Miscellaneous Expenses

In addition to travel, meal, and entertainment expenses, there are other expenses you can deduct. This section briefly covers some of these expenses (listed in alphabetical order).

Advertising expenses.   You generally can deduct reasonable advertising expenses if they relate to your business activities. Generally, you cannot deduct the cost of advertising to influence legislation. See Lobbying expenses, later.

You can usually deduct as a business expense the cost of institutional or good will advertising to keep your name before the public if it relates to business you reasonably expect to gain in the future. For example, the cost of advertising that encourages people to contribute to the Red Cross, to buy U.S. Saving Bonds, or to participate in similar causes is usually deductible.

Foreign expenses.   You cannot deduct the costs of advertising on foreign radio and television (including cable) where the advertising is primarily for a market in the United States. However, this rule only applies to advertising expenses in countries that deny a deduction for advertising on a United States broadcast primarily for that country's market.

Anticipated liabilities.   Anticipated liabilities or reserves for anticipated liabilities are not deductible. For example, assume you sold 1-year TV service contracts this year totaling $50,000. From experience, you know you will have expenses of about $15,000 in the coming year for these contracts. You cannot deduct any of the $15,000 this year by charging expenses to a reserve or liability account. You can deduct your expenses only when you actually pay or accrue them, depending on your accounting method.

Black lung benefit trust contributions.   If you, as a coal mine operator, make a contribution to a qualified black lung benefit trust, you may be able to deduct your contribution. To deduct it, you must make your contribution during the tax year or pay it to the trust by the due date for filing your federal income tax return (including extensions). You must make the contribution in cash or in property the trust is permitted to hold.

Figure your allowable deduction for contributions to a black lung benefit trust on Schedule A of Form 6069.

Bribes and kickbacks.   You cannot deduct bribes, kickbacks, or similar payments if they are either of the following.

1. Payments directly or indirectly to an official or employee of any government or an agency or instrumentality of any government in violation of the law. If the government is a foreign government, the payments are not deductible if they are unlawful under the Foreign Corrupt Practices Act of 1977.
2. Payments directly or indirectly to a person in violation of any federal or state law (but only if that state law is generally enforced) that provides for a criminal penalty or for the loss of a license or privilege to engage in a trade or business.

Meaning of generally enforced.   A state law is considered generally enforced unless it is never enforced or enforced only for infamous persons or persons whose violations are extraordinarily flagrant. For example, a state law is generally enforced unless proper reporting of a violation of the law results in enforcement only under unusual circumstances.

Kickbacks.   A kickback includes a payment for referring a client, patient, or customer. The common kickback situation occurs when money or property is given to someone as payment for influencing a third party to purchase from, use the services of, or otherwise deal with the person who pays the kickback. In many cases, the person whose business is being sought or enjoyed by the person who pays the kickback does not know of the payment.

Example 1.   Mr. Green, an insurance broker, pays part of the insurance commissions he earns to car dealers who refer insurance customers to him. The car dealers are not licensed to sell insurance. Mr. Green cannot deduct these payments if they are in violation of any federal or state law as explained previously in (2) under Bribes and kickbacks.

Example 2.   The Yard Corporation is in the business of repairing ships. It returns 10% of the repair bills as kickbacks to the captains and chief officers of vessels it repairs. It considers kickbacks necessary to get business. The owners of the ships do not know of these payments.

In the state where the corporation operates, it is unlawful to attempt to influence the actions of any employee, private agent, or fiduciary in relation to the principal's or employer's affairs by giving or offering anything of value without the knowledge and consent of the principal or employer. The state generally enforces the law. The kickbacks paid by the Yard Corporation are not deductible.

Medicare or Medicaid.   Kickbacks, bribes, and rebates paid in Medicare or Medicaid programs are not deductible.

Form 1099-MISC.   If you pay kickbacks during your tax year, whether or not they are deductible on your income tax return, you may have to report them on an information return, Form 1099-MISC. For more information about when to file Form 1099-MISC, see the General Instructions for Forms 1099, 1098, 5498, and W-2G.

Car and truck expenses.   You can deduct the costs of operating a car, truck, or other vehicle in your business. These costs include gas, oil, repairs, license tags, insurance, and depreciation. Only the expenses for business use are deductible. Traveling between your home and your place of business is usually not business use.

Under certain conditions, you can use the standard mileage rate instead of deducting the actual expenses for your vehicle. The standard mileage rate for the cost of operating your car, van, pickup, or panel truck in 2002 is 36½ cents a mile for all business miles. For more information on how to figure your deduction, see Publication 463.

Charitable contributions.   Cash payments to charitable, religious, educational, scientific, or similar organizations may be deductible as business expenses if the payments are not charitable contributions or gifts. If the payments are charitable contributions or gifts, you cannot deduct them as business expenses. However, corporations (other than S corporations) can deduct charitable contributions on their income tax returns. See Charitable Contributions in Publication 542 for more information. Sole proprietors, partners in a partnership, or shareholders in an S corporation may be able to deduct charitable contributions made by their business on Schedule A (Form 1040).

Example.   You paid $15 to a local church for a half-page ad in a program for a concert it is sponsoring. The purpose of the ad was to encourage readers to buy your products. Since your payment is not a contribution, you cannot deduct it as such. However, you can deduct it as an advertising expense.

Inventory.   If you contribute inventory (property you sell in the course of your business), the amount you can claim as a contribution deduction is the smaller of its fair market value on the day you contributed it or its basis. The basis of donated inventory is any cost incurred for the inventory in an earlier year that you would otherwise include in your opening inventory for the year of the contribution. You must remove the amount of your contribution deduction from your opening inventory. It is not part of the cost of goods sold.

If the cost of donated property is not included in your opening inventory, the property's basis is zero and you cannot claim a charitable contribution deduction. Treat the property's cost as you would ordinarily treat it under your method of accounting. For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year.

A corporation (other than an S corporation) can deduct its basis in the property plus one-half of the gain that would have been realized if the property had been sold at its fair market value on the date of contribution. But the deduction cannot be more than twice the property's basis. For more information on the charitable contribution of property by a corporation, see section 170(e)(3) of the Internal Revenue Code.

Example 1.   You own an auto repair shop and in 2002 you donated auto parts to your local school for its auto repair class. The fair market value of the parts at the time of the contribution was $600 and you had included $400 for the parts in your opening inventory for 2002. Your charitable contribution is $400. You reduce your opening inventory by the $400 for the donated property.

Example 2.   Assume the same facts as Example 1, except you purchased the auto parts in 2002 for $400 (not part of the opening inventory). The $400 is included as part of the cost of goods sold for 2002 but not in figuring the basis of the property. Your charitable contribution is $0.

Club dues and membership fees.   Generally, you cannot deduct amounts you pay or incur for membership in any club organized for business, pleasure, recreation, or any other social purpose. This includes country clubs, golf and athletic clubs, hotel clubs, sporting clubs, airline clubs, and clubs operated to provide meals under circumstances generally considered to be conducive to business discussions.

Exception.   None of the following organizations will be treated as a club organized for business, pleasure, recreation, or other social purpose unless one of the main purposes is to conduct entertainment activities for members or their guests or to provide members or their guests with access to entertainment facilities.

• Boards of trade.
• Business leagues.
• Chambers of commerce.
• Civic or public service organizations.
• Professional organizations such as bar associations and medical associations.
• Real estate boards.
• Trade associations.

Damages recovered.   Special rules apply to compensation you receive for damages sustained as a result of patent infringement, breach of contract or fiduciary duty, or antitrust violations. You must include this compensation in your income. However, you may be able to take a special deduction. The deduction applies only to amounts recovered for actual injury, not any additional amount. The deduction is the smaller of the following.

• The amount you received or accrued for damages in the tax year reduced by the amount you paid or incurred in the year to recover that amount.
• Your losses from the injury you have not deducted.

Demolition expenses or losses.   You cannot deduct any amount paid or incurred to demolish a structure or any loss for the undepreciated basis of a demolished structure. Add these amounts to the basis of the land where the demolished structure was located.

Depreciation.   If property you buy to use in your business has a useful life substantially beyond the year it is placed in service, you generally cannot deduct the entire cost as a business expense in the year you buy it. You must spread the cost over more than one tax year and deduct part of it each year. This method of deducting the cost of business property is called depreciation.

However, you may be able to elect to deduct a limited amount of the cost of certain depreciable property in the year you place it in service in your business. This deduction is known as the section 179 deduction.

For information on depreciation and the section 179 deduction, see Publication 946.

Donations to business organizations.   You can deduct donations to business organizations as business expenses if all the following conditions are met.

• The donation relates directly to your trade or business.
• You reasonably expect a financial return in line with your donation.
• The donation is not a nondeductible lobbying expense as discussed later under Lobbying expenses.

For example, a donation you make to a committee organized by the Chamber of Commerce to bring a national convention to your city may be deductible.

Education expenses.   You can deduct the ordinary and necessary expenses you pay for the education and training of your employees. For more information, see Education Expenses in chapter 2.

You can also deduct your own education expenses (including certain related travel) related to your trade or business. You must be able to show the education maintains or improves skills required in your trade or business, or it is required by your employer, or by law or regulations, for keeping your pay, status, or job.

You cannot deduct education expenses you incur to meet the minimum requirements of your present trade or business, or those that qualify you for a new trade or business. This is true even if the education maintains or improves skills presently required in your business. For more information on education expenses, see Publication 508.

Example 1.   Dr. Carter, who is a psychiatrist, begins a program of study at an accredited psychoanalytic institute to qualify as a psychoanalyst. She can deduct the cost of the program because the study maintains or improves skills required in her profession and does not qualify her for a new one.

Example 2.   Herb Jones owns a repair shop for electronic equipment. The bulk of the business is television repairs, but occasionally he fixes tape decks and disc players. To keep up with the latest technical changes, he takes a special course to learn how to repair disc players. Since the course maintains and improves skills required in his trade, he can deduct its cost.

Environmental cleanup costs.   You can deduct certain costs to clean up land and to treat groundwater you contaminated with hazardous waste from your business operations. You can deduct the costs you incur to restore your land and groundwater to the same physical condition that existed prior to contamination. You cannot deduct costs for the construction of groundwater treatment facilities. You must capitalize those costs and you can recover them through depreciation.

Franchise, trademark, trade name.   If you buy a franchise, trademark, or trade name, you can deduct the amount you pay or incur as a business expense only if your payments are part of a series of payments that are:

1. Contingent on productivity, use, or disposition of the item,
2. Payable at least annually for the entire term of the transfer agreement, and
3. Substantially equal in amount (or payable under a fixed formula).

When determining the term of the transfer agreement, include all renewal options and any other period for which you and the transferor reasonably expect the agreement to be renewed.

A franchise includes an agreement that gives one of the parties to the agreement the right to distribute, sell, or provide goods, services, or facilities within a specified area.

Property acquired after August 10, 1993 (or after July 25, 1991, if elected).   Any amounts you pay or incur that are not described in (1) through (3) must be charged to a capital account. These are section 197 intangibles and are amortized over 15 years. See chapter 9 for more information on amortization.

You can elect to apply this treatment to any franchise, trademark, or trade name acquired after July 25, 1991. This election is binding and cannot be revoked without approval of the IRS.

Property acquired before August 11, 1993.   For a transfer not treated as a sale or exchange of a capital asset, you can deduct a lump-sum payment of an agreed upon principal amount ratably over the shorter of the following.

• 10 years.
• The period of the transfer agreement.

For a transfer not treated as a sale or exchange of a capital asset, you can deduct, in the year made, a payment that is one of a series of approximately equal payments payable over either of the following.

• The period of the transfer agreement.
• A period of more than 10 years, regardless of the period of the agreement.

The above business deductions do not apply to transfers after October 2, 1989, and before August 11, 1993, if the principal sum is over $100,000.

Charge any payment not deductible because of these rules to a capital account. However, you can deduct the payments charged to a capital account over the life of the asset if you can determine the useful life of the asset. Otherwise, you can choose to amortize the payment over a 25-year period beginning with the tax year the transfer occurs.

Contracts entered into before October 3, 1989.   For contracts to buy a franchise, trademark, or trade name entered into before October 3, 1989, you can deduct payments contingent on productivity, use, or disposition. The rules discussed earlier for annual and substantially equal payments do not apply.

Disposition of franchise, trademark, or trade name.   If you transfer, sell, or otherwise dispose of a franchise, trademark, or trade name, you must recapture as ordinary income (up to any gain realized) the payments you deducted as any of the following.

• A lump-sum or serial payment of a principal amount not treated as a sale or exchange of a capital asset.
• An amortized payment deducted over 25 years.
• The amortization claimed on section 197 intangibles.

For more information about dispositions of franchises, trademarks, and trade names, see chapter 2 in Publication 544.

Impairment-related expenses.   If you are disabled, you can deduct expenses necessary for you to be able to work (impairment-related expenses) as a business expense, rather than as a medical expense.

You are disabled if you have either of the following.

• A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed.
• A physical or mental impairment that substantially limits one or more of your major life activities.

You can deduct the expense as a business expense if all the following apply.

• Your work clearly requires the expense for you to satisfactorily perform the work.
• The goods or services purchased are clearly not needed or used, other than incidentally, in your personal activities.
• Their treatment is not specifically provided for under other tax law provisions.

Example.   You are blind. You must use a reader to do your work, both at and away from your place of work. The reader's services are only for your work. You can deduct your expenses for the reader as a business expense.

Interview expense allowances.   Reimbursements you make to job candidates for transportation or other expenses related to interviews for possible employment are not wages. You can deduct the reimbursements as a business expense. However, expenses for food, beverages, and entertainment are subject to the 50% limit discussed earlier under Meals and Entertainment.

Legal and professional fees.   Legal and professional fees, such as fees charged by accountants, that are ordinary and necessary expenses directly related to operating your business are deductible as business expenses. However, you usually cannot deduct legal fees you pay to acquire business assets. Add them to the basis of the property.

If the fees include payments for work of a personal nature (such as making a will), you take a business deduction only for the part of the fee related to your business. The personal portion of legal fees for producing or collecting taxable income, doing or keeping your job, or for tax advice may be deductible on Schedule A (Form 1040) if you itemize deductions. See Publication 529.

Tax preparation fees.   You can deduct as a trade or business expense the cost of preparing that part of your tax return relating to your business as a sole proprietor. The remaining cost may be deductible on Schedule A (Form 1040) if you itemize deductions.

You can also take a business deduction for the amount you pay or incur in resolving asserted tax deficiencies for your business as a sole proprietor.

Licenses and regulatory fees.   Licenses and regulatory fees for your trade or business paid each year to state or local governments generally are deductible. Some licenses and fees may have to be amortized. See chapter 9 for more information.

Lobbying expenses.   Generally, you cannot deduct lobbying expenses. Lobbying expenses include amounts paid or incurred for any of the following activities.

• Influencing legislation.
• Participating in or intervening in any political campaign for, or against, any candidate for public office.
• Attempting to influence the general public, or segments of the public, about elections, legislative matters, or referendums.
• Communicating directly with covered executive branch officials (defined later) in any attempt to influence the official actions or positions of those officials.
• Researching, preparing, planning, or coordinating any of the preceding activities.

Your expenses for influencing legislation and communicating directly with a covered executive branch official include a portion of your labor costs and general and administrative costs of your business. For information on making this allocation, see section 1.162-28 of the regulations.

You cannot take a charitable deduction or business expense for amounts paid to an organization if both the following apply.

• The organization conducts lobbying activities on matters of direct financial interest to your business.
• A principal purpose of your contribution is to avoid the rules discussed earlier that prohibit a business deduction for lobbying expenses.

If a tax-exempt organization, other than a section 501(c)(3) organization, provides you with a notice on the part of dues that is allocable to nondeductible lobbying and political expenses, you cannot deduct that part of the dues.

Covered executive branch official.   For purposes of this discussion, a covered executive branch official is any of the following.

1. The President.
2. The Vice President.
3. Any officer or employee of the White House Office of the Executive Office of the President and the two most senior level officers of each of the other agencies in the Executive Office.
4. Any individual who:
   1. Is serving in a position in Level I of the Executive Schedule under section 5312 of title 5, United States Code,
   2. Has been designated by the President as having Cabinet-level status, or
   3. Is an immediate deputy of an individual listed in item (a) or (b).

Exceptions to denial of deduction.   The general denial of the deduction does not apply to the following.

• Expenses of appearing before, or communicating with, any local council or similar governing body concerning its legislation (local legislation) if the legislation is of direct interest to you or to you and an organization of which you are a member. An Indian tribal government is treated as a local council or similar governing body.
• Any in-house expenses for influencing legislation and communicating directly with a covered executive branch official if those expenses for the tax year do not exceed $2,000 (excluding overhead expenses).
• Expenses incurred by taxpayers engaged in the trade or business of lobbying (professional lobbyists) on behalf of another person (but does apply to payments by the other person to the lobbyist for lobbying activities).

Moving machinery.   Generally, the cost of moving your machinery from one city to another is a deductible expense. So is the cost of moving machinery from one plant to another, or from one part of your plant to another. You can deduct the cost of installing the machinery in the new location. However, you must capitalize the costs of installing or moving newly purchased machinery.

Outplacement services.   You can deduct the costs of outplacement services you provide to your employees to help them find new employment, such as career counseling, resumé assistance, skills assessment, etc.

The costs of outplacement services may cover more than one deduction category. For example, deduct as a utilities expense the cost of telephone calls made under this service and deduct as rental expense the cost of renting machinery and equipment for this service.

For information on whether the value of outplacement services is includable in your employees' income, see Publication 15-B.

Penalties and fines.   Penalties you pay for late performance or nonperformance of a contract are generally deductible. For instance, if you contracted to construct a building by a certain date and had to pay an amount for each day the building was not finished after that date, you can deduct the amounts paid or incurred.

On the other hand, you cannot deduct penalties or fines you pay to any government agency or instrumentality because of a violation of any law. These fines or penalties include the following amounts.

• Paid because of a conviction for a crime or after a plea of guilty or no contest in a criminal proceeding.
• Paid as a penalty imposed by federal, state, or local law in a civil action, including certain additions to tax and additional amounts and assessable penalties imposed by the Internal Revenue Code.
• Paid in settlement of actual or possible liability for a fine or penalty, whether civil or criminal.
• Forfeited as collateral posted for a proceeding that could result in a fine or penalty.

Examples of nondeductible penalties and fines include the following.

• Fines for violating city housing codes.
• Fines paid by truckers for violating state maximum highway weight laws and air quality laws.
• Civil penalties for violating federal laws regarding mining safety standards and discharges into navigable waters.

A fine or penalty does not include any of the following.

• Legal fees and related expenses to defend yourself in a prosecution or civil action for a violation of the law imposing the fine or civil penalty.
• Court costs or stenographic and printing charges.
• Compensatory damages paid to a government.

Nonconformance penalty.   You can deduct a nonconformance penalty assessed by the Environmental Protection Agency for failing to meet certain emission standards.

Political contributions.   You cannot deduct contributions or gifts to political parties or candidates as business expenses. In addition, you cannot deduct expenses you pay or incur to take part in any political campaign of a candidate for public office.

Indirect political contributions.   You cannot deduct indirect political contributions and costs of taking part in political activities as business expenses. Examples of nondeductible expenses include the following.

• Advertising in a convention program of a political party, or in any other publication if any of the proceeds from the publication are for, or intended for, the use of a political party or candidate.
• Admission to a dinner or program (including, but not limited to, galas, dances, film presentations, parties, and sporting events) if any of the proceeds from the function are for, or intended for, the use of a political party or candidate.
• Admission to an inaugural ball, gala, parade, concert, or similar event if identified with a political party or candidate.

Removal costs.   You can deduct the cost of retiring and removing a depreciable asset in connection with the installation or production of a replacement asset. However, you must capitalize the cost of removing a component of a depreciable asset if the replacement adds to the value or usefulness of the asset or significantly increases its useful life.

Repairs.   The cost of repairing or improving property used in your trade or business is either a deductible or capital expense. You can deduct repairs that keep your property in a normal efficient operating condition, but that do not add to its value or usefulness or appreciably lengthen its life. If the repairs add to the value or usefulness of your property or significantly increase its life, you must capitalize them. Although you cannot deduct capital expenses as current expenses, you can usually deduct them over a period of time as depreciation.

The cost of repairs includes the costs of labor, supplies, and certain other items. You cannot deduct the value of your own labor.

Examples of repairs include the following.

• Patching and repairing floors.
• Repainting the inside and outside of a building.
• Repairing roofs and gutters.
• Mending leaks.

You cannot deduct the cost of repairs you added to the cost of goods sold as a separate business expense.

Repayments.   If you had to repay an amount you included in your income in an earlier year, you may be able to deduct the amount repaid for the year in which you repaid it. Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it.

Type of deduction.   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. For instance, if you repay an amount you previously reported as a capital gain, deduct the repayment as a capital loss on Schedule D (Form 1040). If you reported it as self-employment income, deduct it as a business deduction on Schedule C or Schedule C-EZ (Form 1040).

If you reported the amount as wages, unemployment compensation, or other nonbusiness ordinary income, enter it on line 22 of Schedule A (Form 1040). However, if the repayment is over $3,000 and Method 1 (discussed later) applies, deduct it on line 27 of Schedule A (Form 1040).

Repayment - $3,000 or less.   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it.

Repayment - over $3,000.   If the amount you repaid was more than $3,000, you can deduct the repayment, as described earlier. However, you can instead choose to take a tax credit for the year of repayment if you included the income under a claim of right. This means that at the time you included the income, it appeared that you had an unrestricted right to it. If you qualify for this choice, figure your tax under both methods and use the method that results in less tax.

Method 1.   Figure your tax for 2002 claiming a deduction for the repaid amount.

Method 2.   Figure your tax for 2002 claiming a credit for the prepaid amount. Follow these steps.

1. Figure your tax for 2002 without deducting the repaid amount.
2. Refigure your tax from the earlier year without including in income the amount you repaid in 2002.
3. Subtract the tax in (2) from the tax shown on your return for the earlier year. This is the credit.
4. Subtract the answer in (3) from the tax for 2002 figured without the deduction (step 1).

If Method 1 results in less tax, deduct the amount repaid as discussed earlier under Type of deduction.

If Method 2 results in less tax, claim the credit on line 68 of Form 1040, and write I.R.C. 1341 next to line 68.

Example.   For 2001 you filed a return and reported your income on the cash method. In 2002 you repaid $5,000 included in your 2001 gross income under a claim of right. Your filing status in 2002 and 2001 is single. Your income and tax for both years are as follows:

	2001 With Income		2001 Without Income
Taxable Income	$15,000		$10,000
Tax	$ 2,254		$ 1,504
	2002 Without Deduction		2002 With Deduction
Taxable Income	$49,950		$44,950
Tax	$9,839		$ 8,489

Tax previously determined for 2001		$ 2,254
Less: Tax as refigured		- 1,504
Decrease in 2001 tax		$ 750
Regular tax liability for 2002		$9,839
Less: Decrease in 2001 tax		- 750
Refigured tax for 2002		$ 9,089

Repayment does not apply.   This discussion does not apply to the following.

• Deductions for bad debts.
• Deductions from sales to customers, such as returns and allowances, and similar items.
• Deductions for legal and other expenses of contesting the repayment.

Year of deduction (or credit).   If you use the cash method of accounting, you can take the deduction (or credit, if applicable) for the tax year in which you actually make the repayment. If you use any other accounting method, you can deduct the repayment or claim a credit for it only for the tax year in which it is a proper deduction under your accounting method. For example, if you use an accrual method, you are entitled to the deduction or credit in the tax year in which the obligation for the repayment accrues.

Subscriptions.   You can deduct as a business expense subscriptions to professional, technical, and trade journals that deal with your business field.

Supplies and materials.   Unless you have deducted the cost in any earlier year, you generally can deduct the cost of materials and supplies actually consumed and used during the tax year.

If you keep incidental materials and supplies on hand, you can deduct the cost of the incidental materials and supplies you bought during the tax year if all the following requirements are met.

• You do not keep a record of when they are used.
• You do not take an inventory of the amount on hand at the beginning and end of the tax year.
• This method does not distort your income.

You can also deduct the cost of books, professional instruments, equipment, etc., if you normally use them up within a year. However, if the usefulness of these items extends substantially beyond the year they are placed in service, you generally must recover their costs through depreciation. See Depreciation, earlier.

Utilities.   Your business expenses for heat, lights, power, and telephone service are deductible. However, any part due to personal use is not deductible.

Telephone.   You cannot deduct the cost of basic local telephone service (including any taxes) for the first telephone line you have in your home, even though you have an office in your home. However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses.

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