and real estate taxes) are allocable to a portion of your home that is exclusively used on a regular basis as a principal place of business, the deductions will be disallowed (i.e., if you maintain a downtown office in your home district in which you conduct your legislative activities, a deduction would not normally be allowed for an office in your home).
OFfice expenses
2014 – 2015 Income Tax Guide for State Legislators
15
Exclusive use means the use of a specific part of the home solely for the purpose of carrying on a trade or business or for meeting with business clients. Regular basis means the home office is used on a continuing basis as a principal place of business or for meeting with business clients (occasional or incidental use will not suffice).
Home office expenses may not be used to reduce taxable income from the activity to less than zero (i.e., to create a loss). Any unused home office expenses are available for carryover to the succeeding year, subject to the taxable income limitation discussed above. The allowable deduction is computed on Form 8829. As the home office deduction is a miscellaneous itemized deduction, it will also be subject to the adjusted gross income limitations discussed on Page 23.
Q.
Assuming that the above-mentioned requirements are met, specifically what may I deduct as a home office expense?
A.
Deductible expenses include a pro-rata share of rent or depreciation, utilities, home mortgage interest, insurance, security system monitoring and real estate taxes. The cost of repairs that do not benefit the room used as a home office are not deductible, but the cost of repairs to that room are deductible in full. Expenses of lawn care and landscaping are not deductible. Personal household expenses are not deductible. The allocation of expenses is determined by dividing the area exclusively used for business by the total area of the home. Depreciation is computed on the lower of the adjusted cost basis of your home or its fair market value at the time you begin using the home office.
Starting with the 2013 tax year, a simplified option of computing the home office deduction has been
created by the Internal Revenue Service. This simplified method reduces the paperwork and recordkeeping required by taxpayers. This optional method allows a deduction capped at $1,500 per year, based on $5 per square foot for a home office, up to 300 square feet. Current restrictions on the use of the home office deduction still apply.
Your deductions for office-in-home expenses cannot exceed the gross income derived from business use for the taxable year reduced by expenses that are otherwise deductible (i.e., home mortgage interest, real estate taxes on the home and business expenses unrelated to the home such as office supplies).
Q.
Does deducting office-in-home expenses affect me when I sell the house?
A.
Office-in-home can impact how gain on the sale is reported and taxed when the house is sold. The general rule is that up to $250,000 ($500,000 for joint returns) of the gain from the sale of a principal residence may be excluded from your income except for gain recognized to the extent of any depreciation taken after May 7, 1997. No allocation of the exclusion is required between a home office and the remainder of a principal residence as long as the home office is located within the principal residence. However, the gain that is eligible for the exclusion must first be reduced by any depreciation taken after May 6, 1997 and the depreciation must be recognized as unrecaptured section 1250 gain.
Q.
If I have a legislative assistant in my home district to whom I pay a token amount each month for work not related to the assistant's job duties from my private funds, am I required to go through the process of filing payroll tax returns and withholding payroll taxes?
A.
Generally, any amount paid for services that are performed by a worker is subject to the payroll tax laws if the worker is classified as an employee. In addition, workman's compensation rules may apply. Employee status exists when you have a right to control and direct the worker who performs the services. However, if the worker qualifies as an independent contractor, you would not be responsible for complying with the payroll tax or the workman's compensation laws.
16
America Counts on CPAs.®
ADVERTISING
Q.
Because I am a member of the Louisiana Legislature, I am often called upon to pay for ads in trade journals, programs or magazines published by various organizations in my district. May I deduct the cost of these ads when paid with personal funds?
A.
Holders of public office are generally allowed to deduct all ordinary and necessary expenses incurred in carrying on their duties in that office. If you pay for the ads personally and they are necessary to
maintain relations with your constituency or to promote your name (which is necessary to you as an
elected official to make people aware of who you are), such expenditures may be deducted as a
business expense. They are, however, subject to the adjusted gross income limitations applicable to miscellaneous itemized deductions. During a re-election campaign period, exclude the costs of these ads from your tax deductible items (campaign expenses are not deductible). During the campaign, these expenses should be paid from campaign contributions, which are kept separate from your personal funds.
Q.
As a member of the Louisiana Legislature, I am requested (and required, in effect, because of my position) to attend many dinners within my district. May I deduct the cost of these dinners?
A.
You may be able to deduct these costs if you pay for your dinner. Additionally, any incidental costs incurred to attend such dinners (travel expenses, parking fees, etc.) are also deductible. Remember, you must document not only the amount of the expenses incurred, but also the business relationship (who, why, when, where). The burden of proof for the deduction is on you, the taxpayer. For dinners that are deductible, only 50 percent of the cost may be deducted, and the deductible portion is subject to the adjusted gross income limitations discussed on Page 23. Remember also that if the dinner is one where the proceeds go to a political party or candidate, it is not deductible.
Q.
I buy calendars, pens and similar items with my address and phone number on them. I pass these items out to my constituency as a means of notifying the people that I am their legislator and that they may contact me should the need arise. May I deduct such items?
A.
You should be able to deduct the costs of these items because this is directly related to the business purpose of adequately and properly servicing your constituency. Any deduction is subject to the adjusted gross income limitations applicable to miscellaneous itemized deductions. However, if these items are distributed near election dates, they are considered a form of campaign expense and are not deductible.
2014 – 2015 Income Tax Guide for State Legislators
17
entertainment
and Business Meal Expenses
Q.
I am required to meet with a constituent regarding a state problem. We meet for breakfast, lunch or dinner, and I pay for his meal. May I deduct this as a tax expense?
A.
The law provides that meal expenses (like other entertainment expenses) are not deductible unless (a) they are directly related to the active conduct of your trade or business (as a state legislator) or (b) they directly precede or follow a substantial business discussion associated with the active conduct of your trade or business. Thus, no deduction is allowed unless business is discussed during, directly before or directly after the meal (an exception: the cost of your own meal if you are traveling on business). Moreover, you or your representative must be present at the meal. Meal expenses may not be deducted to the extent the meal is lavish or extravagant.
Only 50 percent of any otherwise deductible expense for business meals or entertainment is allowable as a business deduction. So, if you spend $100 for a business meal that meets the other deduction requirements, the amount that may be claimed as a business deduction is $50 (which is further subject to the adjusted gross income limitations discussed on Page 23).
In order to claim any deduction, a taxpayer must be able to prove that the expense was in fact
incurred. A meal expense, which is deemed by the IRS as particularly susceptible to abuse, must generally be sustained as to (1) amount, (2) time and place, and (3) business purpose. Receipts must be retained for any expenditure of $75 or more.
You generally cannot deduct the cost of meal expenses for your spouse or for the spouse of a constituent. However, you can deduct these costs if you can show that you had a clear business purpose for providing the meals.
Q.
Because of my position in the community, I occasionally will entertain other elected officials such as city councilmen and mayors. I may also entertain congressmen. This entertainment is primarily for the purpose of maintaining communications with these officials, exploring each other’s problems and determining common solutions. May I deduct this expense?
A.
As long as the expense meets the criteria outlined above, it may be deducted. However, the expense is subject to the 50 percent and adjusted gross income limitations discussed on Page 23. Here again, it is necessary that you keep an itemized record to indicate the date, place, who was there and the business discussed as more fully outlined in the section titled “Recordkeeping.”
18
America Counts on CPAs.®
TELEPHONE
and Other Expenses
Q.
May I deduct the cost of my home telephone since I use the telephone for calling and receiving calls from constituents and for conducting other state business?
A.
The basic cost of local services for the first telephone line is considered personal and would not be a deductible expense, even if the line is used solely for business or legislative purposes. If you have a separate telephone installed exclusively for the purpose of your legislative business, then the entire cost of this telephone may be deducted as a business expense. If this second or other line is used partly for business, then the deduction is allowed to the extent of the business portion. Charges for optional services such as call waiting, call forwarding, speed or three-way calling or extra directory listings are allowable, assuming that business purpose is established. If you are a senator, to the extent your telephone expense is paid by the state, no deduction would be available.
The cost of unreimbursed long distance telephone calls that relate to state business is a deductible expense. The unreimbursed cost of an answering service is also a deductible expense when it is directly related to your position as a member of the Legislature. Further, the cost of a telephone answering machine is a deductible business expense under the same conditions.
Since the state reimburses you for office expenses on a vouchered basis, all of these expenses would be deductible only to the extent that they were not reimbursed by the state. Also, they are considered miscellaneous itemized deductions subject to the adjusted gross income limitations previously discussed.
Q.
Can I deduct the cost of my cell phone or PDA?
A.
The portion of the monthly cost that is specifically related to your position in the Legislature can be deducted as a miscellaneous itemized deduction, similar to the other miscellaneous deductions that have already been discussed in this section. For example, if the monthly cost of operating the cell phone is $60 and you used the phone 75% of the time for business, then your deduction will be $45 ($60 x 75%). You should have documentation to support the business percentage that is used. The business percentage might change from month to month, so keeping records will be important. To help you document your deduction, request the cell phone service provider include a detailed list of all the calls that were made using the phone each month.
Also, you can deduct the cost of buying the cell phone. Only the business use portion can be deducted. For example, if the cell phone cost $250 and your records indicate that you need it 80% for Legislative purposes, then your deduction would be $200 ($250 x 80%). To obtain the deduction for the cost of the cell phone, use Form 4562, which is the form used to report depreciation. You can elect to use the provisions of Section 179 and thereby deduct the entire portion in the year of purchase, or you can elect to depreciate the business portion of the phone’s cost over 5 years. The amount of depreciation expense is also considered a miscellaneous type deduction.
Q.
What other expenses may I deduct on my personal tax return?
A.
There are many other expenses you may incur as a result of your position as a member of the Legislature. Some of these expenses may include the following, which are tax deductible as miscellaneous itemized deductions if not reimbursed by the state:
1. Stationery and postage relating to mail concerning your business as a member of the Legislature.
2014 – 2015 Income Tax Guide for State Legislators
19
2. Any other supplies, such as pens, paper clips, pencils, etc., that are necessary to maintain your office and serve your constituency.
3. Dues to organizations you normally would not belong to before becoming a member of the Legislature (to which you now belong as a matter of policy and to which your participation is instrumental to your functions as a legislator) are deductible expenses. Examples would be dues to civic organizations in your community. Dues to organizations you normally are a member of may be partially deductible to the extent you can show a direct business use and purpose.
No deduction is permitted for club dues. This rule applies to many types of club dues, including social, country, sports, luncheon, etc. Dues to civic clubs and chambers of commerce are deductible. Business related meals and entertainment expenses incurred at a club are deductible up to the 50 percent standard.
4. Newspapers and magazines – the cost of obtaining additional publications because of your position as a state legislator, such as special weekly papers in your district and special publications relating to politics of state or related areas of government, are deductible expenses.
5. The cost of Christmas cards sent to district leaders and leaders in the community is a form of advertising expense that is directly related to your business as a member of the Legislature. If you buy special Christmas cards that are mailed to people related to you in politics, this constitutes a tax deductible expense (cost of the cards, envelopes, postage and even family photographs, if the photographs are included in the Christmas cards).
6. Cost of newsletters sent to constituents is a tax deductible expense unless paid from
campaign funds.
7. The cost of furniture and fixtures purchased by the legislator and not reimbursed by the state may be deducted over time through a depreciation allowance. 8. Business gifts are deductible, up to $25 per recipient per year. Items clearly of an advertising nature that cost $4 or less are not included in the $25 business gift limitation.
Remember that all the above expenses are subject to the adjusted gross income limitations.
Q.
Explain more fully the limitations on deductions for unreimbursed employee business expenses.
A.
Unreimbursed employee business expenses are subject to two separate limitations.
First, miscellaneous itemized deductions (e.g., tax preparation fees, safe deposit box rentals, unreimbursed employee business expenses) are deductible to the extent that these items, in the aggregate, exceed 2 percent of adjusted gross income, and you are able to itemize.
Second, the overall deduction for all itemized deductions (except for the deductions for medical expense, investment interest, casualty losses and wagering losses to the extent of wagering gains) is further reduced by 3 percent of the excess of adjusted gross income in excess of $305,050 (married joint filers), $279,650 (heads of households), $254,200 (single filers), or $152,525 (married separate filers). These 2014 threshold amounts are adjusted annually for inflation. In no event will the reduction in these allowable itemized deductions exceed 80 percent. For 2015, the threshold amounts are projected to increase to $309,900, $284,050, $258,250, and $154,950, respectively.
You should note that this limitation applies to the deductions for home mortgage interest, state income taxes and charitable contributions, as well as employee business expenses.
In summary, due to these two limitations, the deductions for unreimbursed employee business expenses may be cut back significantly or be zero, depending upon the level of adjusted gross income.
20
America Counts on CPAs.®
PERSONAL FINANCIAL DISCLOSURE
Q. Do I have to file an annual Financial Disclosure Report with the Louisiana Board of Ethics?
A. Yes. The annual personal financial disclosure provisions in the ethics code that apply to legislators generally require the disclosure of certain specified information concerning income, employment, property, business associations, investments, liabilities, and transactions. Also required is disclosure of specified information, including value, regarding certain purchases or sales of immovable property, stocks, and other securities (subject to specific exceptions). Generally, except for amounts of income received from public sources and gaming interests, amounts are disclosed by category of value.
Q. How often do I have to file the report and what is the deadline for filing the report?
A. The financial disclosure report must be filed by May 15th each year the office is held and the year following the termination of the holding of the office. However, a legislator may file his or her financial disclosure statement within 30 days after filing his or her federal tax return for the year for which the report is filed, BUT ONLY IF he or she has timely filed for an extension for filing the federal income tax
return AND he or she notifies the Board of Ethics prior to the annual May 15 deadline of his or her intention to do so.
Q. Where can I find more information on financial disclosure reporting?
A. Financial disclosure forms and instructions and other information are made available by the Board of Ethics (http://www.ethics.la.gov).
There are other disclosure requirements in the ethics code regarding certain transactions with the state, certain contracts with the state, and certain transactions with the legislative branch of state government which apply to legislators and immediate family members of legislators and related entities. It is important to contact the Board of Ethics regarding the applicability of these provisions to the individual facts and circumstances involved.
2014 – 2015 Income Tax Guide for State Legislators
21
Campaign Expenses
and Contributions
Q.
Are my campaign expenses deductible for tax purposes?
A.
In 1962 Congress passed legislation that prohibits all deductions for expenditures in any political
campaign by a candidate for public office.
A candidate’s campaign expenditures out of his own resources are not deductible as ordinary business
expenses for income tax purposes. This is true even though a public office is defined as a trade or business. Additionally, these expenses may not be amortized as capital expenditures over the term of office.
Campaign expenses paid from a candidate’s private resources are considered non-deductible personal expenses regardless of the result of the election. Such expenses would include the cost of attending a political convention; contributions to the party that sponsored the candidacy; expenses of campaigning, travel and campaign advertising; expenses of successfully defending a contested election; filing fees; and the cost of legal fees paid in litigation over redistricting. However, once elected, an individual defending his right to elected office may deduct the expenses incurred in defending against a recall campaign.
Even though political office may be viewed as a stepping stone to some other business or profession, this is not enough to change the result. Thus, political campaign expenses are not deductible by a lawyer seeking election as a legislator in the hope that the exposure will build his professional practice. Even though a candidate feels that his professional reputation was damaged during a political campaign, he cannot deduct the cost of any defamation litigation for allegations published during the campaign.
Q.
May I handle my campaign finances through my personal legislative office checking account?
A.
No. The Louisiana Election Campaign Finance Disclosure Act requires that all candidates designate one or more state or national banks or state or federally chartered savings and loan associations or
savings banks or state or federally charted credit unions as a campaign depository. In 1997 the Legislature passed Act No. 863 which allows campaign funds to be deposited in a money market mutual fund and designated as a campaign depository. Separate accounts should be maintained.
Q.
Are campaign receipts and expenditures subject to Internal Revenue Service review?
A.
Yes. However, the Internal Revenue Service has ruled that campaign contributions and political gifts used solely for the expenses of an election campaign or similar purpose are not taxable income to the candidate. Any contributions that are used for personal purposes must be included in the candidate’s taxable income. You should keep in mind that personal use of campaign funds is illegal under Louisiana law.
Q.
Is it permissible to commingle political funds with personal funds?
A.
No. If funds are commingled so as to make tracing impractical, the entire fund will be presumed
devoted to personal use and deemed taxable income to the candidate, and the act of commingling would also be considered a violation of Louisiana law.
22
America Counts on CPAs.®
Q.
How are proceeds derived from fund-raising dinners or testimonial dinners accounted for?
A.
The accounting and reporting for dinner proceeds are the same as for campaign contributions.
Q.
How should currency contributions be accounted for?
A.
Currency contributions in excess of $100 are illegal. Receipts for currency contributions of $100 or less shall
contain the name, address and social security number of the contributor and be signed by the contributor, and the candidate or campaign fund shall retain a copy and provide a copy to the contributor.
Q.
Are contributions of property recorded in the same manner as cash?
A.
Yes. The fair market value on the date of the contribution should be acknowledged as the amount of the contribution.
Q.
Can my political campaign committee receive contributions from foreign nationals?
A.
No. Act No. 1164 passed by the Legislature in 1997 prohibits contributions by any foreign government entity, foreign business entity not qualified to do business in Louisiana, or an individual not a resident of the United States and not a citizen of the United States.
Q.
Are contributions to my campaign eligible for a political contributions credit or deductible as
itemized deductions on the individual contributor’s tax return?
A.
No. There is no longer any provision for tax credit or deduction for campaign contributions.
Q.
What type of expenditures may be paid from campaign contributions?
A.
The general rule concerning the expenditure of campaign funds is that the funds must be expended for a use related to a political campaign or the holding of a public office.
Examples of expenditures properly payable from campaign contributions include:
1. Generally recognized campaign expenses.
2. Contributions to the national, state or local committee of the candidate’s party.
3. Reimbursements to the political candidate for out-of-pocket campaign expenses paid by him. However, all campaign expenditures should be made directly to the recipient on a check drawn on the account of the campaign.
An opinion issued by the Board of Ethics for Elected Officials acting as the Supervisory Committee on Campaign Finance Disclosure provided additional guidance by permitting the following expenditures (Ethics Board Opinion No. 91-050):
1. Donations to bona fide charitable or governmental organizations such as churches, schools and civic organizations, as long as these types of expenditures are reasonable and customary.
2. The purchase or lease of telephone equipment provided the primary purpose is to facilitate the
campaign or the holding of public office.
3. Payment of membership dues directly related to holding public office. Examples include the State
Legislators’ National Conference, Common Cause, Public Affairs Research Council, etc.
4. Expenses of operating a district office. However, funds should not be used to compensate persons who would be considered public employees for the performance of duties and responsibilities of their public office or position.
5. Expenses for attendance of a legislative session or interim committee meeting, including
transportation, meals and lodging, to the extent these expenses are not otherwise reimbursed through the Legislature.
2014 – 2015 Income Tax Guide for State Legislators
23
6. Flowers for funerals or serious illnesses of constituents or graduation gifts to young people in the legislator’s district.
Expenditures for transporting electors to polling places for purposes of voting are strictly prohibited and subject to civil fines. However, a candidate may pay a bona fide bus, taxi, or transportation service, which holds a license or permit.
Q.
What is the tax status of unexpended balances of political funds refunded to contributors?
A.
Campaign funds may be refunded to all contributors on a pro-rata basis. For tax purposes, unexpended balances of political funds that are repaid to contributors are not considered to be either expended or diverted and, therefore, are not taxable income to the candidate or income to the original contributor.
Q.
In what other ways may unexpended balances of political funds be disposed of without being taxable to the candidate?
A.
Unexpended balances of political funds may be contributed to or for the use of another political
organization subject to the contribution limits; transferred to the general fund of the U.S. Treasury
or of any state or local government; or transferred to or for the use of an exempt public charity without being considered to be expended, diverted or taxable to the candidate. Alternatively, funds may be held in reasonable anticipation of being used for future campaign purposes without being considered
a disposition.
Q.
What reporting is required of a political committee, organization, association or fund formed for the purpose of managing expenses of a candidate?
A.
Such entity is considered an association taxable as a corporation and Form 1120-POL must be filed annually. The return is due on or before the fifteenth day of the third month after the end of the taxable year. The return must be filed with the Internal Revenue Service Center, Ogden, UT 84201. A political organization, other than a newsletter fund is not required to file Form 1120-POL if its taxable income before the specific deduction of $100 is $100 or less. (Newsletter funds cannot even claim the specific deduction of $100.) Political organizations that are not required to report certain information
to the federal government or Louisiana generally must (1) file Form 8871 and send the IRS an electronic message within 24 hours of its formation, (2) report the organization’s contributions
and expenditures to the IRS on Form 8872 (the frequency of these reports depends upon whether they are made during a federal election year) and (3) if the political organization has gross receipts of more than $25,000, it must annually file Form 990. Prior to the passage of P.L. 107-276 in October
2002, most state and local political organizations were also required to comply with these requirements. The 2002 law, however, removed these reporting requirements for most state and local political organizations retroactively, specifically including candidates for state and local office in the state and local group.
If the campaign files Form 1120-POL, the campaign is also required to file a Louisiana corporate income tax return. If the campaign is incorporated, the campaign may have to pay a Louisiana franchise tax with the tax return.
If you operate your campaign through or in the name of a committee, you are required to register that committee annually with the Campaign Finance Office of the Louisiana Board of Ethics. You must file a Statement of Organization, which requires a $100 filing fee, as well as a Designation of Principal/Subsidiary Campaign Committee. The forms may be downloaded at: www.ethics.state.la.us.
24
America Counts on CPAs.®
Q.
What items would be reported and subject to tax on the 1120-POL?
A.
All receipts and expenditures not related to tax-exempt campaign activities must be reported on the 1120-POL. Generally, these types of receipts and expenditures relate to investment income such as
dividends and capital gains or losses. As discussed in answers to previous questions, however, campaign receipts are not subject to tax. The Internal Revenue Code provides the campaign fund a $100 specific deduction against investment income, and the balance is taxed at the maximum federal corporate rate of 35 percent for state legislators. Estimated tax rules and alternative minimum tax do not apply to political organizations. For Louisiana income tax reporting, the state provides for no specific deduction and all investment income is subject to tax at the regular Louisiana corporate tax rates. If the campaign fund is considered to be incorporated, the Louisiana corporate franchise tax is also payable.
Q.
What accounting records are required for political funds?
A.
Detailed substantiating records should be kept by the political candidate or other custodian to enable the candidate to account accurately for the receipt and disbursement of political funds. Otherwise, receipts may be taxed on his individual return, whereas campaign expenses would be non-deductible. If political funds are commingled with the personal funds of the political candidate to render tracing or identification impractical, the political funds will be presumed to have been diverted to personal use at the time so commingled and as such would also be considered an illegal act under Louisiana law.
Candidates should determine that their records are kept in a manner that will assure their compliance with the Louisiana Campaign Finance Disclosure Act, as previously enacted, and as amended by Act 994 of 1988 and Acts 294, 340 and 1208 of 2001 (La. R.S. 18:1505.2). Detailed contributions and expenditures by date are required to be submitted as part of the Candidate’s Report. Expenditures made by a public relations firm, advertising agency or agent for the campaign must be reported to the campaign, and the ultimate recipients of such expenditures must be submitted in the Report.
Q.
What is the tax rule regarding presumption against unrestricted gifts?
A.
The Internal Revenue Service will presume, in the absence of evidence to the contrary, that contributions to a political candidate are political funds that are not intended for the unrestricted personal use of such recipient. If, in fact, the funds were intended for the unrestricted personal use of the political candidate, he must be able to substantiate this claim.
Q.
Are amounts paid by a contributor for advertising in a political publication tax deductible?
A.
No. The Internal Revenue Code specifically bars any deduction for expenses of advertising in political
programs or in any publication if any part of the proceeds directly or indirectly inures to the benefit of or for the use of a political party or candidate. If the political program or publication is not issued by the legislator but the ad supports the legislator, the cost of the ad should be considered an
“in-kind” contribution to the legislator, unless it qualifies as an independent expenditure.
Q.
What are the maximum amounts that may be contributed to a legislator’s campaign per election?
A.
A legislator is considered to be a District Office candidate and as such can receive $2,500 from an
individual, a legal entity (or parent 50+ percent subsidiary group) or a PAC. A “Big PAC” can
contribute up to $5,000. Candidates can receive $60,000 in the aggregate from PACs for both the primary and general elections combined. Contributions from Democratic or Republican parties or committees are not limited. When calculating whether the contribution limits have been reached, outstanding loans, loan endorsements, loan guarantees and contributions must be added together. Loans, and guarantors and endorsements thereof, are subject to the contribution limits.
2014 – 2015 Income Tax Guide for State Legislators
25
Q.
What expenditures are permissible in cash?
A.
No expenditure in excess of $100 shall be made from a petty cash fund, and no expenditures for personal services shall be made from petty cash funds except for gratuities paid for the serving of food or drink.
Q.
What are the reporting requirements for any loan made or received by a candidate?
A.
The date and amount of each loan for campaign purposes made or received by the candidate to or from any person or political committee during the reporting period, together with the full name and address of the lender, of the recipient of the proceeds of the loan, and of any person who makes any type of security agreement binding himself or his property, directly or indirectly, for the repayment of all or any part of the loan must be reported. Generally, amounts reported originally as campaign contributions can not be later changed to loans.
Q.
Besides foreign nationals, is there another group that cannot give political contributions to Louisiana candidates?
A.
Persons substantially interested in the riverboat and land-based casino gaming industry are prohibited from contributing to candidates and committees supporting or opposing candidates. No one who only holds a license under the Video Draw Poker Devices Control Law is prohibited from making a political contribution.
26
America Counts on CPAs.®
CONTRIBUTION LIMITS and campaign REPORTING DEADLINES
Contribution Limits (R.S. 18:1505.2 H, K)
Contributions, in-kind contributions, loans, endorsements or guarantees on loans and transfers of funds are all counted towards the contribution limits. Cash contributions are limited to $100 and receipts must be given which include the name, address, social security number, and signature of the contributor.
Exception:
(1) A candidate’s personal funds are not subject to the limits. A candidate may not charge interest on personal loans to his campaign above the judicial interest rate (uncompounded) as of the date of the loan.
(2) Loans made in the ordinary course of business, on a basis which assures repayment, as the usual and customary interest rate from a state bank, a federally chartered depository institution, a depository institution with insured accounts, a licensed lender or an insurance company do not count towards the limits. However, a loan from such an institution shall be considered a “loan” by each endorser or guarantor in the proportion of their liability.
The contribution limits are detailed in the following chart:
To a major office
candidate or
candidate committee
per election2
1
2
3
4
5
To a district office
candidate or
candidate committee
per election1
To any other
office candidate or
candidate committee
per election1
To a PAC over any
four year calendar
period
Individual may give2
$ 5,000
$ 2,500
$ 1,000
$ 100,000
Family Member of Candidate may give
$ 5, 000
$ 2,500
$ 1,000
$ 100,000
Legal Entity may give2
$ 5,000
$ 2,500
$ 1,000
$ 100,000
PAC may give4
$ 5,000
$ 2,500
$ 1,000
$ 5,000/
$ 2,500/
$ 1,000
$ 10,000
$ 5,000
$ 2,000
Big PAC5 may give4
$ 10,000/
$ 5,000/
$ 2,000
Democratic or Republican Party or Committees may give
No limits
No limits
No limits
No limits
The Primary and general elections are considered as two separate elections.
A husband and wife may each make contributions to the same candidate up to the limit. However, separate checks should be used. If a single check is signed by one spouse, the other must provide an affidavit as to their intent to share in the contribution.
Includes legal entities owned wholly or partially by candidates, except Internal Revenue Code Subchapter S corporations and Limited Liability Companies wholly owned by the candidate. Parent corporations and their subsidiaries are subject to a single limit. A corporation is a parent if it owns over 50% of another corporation.
Candidates are also subject to an aggregate limit on the contributions they may accept from all PACS combined for both the primary and general elections. Those limits are: $80,000 – major office, $60,000 – district office and $20,000 – any other office.
A PAC with over 250 members who contributed over $50 to the PAC during the preceding calendar year and has been certified as meeting that membership requirement.
2014 – 2015 Income Tax Guide for State Legislators
27
Definition of Types of Offices
1. “Major Office”
a. offices elected statewide
b. Public Service Commissioner, Supreme Court Justice, Court of Appeal Judges, BESE and district court judges elected parishwide in Orleans.
c. any office with an election district containing a population in excess of 250,000, including offices elected parishwide in Caddo, East Baton Rouge, Jefferson and Orleans.
2.
“District Office”
a. office of a member of the Louisiana Legislature
b. offices elected parishwide (except in Caddo, East Baton Rouge, Jefferson and Orleans)
c. offices elected in more than one parish (unless the population exceeds 250,000)
d. offices elected in a district with a population in excess of 35,000, but less than 250,000, including offices elected citywide in the cities of Alexandria, Baton Rouge, Bossier City, Kenner, Lafayette, Lake Charles, Marrero, Metairie, Monroe and Shreveport.
e. District Court Judgeships (except parishwide in Orleans), Family Court, Juvenile, and City Court Judgeships (unless the district has a population exceeding 250,000).
“Any Other Office” means offices not considered major or district, i.e., offices elected in a district 3.
having a population of 35,000 or less and not elected parishwide.
Campaign Reporting Deadlines (R.S. 18:1491.6 or 1495.4)
A.
Annual Reports are filed for each candidate/committee no later than February 15 of each year and are completed through the preceding December 31. The reports are used when a candidate begins participating in an election set for a future calendar year.
Exception: An annual report is not due (1) if another required report was filed any time after the preceding December 10 and prior to the February 15 due date, or (2) if the candidate/committee has received no contributions, made no expenditures, and received or made no loans during the reporting period.
B.
180 days prior to the primary election (180-P).
• filed only by major office candidates and their committees
C.
90 days prior to the primary election (90-P).
• filed only by major office candidates and their committees
D.
30 days prior to the primary election (30-P).
E.
10 days prior to the primary election (10-P).
F.
Election Day Expenditures (EDE-P) report due 10 days after the primary election. Name and address
of all election day workers must be reported as well as expenditures for election day advertisements.
G.
10 days prior to the general election (10-G).
• last report required for candidates with no outstanding debts or loans and not participating in general election and committees not participating in general election.
H.
Election Day Expenditures (EDE-G) report due 10 days after the general election. Name and address of all election day workers must be reported as well as expenditure for election day advertisement.
I.
40 days after the general election (40-G).
• filed only by candidates and committees participating in the general election
• last report required if there are not outstanding debts or loans
Note: A specific reporting schedule is available for each election and may be dowloaded at www.
ethics.state.la.us. Reports are filed when received or when postmarked if delivered by United States Mail or commercial delivery service.
28
America Counts on CPAs.®
J.
Affidavits in Lieu of Reports: Candidates for major or district offices, and committees supporting such candidates, who do not spend over $5,000 and do not receive contributions from one source, including personal funds of the candidate, totaling in excess of $200 may file an affidavit in lieu of each report required above. A separate affidavit is required for each report and once a candidate exceeds either of the threshold amounts he may not return to filing affidavits for that election. Candidates for “any other offices” may never file an affidavit.
K.
Special Reports are required during the 20 day period immediately preceding an election if:
1. a contribution or loan in excess of $1000 for major office candidates, $500 for district office candidates, or $250 for any other office candidates is received and accepted during the 20 day period, or
2. an expenditure in excess of $200 is made during the 20 day period to a candidate, committee or other person required to file disclosure reports who makes endorsements.
Note: Special Reports must be filed within 48 hours after the transaction.
L.
Supplemental Reports are required to be filed annually by February 15, complete through the preceding December 31, if the last report of a candidate for an election shows outstanding debts or loans or surplus funds. Exception: A supplemental report need not be filed if the candidate is not elected and shows outstanding debts and loans or a surplus totaling less than $2,500. If the legislator was involved in the general election of December 4, 2004 their next supplemental report would contain information from January 4, 2005 through December 31, 2005 and is due by February 15, 2006.
M.
Withdrawn and Unopposed Candidates: The final report of a candidate who withdraws or is unopposed is the next report due as of the date that the candidate withdraws or becomes unopposed.
N.
Proposition Elections: Reports are required 30 days prior to the election, 10 days prior to the election and 40 days after the election. Special reports are required for any contribution or expenditure in excess of $200 during the 20 day period immediately preceding the election.
O.
Recall Elections: A statement of organization is required within 3 days of the filing of the recall petition. Reports are due 45 days, 135 days, and 200 days after the filing of the recall petition. If the recall effort is successful, the rules for proposition elections then apply. The application of the campaign finance rules are governed to a large degree by the type of office which the candidate is vying for.
Electronic Filing Requirements
Candidates for major and district offices who have contributions or expenditures in excess of $25,000 are
required to file their campaign finance reports electronically. All other filers are welcome to do so, but it is
not required.
File your reports electronically with the Louisiana Ethics Administration Disclosure and Electronic Reporting
System (L.E.A.D.E.R.S.). Free software may be downloaded from the following Web site: www. ethics.state.
la.us. The software can be used to produce paper forms also if electronic filing is not required.
Enter your data and file your reports electronically via the Internet, direct dial-up or on a diskette. You must
obtain a password and ID number before electronically submitting your report. To obtain a password and ID
number, contact Gene Dawson at (225) 219-5600 (phone) or (225) 381-7271 (fax), or E-mail
gene.dawson@la.gov. You can test the software without obtaining a password.
2014 – 2015 Income Tax Guide for State Legislators
29
Recordkeeping
Q.
For tax purposes, what kind of information do I need to substantiate my deductions for travel, entertainment and other business expenses that are in excess of reimbursement?
A.
Because estimates are not conclusive, you must substantiate by adequate records or sufficient evidence which corroborate your own statements, all expenditures for travel, entertainment and gifts. If actual expense amounts are used in lieu of per diems for lodging, proper receipts must be maintained. Other business expenses must be supported by receipts, canceled checks and books of record. In every case, the business nature of the expense must be evidenced in some fashion.
The elements for recording travel expenses are:
1. The amount spent daily for transportation, meals, lodging, etc. The costs of travel by automobile may be substantiated in certain cases by using the standard mileage allowance not in excess of
$.560 per mile for 2014 and $.575 per mile for 2015.
2. Record the dates of departure and return and the number of days spent on business.
3. Record the destination or locality of the travel.
4. Report the business purpose of the trip or the business benefit derived or expected to be derived as a result of travel.
Entertainment expenses should be recorded as follows:
1. The amount and description (i.e., “dinner” or “theater”) of each separate expenditure; however,
incidental items such as taxi fares and telephone calls may be aggregated on a daily basis.
2. The time and place the entertainment was provided.
3. The business purpose of the activity, including a description of any business benefit derived or expected, and the nature of the business discussion with the person entertained.
4. The business relationship to the person or persons entertained, which may be indicated by
reference to name, title, occupation or other designation sufficient to establish the relationship.
To deduct the cost of business gifts, you must substantiate:
1. The cost and a description of the gift.
2. The date the gift was made.
3. The business reason for or the benefit derived or expected to be derived as a result of the gift.
4.
30
The relationship of the recipient to you, including his name, title or other designation sufficient to establish such relationship. (It is not necessary to record the recipient’s name in certain situations
if the business relationship of the gift is clear and if it is apparent that you are not attempting to avoid the $25-per-donee limitation.) Thus, if you purchase a large number of inexpensive tickets to local high school basketball games and distribute one or two of them to each of a large number of constituents, you need not record the names of the recipients. However, you must still substantiate the cost, date, description and business purpose of the gift.
America Counts on CPAs.®
You must record the above elements for each separate expenditure. Generally, a single payment for goods,
services or facilities will be considered a separate expenditure. Thus, when you entertain a guest at dinner
and the theater, the payment for the meal and the one for the tickets are deemed to constitute separate
expenditures, each of which must be individually recorded. If you hold season or series tickets to an event,
you must treat each ticket in the series as a separate item and record the use of each for entertainment or
gift purposes.
However, concurrent or repetitious payments of a similar nature made during the course of a single event
may be treated as a single expenditure. Thus, rounds of drinks paid for separately during an evening’s
entertainment at one place may be treated as a whole.
In some instances certain kinds of expenses may be aggregated on a daily basis. Thus, the IRS regulations
permit you to treat as one expenditure the total meal expenses (breakfast, lunch and dinner) incurred in one
day. Tips may be aggregated with the expense of the services to which they relate. Other expenses that
may be grouped include gasoline and oil, taxi and telephone calls.
Adequate records consist of:
1.
Diaries and Account Books – It is necessary that the elements of an expenditure be recorded at or near the time when the expense was incurred. Such records are believed to have a high degree of credibility not present with respect to a statement prepared subsequent thereto when generally there is a lack of accurate recall. Thus, although no special form of records must be maintained, it is clear that the Internal Revenue Service contemplates that the taxpayer will keep a diary or account book in which entries are made on a daily basis.
The degree of specificity of entries in a diary or account book will vary with the facts and circumstances of each expenditure. When documentary evidence is required, it is not necessary to make a diary entry that duplicates information contained in the receipt if the receipt and diary complement each other in an orderly fashion.
Again, when the business purpose of an expenditure is evident from surrounding facts and circumstances, a written statement of such business purpose is not required.
Confidential or highly sensitive information need not be recorded in a diary or account book. However, you should be ready to submit a record of the expenditure to the district director during an audit if you are to obtain a deduction for the expenditure.
2.
Documentary Evidence – A diary or account book standing alone is not sufficient substantiation in all
circumstances. You must be prepared to produce documentary evidence (i.e., receipts, paid bills, etc.) in order to deduct non per diem lodging expenses incurred while traveling away from home and other expenses of $75 or more. Documentary evidence supporting expenditure for transportation of $75 or more will not be required if such is not readily available. Such expenses can be easily authenticated by fare schedules and by mileage rates.
Usually a receipt will suffice if it contains enough information to establish the amount, date, place and character of an expense. Thus, a hotel receipt must include the name, location, date and the separate charges for lodging, meals, telephone etc., if it is to serve as adequate substantiation of a business
travel expense.
Similarly, a restaurant receipt must indicate the name and location of the restaurant, the date and the charge for food, beverages and other items.
2014 – 2015 Income Tax Guide for State Legislators
31
A canceled check will not ordinarily constitute adequate documentary evidence since it does not show in detail the specific items composing the total expenditure. Thus, if you make a long-distance telephone call to
your home (a personal expense), a hotel receipt would usually indicate this fact while a canceled check would not. However, a canceled check, in connection with your bill, will typically be sufficient to substantiate the business nature of an expenditure. The detail required is important for it is the basis upon which an allocation between personal and business expenses is made. Moreover, if expenses incurred with respect to certain persons (i.e., spouses) are not deductible, it is essential that evidence of the cost incurred with respect to them be available. Otherwise, they will be deemed to bear a proportionate share of the total charge.
Q.
How long do I have to keep documentary evidence such as diaries, receipts, etc.?
A.
You must retain records and related documentary evidence in support of travel, entertainment, gifts and other deductions during the period in which your tax return is subject to audit. Normally, this period is three years from the due date for filing the tax return in which you claimed a deduction. However, the period of limitations may be longer if you consent to an extension, your return is filed late or if there has been omission of more than 25% of gross income. Moreover, there is no statute of limitations in cases of fraud. The Supreme Court has held that an amended return will not commence the beginning of a three-year statutory period if a fraudulent return was filed originally.
For campaign purposes, candidates are required to keep their records for two years after their last report is filed for an election.
Q.
Must my certified public accountant (CPA) issue a compilation report when submitting campaign finance reports to the Campaign Finance?
A.
CPAs who are not officers of the campaign should follow the Statements on Standards for Accounting and Review Services (SSARS), which requires a compilation report. (Note that the SSARS 8 exception for “Management Use Only” reports is not applicable since the financial statement will be used by third parties.)
CPAs who are officers of the campaign should either (1) follow SSARS (which requires issuance of a report) or (2) use a transmittal letter that clearly indicates the CPA’s relationship to the campaign. The following is an example of the type of communication that may be used by the CPA:
The accompanying Campaign Finance Report of Campaign X for the period ended
December 31, 20XX has been prepared by [name of accountant], CPA. I have prepared
such financial statements in my capacity [describe capacity, for example, as an officer]
of Campaign X.
The CPA should also consider current guidance for independence. A CPA is not precluded from issuing a compilation report if they lack independence, but they must disclose the lack of independence in the compilation report. Note that the reason for the lack of independence may not be disclosed.
Your CPA should also consider AR section 300, which contains an alternative form for a compilation report. This alternate form precludes the CPA from having to disclose departures from GAAP that are inherent in the Campaign Finance Report. All GAAP departures must be disclosed if the CPA issues the standard compilation report.
32
America Counts on CPAs.®
Q.
When are campaign reports of legislators due to Campaign Finance?
A.
Annual reports are generally due February 15th of each year. During election years, reports are also due 30 days prior to the primary election, as well as 10 days prior to the primary and 10 days prior to the general election (see page 30). A legislator participating in the general election must file a report 40 days after the general election. Reports should be mailed to: Campaign Finance
Post Office Box 4368
Baton Rouge, LA 70821
Phone 225.219.5600
800.842.6630
Fax 225.381.7271
www.ethics.state.la.us
Effective January 1, 2012, state legislators are required to electronically file campaign finance disclosure reports. Electronic filing is voluntary for candidates that are not major or district level office candidates.
Q.
Can the Ethics Board assess penalties for failure to file or late filing of required campaign reports?
A.
Yes. Act No. 352 of 1997 allows the Ethics Board to assess automatic penalties for campaign reports not filed on a timely basis. For example, candidates for district office will be charged $60 per day not to exceed $2,000 per report for failure to file or late filing. An additional penalty of up to $10,000 may be assessed if the report is more than 11 days late.
2014 – 2015 Income Tax Guide for State Legislators
33
lcpa.org • 800.288.5272
34
America Counts on CPAs.®
Form
2106
Department of the Treasury
Internal Revenue Service (99)
▶ Attach to Form 1040 or Form 1040NR.
2014
Attachment
Sequence No.
Social security number
▶ Information about Form 2106 and its separate instructions is available at www.irs.gov/form2106.
Your name
Part I
OMB No. 1545-0074
Employee Business Expenses
Occupation in which you incurred expenses
129
Employee Business Expenses and Reimbursements
Column A
Other Than Meals
and Entertainment
Step 1 Enter Your Expenses
1 Vehicle expense from line 22 or line 29. (Rural mail carriers: See
instructions.) . . . . . . . . . . . . . . . . . .
2 Parking fees, tolls, and transportation, including train, bus, etc., that
did not involve overnight travel or commuting to and from work .
3 Travel expense while away from home overnight, including lodging,
airplane, car rental, etc. Do not include meals and entertainment .
4 Business expenses not included on lines 1 through 3. Do not include
meals and entertainment . . . . . . . . . . . . . .
5 Meals and entertainment expenses (see instructions) . . . . .
6 Total expenses. In Column A, add lines 1 through 4 and enter the
result. In Column B, enter the amount from line 5 . . . . . .
Column B
Meals and
Entertainment
1
2
3
4
5
6
Note. If you were not reimbursed for any expenses in Step 1, skip line 7 and enter the amount from line 6 on line 8.
Step 2 Enter Reimbursements Received From Your Employer for Expenses Listed in Step 1
7 Enter reimbursements received from your employer that were not
reported to you in box 1 of Form W-2. Include any reimbursements
reported under code “L” in box 12 of your Form W-2 (see
instructions) . . . . . . . . . . . . . . . . . . .
7
Step 3 Figure Expenses To Deduct on Schedule A (Form 1040 or Form 1040NR)
8 Subtract line 7 from line 6. If zero or less, enter -0-. However, if line 7
is greater than line 6 in Column A, report the excess as income on
Form 1040, line 7 (or on Form 1040NR, line 8) . . . . . . .
8
Note. If both columns of line 8 are zero, you cannot deduct
employee business expenses. Stop here and attach Form 2106 to
your return.
9 In Column A, enter the amount from line 8. In Column B, multiply line
8 by 50% (.50). (Employees subject to Department of Transportation
(DOT) hours of service limits: Multiply meal expenses incurred while
away from home on business by 80% (.80) instead of 50%. For
details, see instructions.) . . . . . . . . . . . . . .
9
10 Add the amounts on line 9 of both columns and enter the total here. Also, enter the total on
Schedule A (Form 1040), line 21 (or on Schedule A (Form 1040NR), line 7). (Armed Forces
reservists, qualified performing artists, fee-basis state or local government officials, and individuals
with disabilities: See the instructions for special rules on where to enter the total.) . . . . . ▶
For Paperwork Reduction Act Notice, see your tax return instructions.
2014 – 2015 Income Tax Guide for State Legislators
Cat. No. 11700N
10
Form 2106 (2014)
35
Form 2106 (2014)
Part II
Page
Vehicle Expenses
Section A—General Information (You must complete this section if you
are claiming vehicle expenses.)
11
12
13
14
15
16
17
18
19
20
21
2
Enter the date the vehicle was placed in service . . . . . . . .
Total miles the vehicle was driven during 2014
. . . . . . . .
Business miles included on line 12 . . . . . . . . . . . .
Percent of business use. Divide line 13 by line 12 . . . . . . . .
Average daily roundtrip commuting distance . . . . . . . . .
Commuting miles included on line 12
. . . . . . . . . . .
Other miles. Add lines 13 and 16 and subtract the total from line 12
.
Was your vehicle available for personal use during off-duty hours? . .
Do you (or your spouse) have another vehicle available for personal use?
Do you have evidence to support your deduction? . . . . . . .
If “Yes,” is the evidence written? . . . . . . . . . . . . .
(a) Vehicle 1
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
11
12
13
14
15
16
17
.
.
.
.
/
.
.
.
.
.
.
.
.
.
.
.
.
(b) Vehicle 2
/
.
.
.
.
.
.
.
.
/
miles
miles
%
miles
miles
miles
. . .
. . .
. . .
. . .
Yes
Yes
Yes
Yes
/
miles
miles
%
miles
miles
miles
No
No
No
No
Section B—Standard Mileage Rate (See the instructions for Part II to find out whether to complete this section or Section C.)
22
Multiply line 13 by 56¢ (.56). Enter the result here and on line 1 . . .
(a) Vehicle 1
Gasoline, oil, repairs, vehicle
23
insurance, etc. . . . . . .
23
24a Vehicle rentals . . . . . .
24a
b Inclusion amount (see instructions) .
24b
c Subtract line 24b from line 24a .
24c
Value of employer-provided vehicle
25
(applies only if 100% of annual
lease value was included on Form
W-2—see instructions) . . . .
25
26
Add lines 23, 24c, and 25. . .
26
Multiply line 26 by the percentage
27
on line 14 . . . . . . . .
27
28
Depreciation (see instructions) .
28
Add lines 27 and 28. Enter total
29
here and on line 1 . . . . .
29
Section C—Actual Expenses
.
.
.
.
.
.
.
.
22
(b) Vehicle 2
Section D—Depreciation of Vehicles (Use this section only if you owned the vehicle and are completing Section C for the vehicle.)
(a) Vehicle 1
30
Enter cost or other basis (see
instructions) . . . . . . .
30
31
Enter section 179 deduction (see
instructions) . . . . . . .
31
32
Multiply line 30 by line 14 (see
instructions if you claimed the
section 179 deduction) . . .
Enter depreciation method and
percentage (see instructions) .
Multiply line 32 by the percentage
on line 33 (see instructions) . .
33
34
35
36
Add lines 31 and 34 . . . .
Enter the applicable limit explained
in the line 36 instructions . . .
37
Multiply line 36 by the percentage
on line 14 . . . . . . . .
38
Enter the smaller of line 35 or line
37. If you skipped lines 36 and 37,
enter the amount from line 35.
Also enter this amount on line 28
above . . . . . . . . .
(b) Vehicle 2
32
33
34
35
36
37
38
Form 2106 (2014)
36
America Counts on CPAs.®
2014
Department of the Treasury
Internal Revenue Service
Instructions for Form 2106
Employee Business Expenses
Section references are to the Internal
Revenue Code unless otherwise noted.
Future Developments
For the latest developments related to
Form 2106 and its instructions, such
as legislation enacted after they were
published, go to www.irs.gov/
form2106.
What's New
Standard mileage rate. The 2014
rate for business use of your vehicle is
56 cents a mile.
Depreciation limits on vehicles.
For 2014, the first-year limit on
depreciation, special depreciation
allowance, and section 179 deduction
for most vehicles remains at $11,160
($3,160 if you elect not to claim the
special depreciation allowance). For
trucks and vans, the first-year limit is
$11,460 ($3,460 if you elect not to
claim the special depreciation
allowance). For more details, see the
discussion under Section D –
Depreciation of Vehicles, later.
General Instructions
Purpose of Form
Use Form 2106 if you were an
employee deducting ordinary and
necessary expenses for your job. See
the flowchart below to find out if you
must file this form.
An ordinary expense is one that is
common and accepted in your field of
trade, business, or profession. A
necessary expense is one that is
helpful and appropriate for your
business. An expense does not have
Who Must File Form 2106
No
A Were you an employee during the year?
to be required to be considered
necessary.
Form 2106-EZ. You can file Form
2106-EZ, Unreimbursed Employee
Business Expenses, provided you
were an employee deducting ordinary
and necessary expenses for your job
and you:
Use the standard mileage rate (if
claiming vehicle expense), and
Were not reimbursed by your
employer for any expense (amounts
your employer included in box 1 of
your Form W-2 are not considered
reimbursements for this purpose).
Recordkeeping
You cannot deduct expenses for
travel (including meals unless you
used the standard meal allowance),
entertainment, gifts, or use of a car or
Do not file Form 2106.
See the instructions for Schedule C, C-EZ, E, or F.
Yes
No
B Did you have job-related business expenses?
Do not file Form 2106.
Yes
C Were you reimbursed for any of your business
expenses (count only reimbursements your employer
did not include in box 1 of your Form W-2)?
No
Yes
Yes
File Form 2106 (but
see Notes below).
No
Yes
F Did you use a vehicle in your job in 2014 that
you also used for business in a prior year?
D Are you claiming job-related vehicle,
travel, transportation, meals, or
entertainment expenses?
E Are you a reservist, a qualified performing artist, a fee-basis Yes
state or local government official, or an individual with a
disability claiming impairment-related work expenses? See
the line 10 instructions for definitions.
No
H Are your deductible expenses more than your
reimbursements (count only reimbursements your
employer did not include in box 1 of your Form W-2)?
For rules covering employer reporting of reimbursed
expenses, see the instructions for line 7.
No
No
Do not file Form 2106. Enter expenses on Schedule A
(Form 1040), line 21 or Schedule A (Form 1040NR), line
7. These expenses include business gifts, education
(tuition and books), home office, trade publications, etc.
Do not file Form 2106.
G Is either (1) or (2) true?
1 You owned this vehicle and used the actual
expense method in the first year you used the
vehicle for business.
2 You used a depreciation method other than
straight line for this vehicle in a prior year.
No
Yes
File Form 2106 (but
see Notes).
Yes
File Form 2106.
Jan 07, 2015
2014 – 2015 Income Tax Guide for State Legislators
Notes
• Generally, employee expenses are deductible only on
line 21 of Schedule A (Form 1040) or line 7 of Schedule A
(Form 1040NR). But reservists, qualified performing artists,
fee-basis state or local government officials, and
individuals with disabilities should see the instructions for
line 10 to find out where to deduct employee expenses.
• Do not file Form 2106 if none of your expenses are
deductible because of the 2% limit on miscellaneous
itemized deductions.
Cat. No. 64188V
37
other listed property unless you keep
records to prove the time, place,
business purpose, business
relationship (for entertainment and
gifts), and amounts of these
expenses. Generally, you must also
have receipts for all lodging expenses
(regardless of the amount) and any
other expense of $75 or more.
Additional Information
For more details about employee
business expenses, see:
Pub. 463, Travel, Entertainment,
Gift, and Car Expenses.
Pub. 529, Miscellaneous
Deductions.
Pub. 587, Business Use of Your
Home (Including Use by Daycare
Providers).
Pub. 946, How To Depreciate
Property.
Specific Instructions
Part I—Employee
Business Expenses and
Reimbursements
Fill in all of Part I if you were
reimbursed for employee business
expenses. If you were not reimbursed
for your expenses, complete steps 1
and 3 only.
Step 1—Enter Your Expenses
Line 1. If you were a rural mail
carrier, you can treat the amount of
qualified reimbursement you received
as the amount of your allowable
expense. Because the qualified
reimbursement is treated as paid
under an accountable plan, your
employer should not include the
amount of reimbursement in your
income.
You were a rural mail carrier if you
were an employee of the United
States Postal Service (USPS) who
performed services involving the
collection and delivery of mail on a
rural route.
Qualified reimbursements.
These are the amounts paid by the
USPS as an equipment maintenance
allowance under a collective
bargaining agreement between the
USPS and the National Rural Letter
Carriers' Association, but only if such
amounts do not exceed the amount
that would have been paid under the
1991 collective bargaining agreement
(adjusted for changes in the
Consumer Price Index since 1991).
If you were a rural mail carrier and
your vehicle expenses were:
Less than or equal to your qualified
reimbursements, do not file Form
2106 unless you have deductible
expenses other than vehicle
expenses. If you have deductible
expenses other than vehicle
expenses, skip line 1 and do not
include any qualified reimbursements
in column A on line 7.
More than your qualified
reimbursements, first complete Part II
of Form 2106. Enter your total vehicle
expenses from line 29 on line 1 and
the amount of your qualified
reimbursements in column A on
line 7.
If you are a rural mail carrier
and received a qualified
CAUTION
reimbursement, you cannot
use the standard mileage rate.
!
Line 2. The expenses of commuting
to and from work are not deductible.
See the line 15 instructions for the
definition of commuting.
Line 3. Enter lodging and
transportation expenses connected
with overnight travel away from your
tax home (defined next). Do not
include expenses for meals and
entertainment. For more details,
including limits, see Pub. 463.
Tax home. Generally, your tax
home is your regular or main place of
business or post of duty regardless of
where you maintain your family home.
If you do not have a regular or main
place of business because of the
nature of your work, then your tax
home may be the place where you
regularly live. If you do not have a
regular or a main place of business or
post of duty and there is no place
where you regularly live, you are
considered an itinerant (a transient)
and your tax home is wherever you
work. As an itinerant, you are never
away from home and cannot claim a
travel expense deduction. For more
details on the definition of a tax home,
see Pub. 463.
Generally, you cannot deduct any
expenses for travel away from your
tax home for any period of temporary
employment of more than 1 year.
However, this 1-year rule does not
apply for a temporary period in which
-2-
38
you were a federal employee certified
by the Attorney General (or his or her
designee) as traveling in temporary
duty status for the U.S. government to
investigate or prosecute a federal
crime (or to provide support services
for the investigation or prosecution of
a federal crime).
Incidental expenses. The term
“incidental expenses” means fees and
tips given to porters, baggage
carriers, hotel staff, and staff on ships.
Incidental expenses do not include
expenses for laundry, cleaning and
pressing of clothing, lodging taxes,
costs of telegrams or telephone calls,
transportation between places of
lodging or business and places where
meals are taken, or the mailing cost of
filing travel vouchers and paying
employer-sponsored charge card
billings.
You can use an optional method
(instead of actual cost) for deducting
incidental expenses only. The amount
of the deduction is $5 a day. You can
use this method only if you did not pay
or incur any meal expenses. You
cannot use this method on any day
you use the standard meal allowance
(defined in the instructions for line 5).
Line 4. Enter other job-related
expenses not listed on any other line
of this form. Include expenses for
business gifts, education (tuition, fees,
and books), home office, trade
publications, etc. For details, including
limits, see Pub. 463 and Pub. 529.
If you are deducting home office
expenses, see Pub. 587 for special
instructions on how to report these
expenses.
If you are deducting depreciation or
claiming a section 179 deduction, see
Form 4562, Depreciation and
Amortization, to figure the
depreciation and section 179
deduction to enter on Form 2106,
line 4.
Do not include on line 4 any (a)
educator expenses you deducted on
Form 1040, line 23, or Form 1040NR,
line 24, or (b) tuition and fees you
deducted on Form 1040, line 34.
You may be able to take a
credit for your educational
expenses instead of a
deduction. See Form 8863, Education
Credits, for details.
TIP
Instructions for Form 2106 (2014)
America Counts on CPAs.®
Do not include expenses for meals
and entertainment, taxes, or interest
on line 4. Deductible taxes are
entered on Schedule A (Form 1040),
lines 5 through 9; or Schedule A
(Form 1040NR), line 1. Employees
cannot deduct car loan interest.
Note. If line 4 is your only entry, do
not complete Form 2106 unless you
are claiming:
Performing-arts-related business
expenses as a qualified performing
artist,
Expenses for performing your job
as a fee-basis state or local
government official, or
Impairment-related work expenses
as an individual with a disability.
See the line 10 instructions. If you
are not required to file Form 2106,
enter your expenses directly on
Schedule A (Form 1040), line 21 (or
Schedule A (Form 1040NR), line 7).
Line 5. Enter your allowable meals
and entertainment expense. Include
meals while away from your tax home
overnight and other business meals
and entertainment.
Standard meal allowance.
Instead of actual cost, you may be
able to claim the standard meal
allowance for your daily meals and
incidental expenses (M&IE) while
away from your tax home overnight.
Under this method, instead of keeping
records of your actual meal expenses,
you deduct a specified amount,
depending on where you travel.
However, you must still keep records
to prove the time, place, and business
purpose of your travel.
The standard meal allowance is the
federal M&IE rate. For most small
localities in the United States, this rate
is $46 a day. Most major cities and
many other localities in the United
States qualify for higher rates. You
can find the rates that applied during
2014 on the Internet at www.gsa.gov/
perdiem. At the Per Diem Overview
page select “2014” for the rates in
effect for the period January 1, 2014–
September 30, 2014. Select “Fiscal
Year 2015” for the period October 1,
2014–December 31, 2014. However,
you can apply the rates in effect
before October 1, 2014, for expenses
of all travel within the United States for
2014 instead of the updated rates. For
the period October 1, 2014–
December 31, 2014, you must
consistently use either the rates for
the first 9 months of 2014 or the
updated rates.
For locations outside the
continental United States, the
applicable rates are published each
month. You can find these rates on
the Internet at www.state.gov/travel
and select the option for “Foreign Per
Diem Rates.”
See Pub. 463 for details on how to
figure your deduction using the
standard meal allowance, including
special rules for partial days of travel
and transportation workers.
verified the time, place, and business
purpose of the travel for that day.
Your employer reimbursed you for
vehicle expenses at the standard
mileage rate or according to a flat rate
or stated schedule, and you verified
the date of each trip, mileage, and
business purpose of the vehicle use.
See Pub. 463 for more details.
Line 7. Enter reimbursements
received from your employer (or third
party) for expenses shown in Step 1
that were not reported to you in box 1
of your Form W-2. This includes
reimbursements reported under code
“L” in box 12 of Form W-2. Amounts
reported under code “L” are
reimbursements you received for
business expenses that were not
included as wages on Form W-2
because the expenses met specific
IRS substantiation requirements.
Generally, when your employer
pays for your expenses, the payments
should not be included in box 1 of
your Form W-2 if, within a reasonable
period of time, you:
Accounted to your employer for the
expenses, and
Were required to return, and did
return, any payment not spent (or
considered not spent) for business
expenses.
If these payments were incorrectly
included in box 1, ask your employer
for a corrected Form W-2.
Reimbursement Allocation
Worksheet
(keep for your records)
Step 2—Enter Reimbursements
Received From Your Employer
for Expenses Listed in Step 1
Accounting to your employer.
This means that you gave your
employer documentary evidence and
an account book, diary, log, statement
of expenses, trip sheets, or similar
statement to verify the amount, time,
place, and business purpose of each
expense. You are also treated as
having accounted for your expenses if
either of the following applies.
Your employer gave you a fixed
travel allowance that is similar in form
to the per diem allowance specified by
the Federal Government and you
Instructions for Form 2106 (2014)
2014 – 2015 Income Tax Guide for State Legislators
Allocating your reimbursement.
If your employer paid you a single
amount that covers meals and
entertainment as well as other
business expenses, you must allocate
the reimbursement so that you know
how much to enter in Column A and
Column B of line 7. Use the following
worksheet to figure this allocation.
1. Enter the total amount of
reimbursements your
employer gave you that
were not reported to you
in box 1 of Form W-2 . . .
2. Enter the total amount of
your expenses for the
periods covered by this
reimbursement . . . . . . .
3. Enter the part of the
amount on line 2 that was
your total expense for
meals and
entertainment . . . . . . .
4. Divide line 3 by line 2.
Enter the result as a
decimal (rounded to three
places) . . . . . . . . . . . .
.
5. Multiply line 1 by line 4.
Enter the result here and
in Column B, line 7 . . . .
6. Subtract line 5 from line 1.
Enter the result here and
in Column A, line 7 . . . .
Step 3—Figure Expenses
To Deduct on Schedule A
(Form 1040 or Form 1040NR)
Line 9. Generally, you can deduct
only 50% of your business meal and
entertainment expenses, including
meals incurred while away from home
on business. However, if you were an
employee subject to the DOT hours of
service limits, that percentage is
increased to 80% for business meals
consumed during, or incident to, any
-3-
39
period of duty for which those limits
are in effect.
Employees subject to the DOT
hours of service limits include certain
air transportation employees, such as
pilots, crew, dispatchers, mechanics,
and control tower operators; interstate
truck operators and interstate bus
drivers; certain railroad employees,
such as engineers, conductors, train
crews, dispatchers, and control
operations personnel; and certain
merchant mariners.
Line 10. If you are one of the
individuals discussed below, special
rules apply to deducting your
employee business expenses. Any
part of the line 10 total that is not
deducted according to the special
rules should be entered on
Schedule A (Form 1040), line 21 (or
Schedule A (Form 1040NR), line 7).
Ministers. Before entering your
total expenses on line 10, you must
reduce them by the amount allocable
to your tax-free allowance(s). See
Pub. 517 for more information.
Armed Forces reservist
(member of a reserve component).
You are a member of a reserve
component of the Armed Forces of
the United States if you are in the
Army, Navy, Marine Corps, Air Force,
or Coast Guard Reserve; the Army
National Guard of the United States;
the Air National Guard of the United
States; or the Reserve Corps of the
Public Health Service.
If you qualify, complete Form 2106
and include the part of the line 10
amount attributable to the expenses
for travel more than 100 miles away
from home in connection with your
performance of services as a member
of the reserves on Form 1040, line 24,
and attach Form 2106 to your return.
The amount of expenses you can
deduct on Form 1040, line 24, 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.
These reserve-related travel
expenses are deductible whether or
not you itemize deductions. See Pub.
463 for additional details on how to
report these expenses.
Fee-basis state or local
government official. You are a
qualifying fee-basis official if you are
employed by a state or political
subdivision of a state and are
compensated, in whole or in part, on a
fee basis.
If you qualify, include the part of the
line 10 amount attributable to the
expenses you incurred for services
performed in that job in the total on
Form 1040, line 24, and attach Form
2106 to your return. These employee
business expenses are deductible
whether or not you itemize
deductions.
Qualified performing artist. You
are a qualified performing artist if you:
1. Performed services in the
performing arts as an employee for at
least two employers during the tax
year,
2. Received from at least two of
those employers wages of $200 or
more per employer,
3. Had allowable business
expenses attributable to the
performing arts of more than 10% of
gross income from the performing
arts, and
4. Had adjusted gross income of
$16,000 or less before deducting
expenses as a performing artist.
In addition, if you are married, you
must file a joint return unless you lived
apart from your spouse for all of 2014.
If you file a joint return, you must
figure requirements (1), (2), and (3)
separately for both you and your
spouse. However, requirement (4)
applies to the combined adjusted
gross income of both you and your
spouse.
If you meet all the requirements for
a qualified performing artist, include
the part of the line 10 amount
attributable to performing-arts-related
expenses in the total on Form 1040,
line 24 (or Form 1040NR, line 35), and
attach Form 2106 to your return. Your
performing-arts-related business
expenses are deductible whether or
not you itemize deductions.
Disabled employee with
impairment-related work
expenses. Impairment-related work
expenses are the allowable expenses
of an individual with physical or
mental disabilities for attendant care
at his or her place of employment.
They also include other expenses in
connection with the place of
employment that enable the employee
-4-
40
to work. See Pub. 463 for more
details.
If you qualify, enter the part of the
line 10 amount attributable to
impairment-related work expenses on
Schedule A (Form 1040), line 28 (or
Schedule A (Form 1040NR), line 14).
These expenses are not subject to the
2% limit that applies to most other
employee business expenses.
Part II—Vehicle Expenses
There are two methods for computing
vehicle expenses—the standard
mileage rate and the actual expense
method. You can use the standard
mileage rate for 2014 only if:
You owned the vehicle and used
the standard mileage rate for the first
year you placed the vehicle in service,
or
You leased the vehicle and are
using the standard mileage rate for
the entire lease period (except the
period, if any, before 1998).
You cannot use actual expenses
for a leased vehicle if you previously
used the standard mileage rate for
that vehicle.
If you have the option of using
either the standard mileage rate or
actual expense method, you should
figure your expenses both ways to
find the method most beneficial to
you. But when completing Form 2106,
fill in only the sections that apply to
the method you choose.
If you were a rural mail carrier and
received an equipment maintenance
allowance, see the line 1 instructions.
For more information on the
standard mileage rate and actual
expenses, see Pub. 463.
Section A—General Information
If you used two vehicles for business
during the year, use a separate
column in Sections A, C, and D for
each vehicle. If you used more than
two vehicles, complete and attach a
second Form 2106, page 2.
Line 11. Date placed in service is
generally the date you first start using
your vehicle. However, if you first start
using your vehicle for personal use
and later convert it to business use,
the vehicle is treated as placed in
service on the date you started using
it for business.
Instructions for Form 2106 (2014)
America Counts on CPAs.®
Line 12. Enter the total number of
miles you drove each vehicle during
2014.
Change from personal to
business use. If you converted your
vehicle during the year from personal
to business use (or vice versa) and
you do not have mileage records for
the time before the change to
business use, enter the total number
of miles driven after the change to
business use.
Line 13. Do not include commuting
miles on this line; commuting miles
are not considered business miles.
See the line 15 instructions below for
the definition of commuting.
Line 14. Divide line 13 by line 12 to
figure your business use percentage.
Change from personal to
business use. If you entered on
line 12 the total number of miles
driven after the change to business
use, multiply the percentage you
figured by the number of months you
drove the vehicle for business and
divide the result by 12.
Line 15. Enter your average daily
round trip commuting distance. If you
went to more than one work location,
figure the average.
Commuting. Generally,
commuting is travel between your
home and a work location. However,
travel that meets any of the following
conditions is not commuting.
You have at least one regular work
location away from your home and the
travel is to a temporary work location
in the same trade or business,
regardless of the distance. Generally,
a temporary work location is one
where your employment is expected
to last 1 year or less. See Pub. 463 for
more details.
The travel is to a temporary work
location outside the metropolitan area
where you live and normally work.
Your home is your principal place of
business under section 280A(c)(1)(A)
(for purposes of deducting expenses
for business use of your home) and
the travel is to another work location in
the same trade or business,
regardless of whether that location is
regular or temporary and regardless
of distance.
Line 16. If you do not know the total
actual miles you used your vehicle for
commuting during the year, figure the
amount to enter on line 16 by
multiplying the number of days during
the year that you used each vehicle
for commuting by the average daily
round trip commuting distance in
miles. However, if you converted your
vehicle during the year from personal
to business use (or vice versa), enter
your commuting miles only for the
period you drove your vehicle for
business.
Section B—Standard Mileage
Rate
You may be able to use the standard
mileage rate instead of actual
expenses to figure the deductible
costs of operating a passenger
vehicle, including a van, sport utility
vehicle (SUV), pickup, or panel truck.
If you want to use the standard
mileage rate for a vehicle you own,
you must do so in the first year you
place your vehicle in service. In later
years, you can deduct actual
expenses instead, but you must use
straight line depreciation.
If you lease your vehicle, you can
use the standard mileage rate, but
only if you use the rate for the entire
lease period (except for the period, if
any, before January 1, 1998).
If you use more than two vehicles,
complete and attach a second Form
2106, page 2, providing the
information requested in lines 11
through 22. Be sure to include the
amount from line 22 of both pages in
the total on Form 2106, line 1.
You can also deduct state and local
personal property taxes. Enter these
taxes on Schedule A (Form 1040),
line 7. (Personal property taxes are
not deductible on Form 1040NR.)
If you are claiming the standard
mileage rate for mileage driven in
more than one business activity, you
must figure the deduction for each
business on a separate form or
schedule (for example, Form 2106 or
Schedule C, C-EZ, E, or F).
Section C—Actual Expenses
Line 23. Enter your total annual
expenses for gasoline, oil, repairs,
insurance, tires, license plates, and
similar items. Do not include state and
local personal property taxes or
interest expense you paid. Deduct
state and local personal property
Instructions for Form 2106 (2014)
2014 – 2015 Income Tax Guide for State Legislators
taxes on Schedule A (Form 1040),
line 7. Employees cannot deduct car
loan interest.
Line 24a. If during 2014 you rented
or leased instead of using your own
vehicle, enter the cost of renting. Also,
include on this line any temporary
rentals, such as when your car was
being repaired, except for amounts
included on line 3.
Line 24b. If you leased a vehicle for a
term of 30 days or more, you may
have to reduce your deduction for
vehicle lease payments by an amount
called the inclusion amount. You may
have an inclusion amount for a
passenger automobile if:
Passenger Automobiles
(Except Trucks and Vans)
The lease term
began in:
And the vehicle's
fair market value on
the first day of the
lease exceeded:
2014 . . . . . . . . . . . . . . . . . .
$ 18,500
2010, 2011, or 2012 . . . . . . . .
18,500
2013 . . . . . . . . . . . . . . . . . .
19,000
If the lease term began before 2010, see Pub. 463
to find out if you have an inclusion amount.
You may have an inclusion amount
for a truck or van if:
Trucks and Vans
The lease term
began in:
And the vehicle's
fair market value on
the first day of the
lease exceeded:
2010, 2011, 2012, 2013, or
2014 . . . . . . . . . . . . . . . . . .
$ 19,000
See Pub. 463 to figure the inclusion
amount.
Line 25. If during 2014 your employer
provided a vehicle for your business
use and included 100% of its annual
lease value in box 1 of your Form
W-2, enter this amount on line 25. If
less than 100% of the annual lease
value was included in box 1 of your
Form W-2, skip line 25.
Line 28. If you completed Section D,
enter the amount from line 38. If you
used Form 4562 to figure your
depreciation deduction, enter the total
of the following amounts.
Depreciation allocable to your
vehicle(s) (from Form 4562, line 28).
Any section 179 deduction
allocable to your vehicle(s) (from
Form 4562, line 29).
-5-
41
Section D—Depreciation of
Vehicles
Depreciation is an amount you can
deduct to recover the cost or other
basis of your vehicle over a certain
number of years. In some cases, you
can elect to claim a special
depreciation allowance or to expense,
under section 179, part of the cost of
your vehicle in the year of purchase.
For details, see Pub. 463.
Vehicle trade-in. If you traded in
one vehicle (the “old vehicle”) for
another vehicle (the “new vehicle”) in
2014, there are two ways you can
treat the transaction.
1. You can elect to treat the
transaction as a tax-free disposition of
the old vehicle and the purchase of
the new vehicle. If you make this
election, you treat the old vehicle as
disposed of at the time of the trade-in.
The depreciable basis of the new
vehicle is the adjusted basis of the old
vehicle (figured as if 100% of the
vehicle's use had been for business
purposes) plus any additional amount
you paid for the new vehicle. You then
figure your depreciation deduction for
the new vehicle beginning with the
date you placed it in service. You
make this election by completing
Form 2106, Part II, Section D.
2. If you do not make the election
described in (1), you must figure
depreciation separately for the
remaining basis of the old vehicle and
for any additional amount you paid for
the new vehicle. You must apply two
depreciation limits. The limit that
applies to the remaining basis of the
old vehicle generally is the amount
that would have been allowed had you
not traded the old vehicle. The limit
that applies to the additional amount
you paid for the new vehicle generally
is the limit that applies for the tax year
it was placed in service, reduced by
the depreciation allowance for the
remaining basis of the old vehicle.
You must use Form 4562 to compute
your depreciation deduction. You
cannot use Form 2106, Part II,
Section D.
If you elect to use the method
described in (1), you must do so on a
timely filed tax return (including
extensions). Otherwise, you must use
the method described in (2).
Line 30. Enter the vehicle's actual
cost or other basis. Do not reduce
your basis by any prior year's
depreciation. However, you must
reduce your basis by any deductible
casualty loss, deduction for clean-fuel
vehicle, gas guzzler tax, alternative
motor vehicle credit, or qualified
plug-in electric vehicle credit you
claimed. Increase your basis by any
sales tax paid (unless you deducted
sales taxes in the year you purchased
your vehicle) and any substantial
improvements to your vehicle.
If you traded in your vehicle, your
basis is the adjusted basis of the old
vehicle (reduced by depreciation
figured as if 100% of the vehicle's use
had been for business purposes) plus
any additional amount you pay for the
new vehicle. See Pub. 463 for more
information.
If you converted the vehicle from
personal use to business use, your
basis for depreciation is the smaller of
the vehicle's adjusted basis or its fair
market value on the date of
conversion.
Line 31. Enter the amount of any
section 179 deduction and, if
applicable, any special depreciation
allowance claimed for this year.
Section 179 deduction. If 2014 is
the first year your vehicle was placed
in service and the percentage on
line 14 is more than 50%, you can
elect to deduct as an expense a
portion of the cost (subject to a yearly
limit). To calculate this section 179
deduction, multiply the part of the cost
of the vehicle that you choose to
expense by the percentage on line 14.
The total of your depreciation and
section 179 deduction generally
cannot be more than the percentage
on line 14 multiplied by the applicable
limit explained in the line 36
instructions. Your section 179
deduction for the year cannot be more
than the income from your job and any
other active trade or business on your
Form 1040.
If you are claiming a section
179 deduction on other
CAUTION
property, or you placed more
than $2,000,000 of section 179
property in service during the year,
use Form 4562 to figure your section
179 deduction. Enter the amount of
the section 179 deduction allocable to
your vehicle (from Form 4562, line 12)
on Form 2106, line 31.
!
-6-
42
Note. For section 179 purposes,
the cost of the new vehicle does not
include the adjusted basis of the
vehicle you traded in.
Example.
Cost including taxes
Adjusted basis of
trade-in . . . . . .
Section 179 basis
. . . .
$25,000
. . . . . . .
− 3,000
. . . . . .
$22,000
Limit on depreciation and
section 179 deduction . .
.
$11,160*
Smaller of:
Section 179 basis, or limit on
depreciation . . . . . . . . .
$11,160
Percentage on line 14
. . .
× .75
Section 179 deduction
. . .
$8,370
* $3,160 if electing out of special
depreciation allowance or not qualified
property.
Limit for sport utility and certain
other vehicles. For sport utility and
certain other vehicles placed in
service in 2014, the portion of the
vehicle's cost taken into account in
figuring your section 179 deduction is
limited to $25,000. This rule applies to
any 4-wheeled vehicle primarily
designed or used to carry passengers
over public streets, roads, or
highways that is not subject to any of
the passenger automobile limits
explained in the line 36 instructions
and is rated at no more than 14,000
pounds gross vehicle weight.
However, the $25,000 limit does not
apply to any vehicle:
Designed to have a seating
capacity of more than nine persons
behind the driver's seat,
Equipped with a cargo area of at
least 6 feet in interior length that is an
open area or is designed for use as an
open area but is enclosed by a cap
and is not readily accessible directly
from the passenger compartment, or
That has an integral enclosure, fully
enclosing the driver compartment and
load carrying device, does not have
seating rearward of the driver's seat,
and has no body section protruding
more than 30 inches ahead of the
leading edge of the windshield.
Special depreciation allowance.
The special depreciation allowance
applies only for the first year a new
vehicle is placed in service. To qualify
Instructions for Form 2106 (2014)
America Counts on CPAs.®
for the special depreciation
allowance, the new vehicle must be
qualified property (see Pub. 463,
chapter 4, for more information). The
special allowance is an additional first
year depreciation deduction of 50%.
Your total section 179 deduction,
special depreciation allowance, and
regular depreciation deduction cannot
be more than $11,160 for cars and
$11,460 for trucks and vans,
multiplied by your business use
percentage on line 14. See the line 36
instructions for depreciation limits.
You cannot recover the amount by
which your depreciation deduction
exceeds the depreciation limits for the
year placed in service until after the
end of the recovery period for your
vehicle.
Use the following worksheet to
figure the amount of the special
depreciation allowance.
Worksheet for the Special
Depreciation Allowance
(keep for your records)
1. Enter the total amount from
Form 2106, line 30 . . . .
2. Multiply line 1 by the
percentage on Form 2106,
line 14, and enter the
result . . . . . . . . . . . . .
3. Enter any section 179
deduction . . . . . . . .
4. Subtract line 3 from
line 2 . . . . . . . . .
. .
. . . .
5. Multiply the applicable limit
explained in the line 36
instructions by the
percentage on Form 2106,
line 14, and enter the
result . . . . . . . . . . . . .
6. Subtract line 3 from
line 5 . . . . . . . . .
. . . .
7. Enter the smaller of line 4
or line 6. Add the result to
any section 179 deduction
(line 3 above) and enter the
total on Form 2106,
line 31 . . . . . . . . . . . .
Election out. You can elect not to
claim the special depreciation
allowance for your vehicle. If you
make this election, it applies to all
property in the same class placed in
service during the year.
To make the election, attach a
statement to your timely filed return
(including extensions) indicating that
you are electing not to claim the
special depreciation allowance and
the class of property for which you are
making the election.
More information. See Pub. 463,
chapter 4, for more information on the
special depreciation allowance.
Line 32. To figure the basis for
depreciation, multiply line 30 by the
percentage on line 14. From that
result, subtract the total amount of any
section 179 deduction and special
depreciation allowance claimed this
year (see line 31) or any section 179
deduction and special depreciation
allowance claimed in any previous
year for this vehicle.
Line 33. If you used the standard
mileage rate in the first year the
vehicle was placed in service and now
elect to use the actual expense
method, you must use the straight line
method of depreciation for the
vehicle's estimated useful life.
Otherwise, use the following
Depreciation Method and Percentage
Chart to find the depreciation method
and percentage to enter on line 33.
To use the chart, first find the date
you placed the vehicle in service
(line 11). Then, select the
depreciation method and percentage
from column (a), (b), or (c). For
example, if you placed a car in service
on July 1, 2014, and you use the
method in column (a), enter “200 DB
20%” on line 33.
For vehicles placed in service
before 2014, use the same method
you used on last year's return unless a
decline in your business use requires
a change to the straight line method.
For vehicles placed in service during
2014, select the depreciation method
and percentage after reading the
explanation for each column.
Column (a)—200% declining
balance method. You can use
column (a) only if the business use
percentage on line 14 is more than
50%. Of the three depreciation
methods, the 200% declining balance
method may give you the largest
depreciation deduction for the first 3
years (after considering the
depreciation limit for your vehicle).
See the depreciation limit tables, later.
Column (b)—150% declining
balance method. You can use
Instructions for Form 2106 (2014)
2014 – 2015 Income Tax Guide for State Legislators
column (b) only if the business use
percentage on line 14 is more than
50%. The 150% declining balance
method may give you a smaller
depreciation deduction than in column
(a) for the first 3 years. However, you
will not have a “depreciation
adjustment” on this vehicle for the
alternative minimum tax. This may
result in a smaller tax liability if you
must file Form 6251, Alternative
Minimum Tax—Individuals.
Column (c)—straight line
method. You must use column (c) if
the business use percentage on
line 14 is 50% or less. The method for
these vehicles is the straight line
method over 5 years. The use of this
column is optional for these vehicles if
the business use percentage on
line 14 is more than 50%.
Note. If your vehicle was used more
than 50% for business in the year it
was placed in service and used 50%
or less in a later year, part of the
depreciation, section 179 deduction,
and special depreciation allowance
previously claimed may have to be
added back to your income in the later
year. Figure the amount to be
included in income in Part IV of Form
4797, Sales of Business Property.
More information. For more
information on depreciating your
vehicle, see Pub. 463.
If you placed other business
property in service in the
CAUTION
same year you placed your
vehicle in service or you used your
vehicle mainly within an Indian
reservation, you may not be able to
use the chart. See Pub. 946 to figure
your depreciation.
!
Line 34. If you sold or exchanged
your vehicle during the year, use the
following instructions to figure the
amount to enter on line 34.
If your vehicle was placed in
service:
1. Before 2009, enter the result of
multiplying line 32 by the percentage
on line 33;
2. After 2008, from January 1
through September 30, enter the
amount figured by multiplying the
result in (1) by 50%; or
3. After 2008, from October 1
through December 31, enter the
amount figured by multiplying the
-7-
43
Depreciation Method and Percentage Chart—Line 33
Date Placed in Service
(a)1
(b)1
Oct. 1 – Dec. 31, 2014
200 DB 5.0 %
150 DB 3.75%
SL 2.5%
Jan. 1 – Sept. 30, 2014
200 DB 20.0
150 DB 15.0
SL 10.0
Oct. 1 – Dec. 31, 2013
200 DB 38.0
150 DB 28.88
SL 20.0
Jan. 1 – Sept. 30, 2013
200 DB 32.0
150 DB 25.5
SL 20.0
Oct. 1 – Dec. 31, 2012
200 DB 22.8
150 DB 20.21
SL 20.0
Jan. 1 – Sept. 30, 2012
200 DB 19.2
150 DB 17.85
SL 20.0
Oct. 1 – Dec. 31, 2011
200 DB 13.68
150 DB 16.4
SL 20.0
Jan. 1 – Sept. 30, 2011
200 DB 11.52
150 DB 16.66
SL 20.0
Oct. 1 – Dec. 31, 2010
200 DB 10.94
150 DB 16.41
SL 20.0
Jan. 1 – Sept. 30, 2010
200 DB 11.52
150 DB 16.66
SL 20.0
Oct. 1 – Dec. 31, 2009
200 DB 9.58
150 DB 14.35
SL 17.5
Jan. 1 – Sept. 30, 2009
200 DB 5.76
150 DB 8.33
SL 10.0
Prior to 2009
(c)
2
You can use this column only if the business use of your car is more than 50%.
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 Pub. 463 for more information.
1
2
result in (1) by the percentage shown
below for the month you disposed of
the vehicle.
Month of Disposal
Jan., Feb., March
April, May, June
July, Aug., Sept.
Oct., Nov., Dec.
. . . .
. . . . .
. . . . .
. . . . .
Percentage
12.5%
37.5%
62.5%
87.5%
Line 36. Using the applicable chart
for your type of vehicle, find the date
you placed your vehicle in service.
Then, enter on line 36 the
corresponding amount from the “Limit”
column. Before using the charts,
please read the following definitions.
A passenger automobile is a
4-wheeled vehicle manufactured
primarily for use on public roads that
is rated at 6,000 pounds unloaded
gross vehicle weight or less. Certain
vehicles, such as ambulances,
hearses, and taxicabs, are not
considered passenger automobiles
and are not subject to the line 36
limits. See Pub. 463 for more details.
A truck or van is a passenger
automobile that is classified by the
manufacturer as a truck or van, and
that is rated at 6,000 pounds gross
vehicle weight or less.
If your vehicle is not subject to any
of the line 36 limits, skip lines 36 and
37, and enter the amount from line 35
on line 38.
Limits for Passenger Automobiles
(Except Trucks and Vans)
Date Vehicle Was
Placed in Service
Jan. 1 – Dec. 31, 2014
Jan. 1 – Dec. 31, 2013
Jan. 1 – Dec. 31, 2012
Each succeeding year
Limit
. .
$11,160*
5,100
. .
3,050
. .
1,875
. .
* If you elect not to claim the special
depreciation allowance for the vehicle or the
vehicle is not qualified property, the limit is
$3,160.
Limits for Trucks and Vans
Date Vehicle Was
Placed in Service
Jan. 1 – Dec. 31, 2014
Jan. 1 – Dec. 31, 2013
Jan. 1 – Dec. 31, 2012
Each succeeding year
Limit
. .
. .
. .
. .
$11,460*
5,500
3,350
1,975
* If you elect not to claim the special
depreciation allowance for the vehicle or the
vehicle is not qualified property, the limit is
$3,460.
Paperwork Reduction Act Notice.
For the Paperwork Reduction Act
-8-
44
Instructions for Form 2106 (2014)
America Counts on CPAs.®
Form
2106-EZ
Department of the Treasury
Internal Revenue Service (99)
Your name
OMB No. 1545-0074
Unreimbursed Employee Business Expenses
2014
Attach to Form 1040 or Form 1040NR.
Information about Form 2106 and its separate instructions is available at www.irs.gov/form2106.
▶
▶
Attachment
Sequence No.
Social security number
Occupation in which you incurred expenses
129A
You Can Use This Form Only if All of the Following Apply.
• You are an employee deducting ordinary and necessary expenses attributable to your job. An ordinary expense is one that is
common and accepted in your field of trade, business, or profession. A necessary expense is one that is helpful and appropriate for
your business. An expense does not have to be required to be considered necessary.
• You do not get reimbursed by your employer for any expenses (amounts your employer included in box 1 of your Form W-2 are not
considered reimbursements for this purpose).
• If you are claiming vehicle expense, you are using the standard mileage rate for 2014.
Caution: You can use the standard mileage rate for 2014 only if: (a) you owned the vehicle and used the standard mileage rate for the first year
you placed the vehicle in service, or (b) you leased the vehicle and used the standard mileage rate for the portion of the lease period after 1997.
Part I
Figure Your Expenses
1
Complete Part II. Multiply line 8a by 56¢ (.56). Enter the result here .
2
Parking fees, tolls, and transportation, including train, bus, etc., that did not involve overnight
travel or commuting to and from work . . . . . . . . . . . . . . . . . . .
2
Travel expense while away from home overnight, including lodging, airplane, car rental, etc. Do
not include meals and entertainment . . . . . . . . . . . . . . . . . . . .
3
Business expenses not included on lines 1 through 3. Do not include meals and
entertainment . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Meals and entertainment expenses: $
× 50% (.50). (Employees subject to
Department of Transportation (DOT) hours of service limits: Multiply meal expenses incurred
while away from home on business by 80% (.80) instead of 50%. For details, see instructions.)
5
Total expenses. Add lines 1 through 5. Enter here and on Schedule A (Form 1040), line 21 (or
on Schedule A (Form 1040NR), line 7). (Armed Forces reservists, fee-basis state or local
government officials, qualified performing artists, and individuals with disabilities: See the
instructions for special rules on where to enter this amount.) . . . . . . . . . . . .
6
3
4
5
6
Part II
.
.
.
.
.
.
.
.
1
.
Information on Your Vehicle. Complete this part only if you are claiming vehicle expense on line 1.
7
When did you place your vehicle in service for business use? (month, day, year) ▶
8
Of the total number of miles you drove your vehicle during 2014, enter the number of miles you used your vehicle for:
a
Business
/
b Commuting (see instructions)
/
c
Other
.
.
.
.
.
.
.
.
.
.
.
.
Yes
No
10
Do you (or your spouse) have another vehicle available for personal use? .
.
.
.
.
.
.
.
.
.
.
.
Yes
No
11a
Do you have evidence to support your deduction?
.
.
.
.
.
.
.
.
.
.
.
Yes
No
.
.
.
.
.
.
.
.
.
.
.
Yes
No
9
Was your vehicle available for personal use during off-duty hours? .
b If “Yes,” is the evidence written? .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
For Paperwork Reduction Act Notice, see your tax return instructions.
2014 – 2015 Income Tax Guide for State Legislators
.
Cat. No. 20604Q
Form 2106-EZ (2014)
45
Page 3
Form 2106-EZ (2014)
Instructions for
Form 2106-EZ
Section references are to the Internal
Revenue Code.
What’s New
Standard mileage rate. The 2014 rate for
business use of your vehicle is 56 cents a
mile.
Purpose of Form
You can use Form 2106-EZ instead of
Form 2106 to claim your unreimbursed
employee business expenses if you meet
all the requirements listed above Part I of
the form.
Recordkeeping
You cannot deduct expenses for travel
(including meals, unless you used the
standard meal allowance), entertainment,
gifts, or use of a car or other listed
property, unless you keep records to prove
the time, place, business purpose,
business relationship (for entertainment
and gifts), and amounts of these expenses.
Generally, you must also have receipts for
all lodging expenses (regardless of the
amount) and any other expense of $75 or
more.
Additional Information
For more details about employee business
expenses, see:
Pub. 463, Travel, Entertainment, Gift, and
Car Expenses
Pub. 529, Miscellaneous Deductions
Pub. 587, Business Use of Your Home
(Including Use by Daycare Providers)
Pub. 946, How To Depreciate Property
Specific Instructions
Part I—Figure Your
Expenses
Line 2. See the line 8b instructions for the
definition of commuting.
Line 3. Enter lodging and transportation
expenses connected with overnight travel
away from your tax home (defined on this
page). You generally cannot deduct
expenses for travel away from your tax
home for any period of temporary
employment of more than 1 year. Do not
include expenses for meals and
entertainment on this line. For more details,
including limits, see Pub. 463.
If you did not pay or incur meal expenses
on a day you were traveling away from your
tax home, you can use an optional method
for deducting incidental expenses instead
of keeping records of your actual incidental
expenses. The amount of the deduction is
$5 a day. The term "incidental expenses"
means fees and tips given to porters,
baggage carriers, hotel staff, and staff on
ships. It does not include expenses for
laundry, cleaning and pressing of clothing,
lodging taxes, costs of telegrams or
46
telephone calls, transportation between
places of lodging or business and places
where meals are taken, or the mailing cost
of filing travel vouchers and paying
employer-sponsored charge card billings.
You cannot use this method on any day
that you use the standard meal allowance
(as explained in the instructions for line 5).
Tax home. Generally, your tax home is
your regular or main place of business or
post of duty regardless of where you
maintain your family home. If you do not
have a regular or main place of business
because of the nature of your work, then
your tax home may be the place where you
regularly live. If you do not fit in either of
these categories, you are considered an
itinerant and your tax home is wherever
you work. As an itinerant, you are never
away from home and cannot claim a travel
expense deduction. For more information
about determining your tax home, see Pub.
463.
Line 4. Enter other job-related expenses
not listed on any other line of this form.
Include expenses for business gifts,
education (tuition, fees, and books), home
office, trade publications, etc. For details,
including limits, see Pub. 463 and Pub.
529.
If you are deducting home office
expenses, see Pub. 587 for special
instructions on how to report these
expenses.
If you are deducting depreciation or
claiming a section 179 deduction, see
Form 4562, Depreciation and Amortization,
to figure the depreciation and section 179
deduction to enter on line 4.
Do not include on line 4 any (a) educator
expenses you deducted on Form 1040, line
23, or Form 1040NR, line 24, or (b) any
tuition and fees you deducted on Form
1040, line 34.
TIP
You may be able to take a credit
for your educational expenses
instead of a deduction. See
Form 8863, Education Credits, for details.
Do not include expenses for meals and
entertainment, taxes, or interest on line 4.
Deductible taxes are entered on Schedule
A (Form 1040), lines 5 through 9; Schedule
A (Form 1040NR), line 1. Employees cannot
deduct car loan interest.
Note. If line 4 is your only entry, do not
complete Form 2106-EZ unless you are
claiming:
• Expenses for performing your job as a
fee-basis state or local government official,
• Performing-arts-related business
expenses as a qualified performing artist,
or
• Impairment-related work expenses as an
individual with a disability.
See the line 6 instructions, below, for
definitions. If you are not required to file
Form 2106-EZ, enter your expenses
directly on Schedule A (Form 1040), line 21
(or on Schedule A (Form 1040NR), line 7).
Line 5. Generally, you can deduct only
50% of your business meal and
entertainment expenses, including meals
incurred while away from home on
business. If you were an employee subject
to the DOT hours of service limits, that
percentage is 80% for business meals
consumed during, or incident to, any
period of duty for which those limits are in
effect.
Employees subject to the DOT hours of
service limits include certain air
transportation employees, such as pilots,
crew, dispatchers, mechanics, and control
tower operators; interstate truck operators
and interstate bus drivers; certain railroad
employees, such as engineers, conductors,
train crews, dispatchers, and control
operations personnel; and certain
merchant mariners.
Instead of actual cost, you may be able
to claim the standard meal allowance for
your daily meals and incidental expenses
(M&IE) while away from your tax home
overnight. Under this method, instead of
keeping records of your actual meal
expenses, you deduct a specified amount,
depending on where you travel. However,
you must still keep records to prove the
time, place, and business purpose of your
travel.
The standard meal allowance is the
federal M&IE rate. For most small localities
in the United States, this rate is $46 a day.
Most major cities and many other localities
in the United States qualify for higher rates.
You can find these rates at www.gsa.gov/
perdiem.
For locations outside the continental
United States, the applicable rates are
published each month. You can find these
rates at www.state.gov/travel/ and select
the option for “Foreign Per Diem Rates.”
See Pub. 463 for details on how to figure
your deduction using the standard meal
allowance, including special rules for partial
days of travel and for transportation
workers.
Line 6. If you are one of the individuals
discussed below, special rules apply to
deducting your employee business
expenses.
Ministers. Before entering your total
expenses on line 6, you must reduce them
by the amount allocable to your tax-free
allowance(s). See Pub. 517 for more
information.
Armed Forces reservist (member of a
reserve component). You are a member
of a reserve component of the Armed
Forces of the United States if you are in the
Army, Navy, Marine Corps, Air Force, or
Coast Guard Reserve; the Army National
Guard of the United States; the Air
National Guard of the United States; or
the Reserve Corps of the Public Health
Service.
America Counts on CPAs.®
SCHEDULE A
(Form 1040)
OMB No. 1545-0074
Itemized Deductions
Department of the Treasury
Internal Revenue Service (99)
▶ Information
about Schedule A and its separate instructions is at www.irs.gov/schedulea.
▶ Attach to Form 1040.
Name(s) shown on Form 1040
Medical
and
Dental
Expenses
Taxes You
Paid
Interest
You Paid
Note.
Your mortgage
interest
deduction may
be limited (see
instructions).
Caution. Do not include expenses reimbursed or paid by others.
1 Medical and dental expenses (see instructions) . . . . .
1
2 Enter amount from Form 1040, line 38
2
3 Multiply line 2 by 10% (.10). But if either you or your spouse was
3
born before January 2, 1950, multiply line 2 by 7.5% (.075) instead
4 Subtract line 3 from line 1. If line 3 is more than line 1, enter -0- . .
5 State and local (check only one box):
a
Income taxes, or
. . . . . . . . . . .
5
b
General sales taxes
6 Real estate taxes (see instructions) . . . . . . . . .
6
7 Personal property taxes . . . . . . . . . . . . .
7
8 Other taxes. List type and amount ▶
8
9 Add lines 5 through 8 . . . . . . . . . . . . . . . .
10 Home mortgage interest and points reported to you on Form 1098 10
11 Home mortgage interest not reported to you on Form 1098. If paid
to the person from whom you bought the home, see instructions
and show that person’s name, identifying no., and address ▶
2014
Attachment
Sequence No. 07
Your social security number
.
.
.
.
.
.
4
.
.
.
.
.
.
9
.
.
.
.
.
.
15
.
.
.
.
.
.
19
}
11
12 Points not reported to you on Form 1098. See instructions for
special rules . . . . . . . . . . . . . . . . .
12
13 Mortgage insurance premiums (see instructions) . . . . .
13
14 Investment interest. Attach Form 4952 if required. (See instructions.) 14
15 Add lines 10 through 14 . . . . . . . . . . . . . . .
Gifts to
16 Gifts by cash or check. If you made any gift of $250 or more,
see instructions . . . . . . . . . . . . . . . .
16
Charity
17 Other than by cash or check. If any gift of $250 or more, see
If you made a
gift and got a
instructions. You must attach Form 8283 if over $500 . . .
17
benefit for it,
18 Carryover from prior year . . . . . . . . . . . .
18
see instructions.
19 Add lines 16 through 18 . . . . . . . . . . . . . . .
Casualty and
Theft Losses 20 Casualty or theft loss(es). Attach Form 4684. (See instructions.) . . . . . . . .
Job Expenses 21 Unreimbursed employee expenses—job travel, union dues,
and Certain
job education, etc. Attach Form 2106 or 2106-EZ if required.
Miscellaneous
21
(See instructions.) ▶
Deductions
22 Tax preparation fees . . . . . . . . . . . . .
22
20
23 Other expenses—investment, safe deposit box, etc. List type
and amount ▶
Other
Miscellaneous
Deductions
24
25
26
27
28
23
Add lines 21 through 23 . . . . . . . . . . . .
24
Enter amount from Form 1040, line 38 25
Multiply line 25 by 2% (.02) . . . . . . . . . . .
26
Subtract line 26 from line 24. If line 26 is more than line 24, enter -0- .
Other—from list in instructions. List type and amount ▶
.
.
.
.
.
27
28
29 Is Form 1040, line 38, over $152,525?
Total
Itemized
No. Your deduction is not limited. Add the amounts in the far right column
for lines 4 through 28. Also, enter this amount on Form 1040, line 40.
Deductions
}
.
Yes. Your deduction may be limited. See the Itemized Deductions
Worksheet in the instructions to figure the amount to enter.
30 If you elect to itemize deductions even though they are less than your standard
deduction, check here . . . . . . . . . . . . . . . . . . . ▶
For Paperwork Reduction Act Notice, see Form 1040 instructions.
2014 – 2015 Income Tax Guide for State Legislators
Cat. No. 17145C
.
29
Schedule A (Form 1040) 2014
47
lcpa.org • 800.288.5272
48
America Counts on CPAs.®
My family is my No. 1 concern. College, retirement,
health care — I need someone who knows the
financial and tax implications of each … and
can help me make the right decisions.
A CPA spends years preparing for
moments just like these.
For tax and financial advice based on unmatched
knowledge, experience and education, ask a CPA.
Graduated from college, often with 150 semester
hours and a master’s in finance or accounting
•
Passed the demanding CPA Exam
•
Licensed by a state to practice
•
Dedicated to CPA ethical standards
•
Committed to 120 hours of continuing professional
education every three years
Visit 360taxes.org/CPA for more information
Copyright © 2013 American Institute of CPAs. All rights reserved.
2400 Veterans Memorial Blvd., Suite 500
Kenner, LA 70062-4739
800.288.5272 | 504.464.1040
lcpa.org | facebook.com/lcpa.org
14378B-312
•