Publication 463 - Introductory Material
What's New
Standard mileage rate. For 2007, the standard mileage rate for the cost of operating your car for business use is 48½ cents per mile. Car expenses and use of the standard mileage rate are explained in chapter 4.
Limit on depreciation and section 179 deduction. For 2007, the first-year limit on depreciation and section 179 deduction for most vehicles has increased to $3,060. For trucks and vans, the first-year limit remains $3,260. There is no longer a higher limit for electric cars. Depreciation limits are explained in chapter 4.
Introduction
You may be able to deduct the ordinary and necessary business-related expenses you have for:
- Travel,
- Entertainment,
- Gifts, or
- Transportation.
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.
This publication explains:
- What expenses are deductible,
- How to report them on your return,
- What records you need to prove your expenses, and
- How to treat any expense reimbursements you may receive.
Who should use this publication
You should read this publication if you are an employee or a sole proprietor who has business-related travel, entertainment, gift, or transportation expenses. Users of employer-provided vehicles. If an employer-provided vehicle was available for your use, you received a fringe benefit. Generally, your employer must include the value of the use or availability in your income as pay. However, there are exceptions if the use of the vehicle qualifies as a working condition fringe benefit (such as the use of a qualified nonpersonal use vehicle). A working condition fringe benefit is any property or service provided to you by your employer for which you could deduct the cost as an employee business expense if you had paid for it. A qualified nonpersonal use vehicle is one that is not likely to be used more than minimally for personal purposes because of its design. See Qualified nonpersonal use vehicles under Actual Car Expenses in chapter 4. For information on how to report your car expenses that your employer did not provide or reimburse you for (such as when you pay for gas and maintenance for a car your employer provides), see Vehicle Provided by Your Employer in chapter 6.
Who does not need to use this publication
Partnerships, corporations, trusts, and employers who reimburse their employees for business expenses should refer to their tax form instructions and chapter 11 of Publication 535, Business Expenses, for information on deducting travel, meals, and entertainment expenses. If you are an employee, you will not need to read this publication if all of the following are true.
- You fully accounted to your employer for your work-related expenses.
- You received full reimbursement for your expenses.
- Your employer required you to return any excess reimbursement and you did so.
- There is no amount shown with a code “L” in box 12 of your Form W-2, Wage and Tax Statement.
Volunteers
If you perform services as a volunteer worker for a qualified charity, you may be able to deduct some of your costs as a charitable contribution. See Out-of-Pocket Expenses in Giving Services in Publication 526, Charitable Contributions, for information on the expenses you can deduct.
Comments and suggestions
We welcome your comments about this publication and your suggestions for future editions. You can write to us at the following address:
Internal Revenue Service
Individual Forms and Publications Branch
SE:W:CAR:MP:T:I
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224
Ordering forms and publications
Visit www.irs.gov/formspubs to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received.
National Distribution Center
P.O. Box 8903
Bloomington, IL 61702-8903
Tax questions
If you have a tax question, check the information available on www.irs.gov or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.
Useful Items - You may want to see:
Publication
- 225 Farmer's Tax Guide
- 529 Miscellaneous Deductions
- 535 Business Expenses
- 946 How To Depreciate Property
- 1542 Per Diem Rates
Form (and Instructions)
- Schedule A (Form 1040)
Itemized Deductions - Schedule C (Form 1040)
Profit or Loss From Business - Schedule C-EZ (Form 1040)
Net Profit From Business - Schedule F (Form 1040)
Profit or Loss From Farming - 2106
Employee Business Expenses - 2106-EZ
Unreimbursed Employee Business Expenses - 4562
Depreciation and Amortization
See chapter 7, How To Get Tax Help, for information about getting these publications and forms.
