Introduction

You may be able to deduct the ordinary and necessary business-related expenses you have for:

• Travel away from home,
• Entertainment,
• Gifts, or
• Local 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 indispensable 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 these business-related expenses that may be deductible. Other businesses (such as partnerships, corporations, and trusts) and employers who reimburse their employees for business expenses should refer to their tax form instructions and chapter 13 of Publication 535, Business Expenses, for information on deducting travel, entertainment, and transportation expenses.

Who does not need to use this publication. You will not need to read this publication if all of the following are true.

1. You fully accounted to your employer for your work-related expenses.
2. You received full reimbursement for your expenses.
3. Your employer required you to return any excess reimbursement and you did so.
4. Box 13 of your Form W-2, Wage and Tax Statement, shows no amount with a code L.

If you meet these four conditions, there is no need to show the expenses or the reimbursements on your return. If you would like more information on reimbursements and accounting to your employer, see chapter 6.

If you meet these conditions and your employer included reimbursements on your Form W-2 in error, ask your employer for a corrected Form W-2.

If you do not meet all of these conditions, you generally must complete Form 2106 or 2106-EZ and itemize your deductions on Schedule A (Form 1040) to claim your expenses. See chapter 6.

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.

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). Employers should see Publication 15-B, Employer's Tax Guide to Fringe Benefits, for information on fringe benefits.

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.

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.

Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions.

You can e-mail us while visiting our web site at www.irs.gov/help/email2.html.

You can write to us at the following address:

Internal Revenue Service
Technical Publications Branch
W:CAR:MP:FP:P
1111 Constitution Ave. NW
Washington, DC 20224

We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

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