Publication 463: Travel Entertainment Gift And Car Expenses (2023)

IRS Publication 463, a valuable resource for taxpayers, delves into the world of deductible business expenses. It covers four main categories: Travel, Entertainment, Gifts, and Car expenses, guiding you on what's allowable and how to claim them on your tax return.

Who Should Use Publication 463?

A. Self-employed individuals: Business owners like sole proprietors and farmers report expenses on Schedules C and F, respectively.

B. Employees with unreimbursed expenses: If your employer doesn't reimburse certain work-related costs, you might be able to deduct them on Schedule A (if itemizing exceeds the standard deduction).

What expenses does Publication 463 cover?

1. Travel:

  • Ordinary and necessary: Directly related to your business (e.g., attending conferences, meeting clients).
  • Transportation, meals, lodging: Reasonable amounts are deductible.
  • Special rules: Foreign travel, home office deduction, entertainment during travel.

2. Entertainment:

  • Limited deductibility: Only 50% of business-related entertainment expenses qualify.
  • Directly related or associated: Must have a clear business purpose and primarily involve discussing business.
  • Examples: Meals with clients, tickets to sporting events for business development.

3. Gifts:

  • De minimis rule: Gifts under $25 to the same individual in a year are fully deductible.
  • Business-related: Must promote goodwill with a client, customer, or employee.
  • Recordkeeping: Track recipient, amount, and business purpose for each gift.

4. Car Expenses:

  • Two methods: Standard mileage rate or actual expenses (depreciation, repairs, gas).
  • Standard mileage rate: Simpler option, updated annually by the IRS.
  • Actual expenses: Requires detailed recordkeeping and depreciation calculations.

For the current year's Publication 463, click here.