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.