Employee Business Expenses
Standard mileage rate. If you use your
car in your business, you can figure your deduction for business use based
on either your actual costs or the optional standard mileage rate. For
1998, the optional standard mileage rate for the cost of operating your
car in your business is 32.5 cents a mile for all business miles.
Rate extended to leased cars.
You can now use the standard mileage rate for a car you lease, as well
as a car you own. Previously, you could only use actual car expenses if
you did not own the car.
Rural mail carriers. Beginning
in 1998, the higher standard mileage rate for rural mail carriers (U.S.
Postal Service employees with rural routes) is repealed. If you are a rural
mail carrier, you may be able to treat the amount of qualified reimbursement
you received in 1998 as the amount of your allowable expense.
If
you are a rural mail carrier who received a qualified reimbursement, you
cannot use the standard mileage rate.
Business car expenses and reimbursements are covered in Publication
463, Travel, Entertainment, Gift, and Car Expenses.
Depreciation limits on business cars. The
total section 179 deduction and depreciation you can take on a car you
use in your business and first place in service in 1998 cannot exceed $3,160.
Your depreciation cannot exceed $5,000 for the second year of recovery,
$2,950 for the third year of recovery, and $1,775 for each later tax year.
Business car expenses are discussed in chapter 4 of Publication
463.
Exceptions for clean-fuel cars. There
are two exceptions to the depreciation limits.
- The first exception is for a car that was produced to run primarily
on electricity and that you place in service in 1998. For this type of
car the depreciation limit is increased as shown below.
a) $9,380 for the first year of recovery.
b) $15,000 for the second year of recovery.
c) $8,950 for the third year of recovery.
d) $5,425 for each later tax year.
- The second exception is for costs you pay to retrofit parts and
components to modify a car to run on clean fuel. These costs are not subject
to the limits on depreciation for cars. Only the cost of the car excluding
this modification is subject to the limit. This exception applies to modifications
you place in service after August 5, 1997.
For more information on clean-fuel vehicles, see chapter 15 in Publication
535, Business Expenses.
Increases to section 179 deduction.
The total cost of section 179 property that you can elect to deduct for
1998 is increased from $18,000 to $18,500. For tax years after 1998, this
amount increases as shown below.
| Tax Year |
Maximum Deduction
|
| 1999.................................. |
$19,000 |
| 2000.................................. |
20,000 |
| 2001 and 2002.................. |
24,000 |
| After 2002........................ |
25,000 |
For more information on the section 179 deduction, see chapter 2 in
Publication 946, How To Depreciate
Property.
Meal expenses when subject to hours of service
limits. Generally, you can deduct only 50% of your business-related
meal expenses while traveling away from your tax home for business purposes.
Beginning in 1998, you can deduct a higher percentage if the meals take
place during or incident to any period subject to the Department of Transportation's
hours of service limits. (These limits apply to certain workers who are
under certain federal regulations.) The percentage is 55% for 1998 and
1999, and it gradually increases to 80% by the year 2008.
Business meal expenses are covered in chapter 1 of Publication
463.
Sale of Your Home
Form 2119, Sale of Your
Home, is obsolete beginning in 1998.
Report the sale of your main home on your tax return only if you
have a gain and at least part of it is taxable. Report any taxable gain
on Schedule D (Form 1040), Capital
Gains and Losses. For more information, see Publication
523, Selling Your Home.
Exclusion of Gain From Sales of Small Business
Stock
Beginning in 1998, you may have to pay tax on only one-half of your
gain from the sale or exchange of qualified small business stock. This
applies only to stock originally issued after August 10, 1993, and held
by you for more than 5 years.
For more information, see Gains on Qualified Small Business Stock
in chapter 4 of Publication 550.
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