2007 Publication[429]

Department of the Treasury

Internal Revenue Service

Contents

What’s New . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Reminders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Publication 529

Cat. No. 15056o Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Deductions Subject to the 2% Limit . . . . . . . . . . . . 2



Miscellaneous Unreimbursed Employee Expenses . . . . . . . . . .

Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . .

3

8





Deductions Deductions Not Subject to the 2% Limit . . . . . . . . 11

List of Deductions . . . . . . . . . . . . . . . . . . . . . . . . 11

Nondeductible Expenses . . . . . . . . . . . . . . . . . . . . 13

For use in preparing List of Nondeductible Expenses . . . . . . . . . . . . . 13



2007 Returns How To Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

How To Get Tax Help . . . . . . . . . . . . . . . . . . . . . . . 19

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21





What’s New

Limit on itemized deductions. For 2007, if your adjusted

gross income is more than $156,400 ($78,200 if you are

married filing separately), you may have to reduce the

amount of certain itemized deductions, including most mis-

cellaneous deductions. For more information and a work-

sheet, see the instructions for Schedule A (Form 1040),

line 29, or Schedule A (Form 1040NR), line 17.



Standard mileage rate. The 2007 standard mileage rate

for business use of a vehicle is 481/2 cents per mile.



Local lodging. You may be able to deduct the cost of

lodging while you are not traveling away from home. See

Travel, Transportation, Meals, Entertainment, Gifts, and

Local Lodging.





Reminders

Photographs of missing children. The Internal Reve-

nue Service is a proud partner with the National Center for

Missing and Exploited Children. Photographs of missing

children selected by the Center may appear in this publica-

tion on pages that would otherwise be blank. You can help

bring these children home by looking at the photographs

and calling 1-800-THE-LOST (1-800-843-5678) if you rec-

ognize a child.



Get forms and other information

faster and easier by: Introduction

This publication explains which expenses you can claim as

Internet • www.irs.gov miscellaneous itemized deductions on Schedule A (Form

1040 or Form 1040NR). You must reduce the total of most

miscellaneous itemized deductions by 2% of your adjusted 1-800-829-1040. We cannot answer tax questions sent to

gross income. This publication covers the following topics. either of the addresses on this page.

• Deductions subject to the 2% limit.

Useful Items

• Deductions not subject to the 2% limit. You may want to see:

• Expenses you cannot deduct.

Publication

• How to report your deductions.

❏ 463 Travel, Entertainment, Gift, and Car

Some of the deductions previously discussed in this Expenses

publication are adjustments to income rather than miscel- ❏ 525 Taxable and Nontaxable Income

laneous deductions. These include certain employee busi-

ness expenses that must be listed on Form 2106 or ❏ 535 Business Expenses

2106-EZ and some that are entered directly on Form 1040. ❏ 587 Business Use of Your Home (Including Use

Those deductions, which are discussed in Publication 463, by Daycare Providers)

Travel, Entertainment, Gift, and Car Expenses, include

employee business expenses of officials paid on a fee ❏ 946 How To Depreciate Property

basis and performing artists.

Form (and Instructions)

Note. Generally, nonresident aliens are allowed miscel- ❏ Schedule A (Form 1040) Itemized Deductions

laneous itemized deductions to the extent they are directly

related to effectively connected income. ❏ 2106 Employee Business Expenses



You must keep records to verify your deductions. ❏ 2106-EZ Unreimbursed Employee Business

You should keep receipts, canceled checks, sub- Expenses

RECORDS stitute checks, financial account statements, and See How To Get Tax Help near the end of this publica-

other documentary evidence. For more information on tion for information about getting these publications and

recordkeeping, see Publication 552, Recordkeeping for forms.

Individuals.



Comments and suggestions. We welcome your com- Deductions Subject

ments about this publication and your suggestions for

future editions. to the 2% Limit

You can write to us at the following address:

You can deduct certain expenses as miscellaneous item-

ized deductions on Schedule A (Form 1040 or Form

Internal Revenue Service 1040NR). You can claim the amount of expenses that is

Individual Forms and Publications Branch more than 2% of your adjusted gross income. You figure

SE:W:CAR:MP:T:I your deduction on Schedule A by subtracting 2% of your

1111 Constitution Ave. NW, IR-6526 adjusted gross income from the total amount of these

Washington, DC 20224 expenses. Your adjusted gross income is the amount on

Form 1040, line 38, or Form 1040NR, line 36.

We respond to many letters by telephone. Therefore, it Generally, you apply the 2% limit after you apply any

would be helpful if you would include your daytime phone other deduction limit. For example, you apply the 50% (or

number, including the area code, in your correspondence. 75%) limit on business-related meals and entertainment

(discussed later under Travel, Transportation, Meals, En-

You can email us at *taxforms@irs.gov. (The asterisk

tertainment, Gifts, and Local Lodging) before you apply the

must be included in the address.) Please put “Publications

2% limit.

Comment” on the subject line. Although we cannot re-

Deductions subject to the 2% limit are discussed in the

spond individually to each email, we do appreciate your

three categories in which you report them on Schedule A:

feedback and will consider your comments as we revise

our tax products. • Unreimbursed employee expenses (line 21 for Form

1040 and line 9 for Form 1040NR).

Ordering forms and publications. Visit www.irs.gov/

formspubs to download forms and publications, call • Tax preparation fees (line 22 for Form 1040 and line

1-800-829-3676, or write to the address below and receive 10 for Form 1040NR).

a response within 10 days after your request is received.

• Other expenses (line 23 for Form 1040 and line 11

for Form 1040NR).

National Distribution Center

P.O. Box 8903

Bloomington, IL 61702 –8903



Tax questions. If you have a tax question, check the

information available on www.irs.gov or call



Page 2 Publication 529 (2007)

Unreimbursed Employee Expenses • Work-related education.

You can deduct only unreimbursed employee expenses

that are:

• Paid or incurred during your tax year, Business Bad Debt

• For carrying on your trade or business of being an A business bad debt is a loss from a debt created or

employee, and acquired in your trade or business. Any other worthless

debt is a business bad debt only if there is a very close

• Ordinary and necessary. relationship between the debt and your trade or business

An expense is ordinary if it is common and accepted in when the debt becomes worthless.

your trade, business, or profession. An expense is neces- A debt has a very close relationship to your trade or

sary if it is appropriate and helpful to your business. An business of being an employee if your main motive for

expense does not have to be required to be considered incurring the debt is a business reason.

necessary.

Example. You make a bona fide loan to the corporation

You may be able to deduct the following items as un- you work for. It fails to pay you back. You had to make the

reimbursed employee expenses. loan in order to keep your job. You have a business bad

• Business bad debt of an employee. debt as an employee.

• Business liability insurance premiums. More information. For more information on business bad

• Damages paid to a former employer for breach of an debts, see chapter 10 in Publication 535. For information

employment contract. on nonbusiness bad debts, see chapter 4 in Publication

550, Investment Income and Expenses.

• Depreciation on a computer or cell phone your em-

ployer requires you to use in your work.

Business Liability Insurance

• Dues to a chamber of commerce if membership

helps you do your job. You can deduct insurance premiums you paid for protec-

• Dues to professional societies. tion against personal liability for wrongful acts on the job.



• Educator expenses that are more than you can de-

duct as an adjustment to income. Damages for Breach of Employment

Contract

• Home office or part of your home used regularly and

exclusively in your work. If you break an employment contract, you can deduct

• Job search expenses in your present occupation. damages you pay your former employer if the damages

are attributable to the pay you received from that employer.

• Laboratory breakage fees.

• Legal fees related to your job. Depreciation on Computers or Cell Phones

• Licenses and regulatory fees.

You can claim a depreciation deduction for a computer or

• Malpractice insurance premiums. cell phone that you use in your work as an employee if its

use is:

• Medical examinations required by an employer.

• For the convenience of your employer, and

• Occupational taxes.

• Required as a condition of your employment.

• Passport for a business trip.

• Repayment of an income aid payment received For the convenience of your employer. This means that

under an employer’s plan. your use of the computer or cell phone is for a substantial

• Research expenses of a college professor. business reason of your employer. You must consider all

facts in making this determination. Use of your computer or

• Rural mail carriers’ vehicle expenses. cell phone during your regular working hours to carry on

• Subscriptions to professional journals and trade your employer’s business is generally for the convenience

magazines related to your work. of your employer.



• Tools and supplies used in your work. Required as a condition of your employment. This

means that you cannot properly perform your duties with-

• Travel, transportation, meals, entertainment, gifts, out the computer or cell phone. Whether you can properly

and local lodging related to your work. perform your duties without it depends on all the facts and

circumstances. It is not necessary that your employer

• Union dues and expenses. explicitly requires you to use your computer or cell phone.

• Work clothes and uniforms if required and not suita- But neither is it enough that your employer merely states

ble for everyday use. that your use of the item is a condition of your employment.



Publication 529 (2007) Page 3

Example. You are an engineer with an engineering organizations, if membership helps you carry out the duties

firm. You occasionally take work home at night rather than of your job. Similar organizations include:

work late at the office. You own and use a computer that is

similar to the one you use at the office to complete your

• Boards of trade,

work at home. Since your use of the computer is not for the • Business leagues,

convenience of your employer and is not required as a

condition of your employment, you cannot claim a depreci-

• Civic or public service organizations,

ation deduction for it. • Real estate boards, and

Which depreciation method to use. The depreciation • Trade associations.

method you use depends on whether you meet the

more-than-50%-use test. You cannot deduct dues paid to an organization if one of

its main purposes is to:

More-than-50%-use test met. You meet this test if you

use the computer or cell phone more than 50% in your • Conduct entertainment activities for members or

work. If you meet this test, you can claim accelerated their guests, or

depreciation under the General Depreciation System • Provide members or their guests with access to en-

(GDS). In addition, you may be able to take the section 179 tertainment facilities.

deduction for the year you place the item in service.

More-than-50%-use test not met. If you do not meet Dues paid to airline, hotel, and luncheon clubs are not

the more-than-50%-use test, you are limited to the straight deductible. See Club Dues under Nondeductible Ex-

line method of depreciation under the Alternative Depreci- penses, later.

ation System (ADS). You also cannot claim the section 179

Lobbying and political activities. You may not be able

deduction. (But if you use your computer in a home office,

to deduct that part of your dues that is for certain lobbying

see the exception below.)

and political activities. See Lobbying Expenses under Non-

Investment use. Your use of a computer or cell phone deductible Expenses, later.

in connection with investments (described later under

Other Expenses) does not count as use in your work.

However, you can combine your investment use with your Educator Expenses

work use in figuring your depreciation deduction.

If you were an eligible educator in 2007, you can deduct up

Exception for computer used in a home office. The to $250 of qualified expenses you paid in 2007 as an

more-than-50%-use test does not apply to a computer adjustment to gross income on Form 1040, line 23, rather

used only in a part of your home that meets the require- than as a miscellaneous itemized deduction. If you file

ments described later under Home Office. You can claim Form 1040A, you can deduct these expenses on line 16. If

accelerated depreciation using GDS for a computer used you and your spouse are filing jointly and both of you were

in a qualifying home office, even if you do not use it more eligible educators, the maximum deduction is $500. How-

than 50% in your work. You also may be able to take a ever, neither spouse can deduct more than $250 of his or

section 179 deduction for the year you place the computer her qualified expenses.

in service. See Computer used in a home office under How

To Report, later. Eligible educator. An eligible educator is a kindergarten

through grade 12 teacher, instructor, counselor, principal,

More information. For more information on deprecia- or aide in a school for at least 900 hours during a school

tion and the section 179 deduction for computers and other year.

items used in a home office, see Business Furniture and

Equipment in Publication 587. Publication 946 has detailed Qualified expenses. Qualified expenses include ordinary

information about the section 179 deduction and deprecia- and necessary expenses paid in connection with books,

tion deductions using GDS and ADS. supplies, equipment, (including computer equipment,

software, and services), and other materials used in the

Reporting your depreciation deduction. See How To classroom. An ordinary expense is one that is common

Report, later, for information about reporting a deduction and accepted in your educational field. A necessary ex-

for depreciation. pense is one that is helpful and appropriate for your profes-

You must keep records to prove your percentage sion as an educator. An expense does not have to be

of business and investment use. required to be considered necessary.

RECORDS Qualified expenses do not include expenses for home

schooling or for nonathletic supplies for courses in health

or physical education. You must reduce your qualified

expenses by the following amounts.

Dues to Chambers of Commerce and • Excludable U.S. series EE and I savings bond inter-

Professional Societies est from Form 8815.



You may be able to deduct dues paid to professional

• Nontaxable qualified state tuition program earnings.

organizations (such as bar associations and medical as- • Nontaxable earnings from Coverdell education sav-

sociations) and to chambers of commerce and similar ings accounts.



Page 4 Publication 529 (2007)

• Any reimbursements you received for these ex- • There was a substantial break between the ending

penses that were not reported to you on your Form of your last job and your looking for a new one, or

W-2, box 1.

• You are looking for a job for the first time.

Educator expenses over limit. If you were an educator

Employment and outplacement agency fees. You can

in 2007 and you had qualified expenses that you cannot

deduct employment and outplacement agency fees you

take as an adjustment to gross income, you can deduct the

pay in looking for a new job in your present occupation.

rest as an itemized deduction subject to the 2% limit.

Employer pays you back. If, in a later year, your em-

ployer pays you back for employment agency fees, you

Home Office must include the amount you receive in your gross income

If you use a part of your home regularly and exclusively for up to the amount of your tax benefit in the earlier year. See

business purposes, you may be able to deduct a part of the Recoveries in Publication 525.

operating expenses and depreciation of your home. Employer pays the employment agency. If your em-

You can claim this deduction for the business use of a ployer pays the fees directly to the employment agency

part of your home only if you use that part of your home and you are not responsible for them, you do not include

regularly and exclusively: them in your gross income.

• As your principal place of business for any trade or

business, ´ ´

Resume. You can deduct amounts you spend for prepar-

• As a place to meet or deal with your patients, clients, ´ ´

ing and mailing copies of a resume to prospective employ-

or customers in the normal course of your trade or ers if you are looking for a new job in your present

business, or occupation.



• In the case of a separate structure not attached to Travel and transportation expenses. If you travel to an

your home, in connection with your trade or busi-

area and, while there, you look for a new job in your

ness.

present occupation, you may be able to deduct travel

The regular and exclusive business use must be for the expenses to and from the area. You can deduct the travel

convenience of your employer and not just appropriate and expenses if the trip is primarily to look for a new job. The

helpful in your job. amount of time you spend on personal activity compared to

the amount of time you spend in looking for work is impor-

Principal place of business. If you have more than one tant in determining whether the trip is primarily personal or

place of business, the business part of your home is your is primarily to look for a new job.

principal place of business if: Even if you cannot deduct the travel expenses to and

• You use it regularly and exclusively for administra- from an area, you can deduct the expenses of looking for a

tive or management activities of your trade or busi- new job in your present occupation while in the area.

ness, and You can choose to use the standard mileage rate to

• You have no other fixed location where you conduct figure your car expenses. The rate for business use of a

substantial administrative or management activities vehicle for 2007 is 481/2 cents per mile. See Publication 463

of your trade or business. for more information on travel and car expenses.



Otherwise, the location of your principal place of busi- Legal Fees

ness generally depends on the relative importance of the

activities performed at each location and the time spent at You can deduct legal fees related to doing or keeping your

each location. job.

You should keep records that will give the infor-

mation needed to figure the deduction according Licenses and Regulatory Fees

RECORDS to these rules. Also keep canceled checks, sub-

stitute checks, or account statements and receipts of the You can deduct the amount you pay each year to state or

expenses paid to prove the deductions you claim. local governments for licenses and regulatory fees for your

trade, business, or profession.

More information. See Publication 587 for more detailed

information and a worksheet for figuring the deduction.

Occupational Taxes

Job Search Expenses You can deduct an occupational tax charged at a flat rate

by a locality for the privilege of working or conducting a

You can deduct certain expenses you have in looking for a business in the locality. If you are an employee, you can

new job in your present occupation, even if you do not get a

claim occupational taxes only as a miscellaneous deduc-

new job. You cannot deduct these expenses if:

tion subject to the 2% limit; you cannot claim them as a

• You are looking for a job in a new occupation, deduction for taxes elsewhere on your return.



Publication 529 (2007) Page 5

Repayment of Income Aid Payment Travel expenses are discussed more fully in chapter 1 of

Publication 463.

An “income aid payment” is one that is received under an

employer’s plan to aid employees who lose their jobs Temporary work assignment. If your assignment or

job away from home in a single location is realistically

because of lack of work. If you repay a lump-sum income

expected to last (and does in fact last) for 1 year or less, it

aid payment that you received and included in income in

is temporary, unless there are facts and circumstances

an earlier year, you can deduct the repayment.

that indicate it is not.

Indefinite work assignment. If your assignment or job

Research Expenses of a College Professor away from home in a single location is realistically ex-

pected to last for more than 1 year, it is indefinite, whether

If you are a college professor, you can deduct your re-

or not it actually lasts for more than 1 year.

search expenses, including travel expenses, for teaching,

If your assignment or job away from home in a single

lecturing, or writing and publishing on subjects that relate

location is realistically expected to last for 1 year or less,

directly to your teaching duties. You must have undertaken

but at some later date it is realistically expected to exceed

the research as a means of carrying out the duties ex-

1 year, it will be treated as temporary (in the absence of

pected of a professor and without expectation of profit

facts and circumstances indicating otherwise) until the

apart from salary. However, you cannot deduct the cost of date that your realistic expectation changes, and it will be

travel as a form of education. treated as indefinite after that date.

Federal crime investigation and prosecution. If you

Rural Mail Carriers’ Vehicle Expenses are a federal employee participating in a federal crime

investigation or prosecution, you are not subject to the

If your expenses to use a vehicle in performing services as 1-year rule for deducting temporary travel expenses. This

a rural mail carrier are more than the amount of your means that you may be able to deduct travel expenses

reimbursements, you can deduct the unreimbursed ex- even if you are away from your tax home for more than one

penses. See chapter 4 of Publication 463 for more informa- year.

tion. To qualify, the Attorney General must certify that you

are traveling:

Tools Used in Your Work • For the Federal Government,

Generally, you can deduct amounts you spend for tools • In a temporary duty status, and

used in your work if the tools wear out and are thrown away

within 1 year from the date of purchase. You can depreci-

• To investigate, prosecute, or provide support serv-

ices for the investigation or prosecution of a federal

ate the cost of tools that have a useful life substantially

crime.

beyond the tax year. For more information about deprecia-

tion, see Publication 946. Armed Forces reservists traveling more than 100

miles from home. If you are a member of a reserve

Travel, Transportation, Meals, component of the Armed Forces of the United States and

you travel more than 100 miles away from home in connec-

Entertainment, Gifts, and Local Lodging tion with your performance of services as a member of the

If you are an employee and have ordinary and necessary reserves, you can deduct some of your travel expenses as

business-related expenses for travel away from home, an adjustment to gross income rather than as a miscella-

local transportation, entertainment, and gifts, you may be neous itemized deduction. The amount of expenses you

able to deduct these expenses. Generally, you must file can deduct as an adjustment to gross income is limited to

Form 2106 or 2106-EZ to claim these expenses. the regular federal per diem rate (for lodging, meals, and

incidental expenses) and the standard mileage rate (for car

Travel expenses. Travel expenses are those incurred expenses) plus any parking fees, ferry fees, and tolls. The

while traveling away from home for your employer. You balance, if any, is reported on Schedule A.

can deduct travel expenses paid or incurred in connection You are a member of a reserve component of the Armed

with a temporary work assignment. Generally, you cannot Forces of the United States if you are in the Army, Naval,

deduct travel expenses paid or incurred in connection with Marine Corps, Air Force, or Coast Guard Reserve, the

an indefinite work assignment. Army National Guard of the United States, the Air National

Guard of the United States, or the Reserve Corps of the

Travel expenses may include:

Public Health Service.

• The cost of getting to and from your business desti- For more information on travel expenses, see Publica-

nation (air, rail, bus, car, etc.), tion 463.

• Meals and lodging while away from home,

Local transportation expenses. Local transportation ex-

• Taxi fares, penses are the expenses of getting from one workplace to

another when you are not traveling away from home. They

• Baggage charges, and

include the cost of transportation by air, rail, bus, taxi, and

• Cleaning and laundry expenses. the cost of using your car.



Page 6 Publication 529 (2007)

You can choose to use the standard mileage rate to • Signs, racks, and promotional materials to be dis-

figure your car expenses. The rate for business use of a played on the business premises of the recipient.

vehicle for 2007 is 481/2 cents per mile.

Work at two places in a day. If you work at two places Local lodging. If your employer provides or requires you

in a day, whether or not for the same employer, you can to obtain lodging while you are not traveling away from

generally deduct the expenses of getting from one work- home, you can deduct the cost of the lodging if it is on a

place to the other. temporary basis, it is necessary for you to participate in or

be available for a business meeting or employer function,

Temporary work location. You can deduct expenses

and the costs are ordinary and necessary, but not lavish or

incurred in going between your home and a temporary

extravagant.

work location if at least one of the following applies.

If your employer provides the lodging or reimburses you

• The work location is outside the metropolitan area for the cost of the lodging, you can deduct the cost only if

where you live and normally work. the value or the reimbursement is included in your gross

• You have at least one regular work location (other income because it is reported as wages on your Form W-2.

than your home) for the same trade or business. (If

Additional information. See Publication 463 for more

this applies, the distance between your home and

information on travel, transportation, meal, entertainment,

the temporary work location does not matter.)

and gift expenses, and reimbursements for these ex-

penses.

For this purpose, a work location is generally considered

temporary if your work there is realistically expected to last

(and does in fact last) for 1 year or less. It is not temporary Union Dues and Expenses

if your work there is realistically expected to last for more

than 1 year, even if it actually lasts for 1 year or less. If your You can deduct dues and initiation fees you pay for union

work there initially is realistically expected to last for 1 year membership.

or less, but later is realistically expected to last for more You can also deduct assessments for benefit payments

than 1 year, the work location is generally considered to unemployed union members. However, you cannot de-

temporary until the date your realistic expectation changes duct the part of the assessments or contributions that

and not temporary after that date. For more information, provides funds for the payment of sick, accident, or death

see chapter 1 of Publication 463. benefits. Also, you cannot deduct contributions to a pen-

sion fund even if the union requires you to make the

Home office. You can deduct expenses incurred in

contributions.

going between your home and a workplace if your home is

You may not be able to deduct amounts you pay to the

your principal place of business for the same trade or

union that are related to certain lobbying and political

business. (In this situation, whether the other workplace is

activities. See Lobbying Expenses under Nondeductible

temporary or regular and its distance from your home do

Expenses, later.

not matter.) See Home Office, earlier, for a discussion on

the use of your home as your principal place of business.

Work Clothes and Uniforms

Meals and entertainment. Generally, you can deduct

entertainment expenses (including entertainment-related You can deduct the cost and upkeep of work clothes if the

meals) only if they are directly related to the active conduct following two requirements are met.

of your trade or business. However, the expense only

needs to be associated with the active conduct of your • You must wear them as a condition of your employ-

trade or business if it directly precedes or follows a sub- ment.

stantial and bona fide business-related discussion. • The clothes are not suitable for everyday wear.

You can deduct only 50% of your business-related meal

and entertainment expenses unless the expenses meet

It is not enough that you wear distinctive clothing.

certain exceptions. You apply this 50% limit before you

apply the 2%-of-adjusted-gross-income limit. !

CAUTION

The clothing must be specifically required by your

employer. Nor is it enough that you do not, in fact,

Meals when subject to “hours of service” limits. wear your work clothes away from work. The clothing must

You can deduct 75% of your business-related meal ex- not be suitable for taking the place of your regular clothing.

penses if you consume the meals during or incident to any Examples of workers who may be able to deduct the

period subject to the Department of Transportation’s cost and upkeep of work clothes are: delivery workers,

“hours of service” limits. You apply this 75% limit before firefighters, health care workers, law enforcement officers,

you apply the 2%-of-adjusted-gross-income limit. letter carriers, professional athletes, and transportation

workers (air, rail, bus, etc.).

Gift expenses. You can generally deduct up to $25 of Musicians and entertainers can deduct the cost of theat-

business gifts you give to any one individual during the rical clothing and accessories that are not suitable for

year. The following items do not count toward the $25 limit. everyday wear.

• Identical, widely distributed items costing $4 or less However, work clothing consisting of white cap, white

that have your name clearly and permanently im- shirt or white jacket, white bib overalls, and standard work

printed. shoes, which a painter is required by his union to wear on



Publication 529 (2007) Page 7

the job, is not distinctive in character or in the nature of a example, a French teacher who travels to France to main-

uniform. Similarly, the costs of buying and maintaining blue tain general familiarity with the French language and cul-

work clothes worn by a welder at the request of a foreman ture cannot deduct the cost of the trip as an educational

are not deductible. expense.



Protective clothing. You can deduct the cost of protec- More information. See chapter 12 of Publication 970,

tive clothing required in your work, such as safety shoes or Tax Benefits for Education, for a complete discussion of

boots, safety glasses, hard hats, and work gloves. the deduction for work-related education expenses.

Examples of workers who may be required to wear

safety items are: carpenters, cement workers, chemical

workers, electricians, fishing boat crew members, machin-

Tax Preparation Fees

ists, oil field workers, pipe fitters, steamfitters, and truck You can usually deduct tax preparation fees in the year

drivers. you pay them. Thus, on your 2007 return, you can deduct

fees paid in 2007 for preparing your 2006 return. These

Military uniforms. You generally cannot deduct the cost fees include the cost of tax preparation software programs

of your uniforms if you are on full-time active duty in the and tax publications. They also include any fee you paid for

armed forces. However, if you are an armed forces reserv- electronic filing of your return. However, if you paid your

ist, you can deduct the unreimbursed cost of your uniform if tax by credit card, you cannot deduct the convenience fee

military regulations restrict you from wearing it except while you were charged. See Tax preparation fees under How

on duty as a reservist. In figuring the deduction, you must To Report, later.

reduce the cost by any nontaxable allowance you receive

for these expenses.

If local military rules do not allow you to wear fatigue

Other Expenses

uniforms when you are off duty, you can deduct the You can deduct certain other expenses as miscellaneous

amount by which the cost of buying and keeping up these itemized deductions subject to the 2%-of-adjusted-gross-

uniforms is more than the uniform allowance you receive. income limit. These are expenses you pay:

If you are a student at an armed forces academy, you

cannot deduct the cost of your uniforms if they replace 1. To produce or collect income that must be included

regular clothing. However, you can deduct the cost of in your gross income,

insignia, shoulder boards, and related items.

You can deduct the cost of your uniforms if you are a 2. To manage, conserve, or maintain property held for

civilian faculty or staff member of a military school. producing such income, or

3. To determine, contest, pay, or claim a refund of any

tax.

Work-Related Education

You can deduct expenses you pay for the purposes in (1)

You can deduct expenses you have for education, even if and (2) above only if they are reasonable and closely

the education may lead to a degree, if the education meets related to these purposes.

at least one of the following two tests.

These other expenses include the following items.

• It maintains or improves skills required in your pres- • Appraisal fees for a casualty loss or charitable con-

ent work.

tribution.

• It is required by your employer or the law to keep • Casualty and theft losses from property used in per-

your salary, status, or job, and the requirement

forming services as an employee.

serves a business purpose of your employer.

• Clerical help and office rent in caring for invest-

You cannot deduct expenses you have for education, ments.

even though one or both of the preceding tests are met, if

the education:

• Depreciation on home computers used for invest-

ments.

• Is needed to meet the minimum educational require- • Excess deductions (including administrative ex-

ments to qualify you in your trade or business, or

penses) allowed a beneficiary on termination of an

• Is part of a program of study that will lead to qualify- estate or trust.

ing you in a new trade or business.

• Fees to collect interest and dividends.

If your education qualifies, you can deduct expenses for • Hobby expenses, but generally not more than hobby

tuition, books, supplies, laboratory fees, and similar items, income.

and certain transportation costs.

If the education qualifies you for a new trade or busi-

• Indirect miscellaneous deductions of pass-through

entities.

ness, you cannot deduct the educational expenses even if

you do not intend to enter that trade or business. • Investment fees and expenses.

Travel as education. You cannot deduct the cost of • Legal fees related to producing or collecting taxable

travel that in itself constitutes a form of education. For income or getting tax advice.



Page 8 Publication 529 (2007)

• Loss on deposits in an insolvent or bankrupt finan- Excess Deductions of an Estate

cial institution.

If an estate’s total deductions in its last tax year are more

• Loss on traditional IRAs or Roth IRAs, when all than its gross income for that year, the beneficiaries suc-

amounts have been distributed to you. ceeding to the estate’s property can deduct the excess. Do

• Repayments of income. not include deductions for the estate’s personal exemption

and charitable contributions when figuring the estate’s total

• Repayments of social security benefits. deductions. The beneficiaries can claim the deduction only

• Safe deposit box rental. for the tax year in which, or with which, the estate termi-

nates, whether the year of termination is a normal year or a

• Service charges on dividend reinvestment plans. short tax year. For more information, see Termination of

• Tax advice fees. Estate in Publication 559, Survivors, Executors, and Ad-

ministrators.

• Trustee’s fees for your IRA, if separately billed and

paid.

If the expenses you pay produce income that is only Fees To Collect Interest and Dividends

partially taxable, see Tax-Exempt Income Expenses, later, You can deduct fees you pay to a broker, bank, trustee, or

under Nondeductible Expenses. similar agent to collect your taxable bond interest or divi-

dends on shares of stock. But you cannot deduct a fee you

Appraisal Fees pay to a broker to buy investment property, such as stocks

or bonds. You must add the fee to the cost of the property.

You can deduct appraisal fees if you pay them to figure a

casualty loss or the fair market value of donated property. You cannot deduct the fee you pay to a broker to sell

securities. You can use the fee only to figure gain or loss

from the sale. See the instructions for columns (d) and (e)

Casualty and Theft Losses of Schedule D (Form 1040) for information on how to report

the fee.

You can deduct a casualty or theft loss as a miscellaneous

itemized deduction subject to the 2% limit if you used the

damaged or stolen property in performing services as an Hobby Expenses

employee. First report the loss in Section B of Form 4684,

Casualties and Thefts. You may also have to include the You can generally deduct hobby expenses, but only up to

loss on Form 4797, Sales of Business Property, if you are the amount of hobby income. A hobby is not a business

otherwise required to file that form. To figure your deduc- because it is not carried on to make a profit. See

tion, add all casualty or theft losses from this type of Not-for-Profit Activities in chapter 1 of Publication 535.

property included on Form 4684, lines 32 and 38b, or Form

4797, line 18a. For more information on casualty and theft

losses, see Publication 547, Casualties, Disasters, and Indirect Deductions of Pass-Through

Thefts. Entities

Pass-through entities include partnerships, S corpora-

Clerical Help and Office Rent tions, and mutual funds that are not publicly offered. De-

ductions of pass-through entities are passed through to the

You can deduct office expenses, such as rent and clerical partners or shareholders. The partners or shareholders

help, that you have in connection with your investments can deduct their share of passed-through deductions for

and collecting the taxable income on them. investment expenses as miscellaneous itemized deduc-

tions subject to the 2% limit.

Depreciation on Home Computer Example. You are a member of an investment club that

You can deduct depreciation on your home computer if you is formed solely to invest in securities. The club is treated

use it to produce income (for example, to manage your as a partnership. The partnership’s income is solely from

investments that produce taxable income). You generally taxable dividends, interest, and gains from sales of securi-

must depreciate the computer using the straight line ties. In this case, you can deduct your share of the partner-

method over the Alternative Depreciation System (ADS) ship’s operating expenses as miscellaneous itemized

recovery period. But if you work as an employee and also deductions subject to the 2% limit. However, if the invest-

use the computer in that work, see Depreciation on Com- ment club partnership has investments that also produce

puters or Cell Phones under Unreimbursed Employee Ex- nontaxable income, you cannot deduct your share of the

penses, earlier. For more information on depreciation, see partnership’s expenses that produce the nontaxable in-

Publication 946. come.



Publicly offered mutual funds. Publicly offered mutual

funds do not pass deductions for investment expenses

through to shareholders. A mutual fund is “publicly offered”

if it is:



Publication 529 (2007) Page 9

• Continuously offered pursuant to a public offering, claim of unlawful discrimination, a claim against the U.S.

Government, or a claim made under section 1862(b)(3)(A)

• Regularly traded on an established securities mar-

ket, or of the Social Security Act. However, the amount you can

deduct on Form 1040, line 36, or Form 1040NR, line 34, is

• Held by or for at least 500 persons at all times during limited to the amount you included in gross income in 2007

the tax year. for that claim. See Publication 525 for more information.



A publicly offered mutual fund will send you a Form

1099-DIV, Dividends and Distributions, or a substitute Loss on Deposits

form, showing the net amount of dividend income (gross

dividends minus investment expenses). This net figure is If you can reasonably estimate the amount of your loss on

the amount you report on your return as income. You money you have on deposit in a financial institution that

cannot deduct investment expenses. becomes insolvent or bankrupt, you can generally choose

to deduct it in the current year even though its exact

Information returns. You should receive information re- amount has not been finally determined. Once you make

turns from pass-through entities. this choice, you cannot change it without IRS approval.

If none of the deposit is federally insured, you can

Partnerships and S corporations. These entities is-

sue Schedule K-1, which lists the items and amounts you deduct the loss in either of the following ways.

must report, and identifies the tax return schedules and • As a miscellaneous itemized deduction subject to

lines to use. the 2% limit. Write the name of the financial institu-

Nonpublicly offered mutual funds. These funds will tion and “Insolvent Financial Institution” beside the

send you a Form 1099-DIV, or a substitute form, showing amount on Schedule A (Form 1040), line 23, or

your share of gross income and investment expenses. You Schedule A (Form 1040NR), line 11. This deduction

can claim the expenses only as a miscellaneous itemized is limited to $20,000 ($10,000 if you are married

deduction subject to the 2% limit. filing separately) for each financial institution, re-

duced by any expected state insurance proceeds.



Investment Fees and Expenses • As a casualty loss. See Publication 547 for details.



You can deduct investment fees, custodial fees, trust ad- If any part of the deposit is federally insured, you can

ministration fees, and other expenses you paid for manag- deduct the loss only as a casualty loss.

ing your investments that produce taxable income.

Exception. You cannot make this choice if you are a

1%-or-more-owner or an officer of the financial institution,

Legal Expenses or are related to such owner or officer. For a definition of

“related,” see Deposit in Insolvent or Bankrupt Financial

You can usually deduct legal expenses that you incur in

Institution in chapter 4 of Publication 550.

attempting to produce or collect taxable income or that you

pay in connection with the determination, collection, or

Actual loss different from estimated loss. If you make

refund of any tax.

this choice and your actual loss is less than your estimated

You can also deduct legal expenses that are:

loss, you must include the excess in income. See Recov-

• Related to either doing or keeping your job, such as eries in Publication 525. If your actual loss is more than

those you paid to defend yourself against criminal your estimated loss, treat the excess loss as explained

charges arising out of your trade or business, under Choice not made, next.

• For tax advice related to a divorce if the bill specifies

how much is for tax advice and it is determined in a Choice not made. If you do not make this choice (or if you

reasonable way, or have an excess actual loss after choosing to deduct your

estimated loss), treat your loss (or excess loss) as a

• To collect taxable alimony. nonbusiness bad debt (deductible as a short-term capital

loss) in the year its amount is finally determined. See

You can deduct expenses of resolving tax issues relat- Nonbusiness Bad Debts in chapter 4 of Publication 550.

ing to profit or loss from business (Schedule C or C-EZ),

rentals or royalties (Schedule E), or farm income and

expenses (Schedule F) on the appropriate schedule. You Loss on IRA

deduct expenses of resolving nonbusiness tax issues on

Schedule A (Form 1040 or Form 1040NR). See Tax Prepa- If you have a loss on your traditional IRA (or Roth IRA)

ration Fees, earlier. investment, you can deduct the loss as a miscellaneous

itemized deduction subject to the 2% limit, but only when

Unlawful discrimination claims. You may be able to all the amounts in all your traditional IRA (or Roth IRA)

deduct, as an adjustment to income on Form 1040, line 36, accounts have been distributed to you and the total distri-

or Form 1040NR, line 34, rather than as a miscellaneous butions are less than your unrecovered basis. For more

itemized deduction, attorney fees and court costs for ac- information, see Publication 590, Individual Retirement

tions settled or decided after October 22, 2004, involving a Arrangements (IRAs).



Page 10 Publication 529 (2007)

Repayments of Income

If you had to repay an amount that you included in income

Deductions Not Subject

in an earlier year, you may be able to deduct the amount to the 2% Limit

you repaid. If the amount you had to repay was ordinary

income of $3,000 or less, the deduction is subject to the You can deduct the items listed below as miscellaneous

2% limit. If it was more than $3,000, see Repayments itemized deductions. They are not subject to the 2% limit.

Under Claim of Right under Deductions Not Subject to the Report these items on Schedule A (Form 1040), line 28, or

2% Limit, later. Schedule A (Form 1040NR), line 16.



Repayments of Social Security Benefits List of Deductions

If the total of the amounts in box 5 (net benefits for 2007) of • Amortizable premium on taxable bonds.

all your Forms SSA-1099, Social Security Benefit State-

ment, and Forms RRB-1099, Payments By the Railroad • Casualty and theft losses from income-producing

Retirement Board, is a negative figure (a figure in paren- property.

theses), you may be able to take a miscellaneous itemized • Federal estate tax on income in respect of a dece-

deduction subject to the 2% limit. The amount you can dent.

deduct is the part of the negative figure that represents an

amount you included in gross income in an earlier year. • Gambling losses up to the amount of gambling win-

The amount in box 5 of Form SSA-1099 or RRB-1099 is nings.

the net amount of your benefits for the year. It will be a • Impairment-related work expenses of persons with

negative figure if the amount of benefits you repaid in 2007 disabilities.

(box 4) is more than the gross amount of benefits paid to

you in 2007 (box 3). • Loss from other activities from Schedule K-1 (Form

1065-B), box 2.

If the deduction is more than $3,000, you will

! have to use a special computation to figure your • Repayments of more than $3,000 under a claim of

CAUTION tax. See Publication 915, Social Security and right.

Equivalent Railroad Retirement Benefits, for additional in- • Unrecovered investment in an annuity.

formation.



Amortizable Premium on Taxable Bonds

Safe Deposit Box Rent

In general, if the amount you pay for a bond is greater than

You can deduct safe deposit box rent if you use the box to its stated principal amount, the excess is bond premium.

store taxable income-producing stocks, bonds, or invest- You can elect to amortize the premium on taxable bonds.

ment-related papers and documents. You cannot deduct The amortization of the premium is generally an offset to

the rent if you use the box only for jewelry, other personal interest income on the bond rather than a separate deduc-

items, or tax-exempt securities. tion item.



Pre-1998 election to amortize bond premium. Gener-

Service Charges on Dividend ally, if you first elected to amortize bond premium before

Reinvestment Plans 1998, the above treatment of the premium does not apply

to bonds you acquired before 1988.

You can deduct service charges you pay as a subscriber in

a dividend reinvestment plan. These service charges in- Bonds acquired after October 22, 1986, and before

clude payments for: 1988. The amortization of the premium on these bonds is

investment interest expense subject to the investment in-

• Holding shares acquired through a plan, terest limit, unless you chose to treat it as an offset to

• Collecting and reinvesting cash dividends, and interest income on the bond.

• Keeping individual records and providing detailed Bonds acquired before October 23, 1986. The amor-

statements of accounts. tization of the premium on these bonds is a miscellaneous

itemized deduction not subject to the 2% limit.



Trustee’s Administrative Fees for IRA Deduction for excess premium. On certain bonds (such

as bonds that pay a variable rate of interest or that provide

Trustee’s administrative fees that are billed separately and for an interest-free period), the amount of bond premium

paid by you in connection with your IRA are deductible (if allocable to a period may exceed the amount of stated

they are ordinary and necessary) as a miscellaneous item- interest allocable to the period. If this occurs, treat the

ized deduction subject to the 2% limit. excess as a miscellaneous itemized deduction that is not

subject to the 2% limit. However, the amount deductible is

limited to the amount by which your total interest inclusions

on the bond in prior periods exceed the total amount you



Publication 529 (2007) Page 11

treated as a bond premium deduction on the bond in prior Diary of winnings and losses. You must keep

periods. If any of the excess bond premium cannot be an accurate diary or similar record of your losses

deducted because of the limit, this amount is carried for- RECORDS and winnings.

ward to the next period and is treated as bond premium Your diary should contain at least the following information.

allocable to that period.

• The date and type of your specific wager or wager-

Pre-1998 choice to amortize bond premium. If ing activity.

!

CAUTION

you made the choice to amortize the premium on

taxable bonds before 1998, you can deduct the

• The name and address or location of the gambling

establishment.

bond premium amortization that is more than your interest

income only for bonds acquired during 1998 and later • The names of other persons present with you at the

years. gambling establishment.

• The amount(s) you won or lost.

More information. For more information on bond pre-

mium, see Bond Premium Amortization in chapter 3 of Proof of winnings and losses. In addition to your diary,

Publication 550. you should also have other documentation. You can gen-

erally prove your winnings and losses through Form W-2G,

Casualty and Theft Losses of Certain Gambling Winnings, Form 5754, Statement by

Income-Producing Property Person(s) Receiving Gambling Winnings, wagering tick-

ets, canceled checks, substitute checks, credit records,

You can deduct a casualty or theft loss as a miscellaneous bank withdrawals, and statements of actual winnings or

itemized deduction not subject to the 2% limit if the dam- payment slips provided to you by the gambling establish-

aged or stolen property was income-producing property ment.

(property held for investment, such as stocks, notes, For specific wagering transactions, you can use the

bonds, gold, silver, vacant lots, and works of art). First following items to support your winnings and losses.

report the loss in Section B of Form 4684. You may also

have to include the loss on Form 4797 if you are otherwise These recordkeeping suggestions are intended

required to file that form. To figure your deduction, add all !

CAUTION

as general guidelines to help you establish your

winnings and losses. They are not all-inclusive.

casualty or theft losses from this type of property included

on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Your tax liability depends on your particular facts and

For more information on casualty and theft losses, see circumstances.

Publication 547. Keno. Copies of the keno tickets you purchased that

were validated by the gambling establishment, copies of

Federal Estate Tax on Income in Respect of your casino credit records, and copies of your casino

a Decedent check cashing records.

Slot machines. A record of the machine number and all

You can deduct the federal estate tax attributable to in- winnings by date and time the machine was played.

come in respect of a decedent that you as a beneficiary

include in your gross income. Income in respect of the Table games (twenty-one (blackjack), craps, poker,

decedent is gross income that the decedent would have baccarat, roulette, wheel of fortune, etc.). The number

received had death not occurred and that was not properly of the table at which you were playing. Casino credit card

includible in the decedent’s final income tax return. See data indicating whether the credit was issued in the pit or at

Publication 559 for information about figuring the amount the cashier’s cage.

of this deduction. Bingo. A record of the number of games played, cost of

tickets purchased, and amounts collected on winning tick-

Gambling Losses Up to the Amount of ets. Supplemental records include any receipts from the

Gambling Winnings casino, parlor, etc.

Racing (horse, harness, dog, etc.). A record of the

You must report the full amount of your gambling winnings races, amounts of wagers, amounts collected on winning

for the year on Form 1040, line 21. You deduct your tickets, and amounts lost on losing tickets. Supplemental

gambling losses for the year on Schedule A (Form 1040), records include unredeemed tickets and payment records

line 28. You cannot deduct gambling losses that are more

from the racetrack.

than your winnings. Generally, nonresident aliens cannot

deduct gambling losses on Schedule A (Form 1040NR). Lotteries. A record of ticket purchases, dates, win-

nings, and losses. Supplemental records include unre-

You cannot reduce your gambling winnings by

deemed tickets, payment slips, and winnings statements.

!

CAUTION

your gambling losses and report the difference.

You must report the full amount of your winnings

as income and claim your losses (up to the amount of Impairment-Related Work Expenses

winnings) as an itemized deduction. Therefore, your rec-

ords should show your winnings separately from your If you have a physical or mental disability that limits your

losses. being employed, or substantially limits one or more of your



Page 12 Publication 529 (2007)

major life activities, such as performing manual tasks, Annuity Income, for more information about the tax treat-

walking, speaking, breathing, learning, and working, you ment of pensions and annuities.

can deduct your impairment-related work expenses.

Impairment-related work expenses are ordinary and

necessary business expenses for attendant care services Nondeductible Expenses

at your place of work and other expenses in connection

with your place of work that are necessary for you to be You cannot deduct the following expenses.

able to work.



Example. You are blind. You must use a reader to do

List of Nondeductible Expenses

your work. You use the reader both during your regular

working hours at your place of work and outside your • Adoption expenses.

regular working hours away from your place of work. The • Broker’s commissions that you paid in connection

reader’s services are only for your work. You can deduct with your IRA or other investment property.

your expenses for the reader as impairment-related work

expenses. • Burial or funeral expenses, including the cost of a

cemetery lot.

See Impairment-related work expenses, later under

How To Report. • Campaign expenses.

• Capital expenses.

Loss From Other Activities From Schedule • Check-writing fees.

K-1 (Form 1065-B), Box 2

• Club dues.

If the amount reported in Schedule K-1 (Form 1065-B), box • Commuting expenses.

2, is a loss, report it on Schedule A (Form 1040), line 28, or

Schedule A (Form 1040NR), line 16 (only if effectively • Fees and licenses, such as car licenses, marriage

connected with a U.S. trade or business). It is not subject to licenses, and dog tags.

the passive activity limitations. • Fines and penalties, such as parking tickets.

• Health spa expenses.

Officials Paid on a Fee Basis • Hobby losses —but see Hobby expenses, earlier.

If you are a fee-basis official, you can claim your expenses • Home repairs, insurance, and rent.

in performing services in that job as an adjustment to

income rather than as a miscellaneous itemized deduction. • Home security system.

See Publication 463 for more information. • Illegal bribes and kickbacks —see Bribes and kick-

backs in chapter 11 of Publication 535.

Performing Artists • Investment-related seminars.

If you are a qualified performing artist, you can deduct your • Life insurance premiums.

employee business expenses as an adjustment to income • Lobbying expenses.

rather than as a miscellaneous itemized deduction. If you

are an employee, complete Form 2106 or Form 2106-EZ. • Losses from the sale of your home, furniture, per-

See Publication 463 for more information. sonal car, etc.

• Lost or misplaced cash or property.

Repayments Under Claim of Right • Lunches with co-workers.



If you had to repay more than $3,000 that you included in • Meals while working late.

your income in an earlier year because at the time you • Medical expenses as business expenses.

thought you had an unrestricted right to it, you may be able

to deduct the amount you repaid, or take a credit against • Personal disability insurance premiums.

your tax. See Repayments in Publication 525 for more • Personal legal expenses.

information.

• Personal, living, or family expenses.

• Political contributions.

Unrecovered Investment in Annuity

• Professional accreditation fees.

A retiree who contributed to the cost of an annuity can

exclude from income a part of each payment received as a • Professional reputation, expenses to improve.

tax-free return of the retiree’s investment. If the retiree dies • Relief fund contributions.

before the entire investment is recovered tax free, any

unrecovered investment can be deducted on the retiree’s

• Residential telephone line.

final income tax return. See Publication 575, Pension and • Stockholders’ meeting, expenses of attending.



Publication 529 (2007) Page 13

• Tax-exempt income, expenses of earning or collect- Fines or Penalties

ing.

You cannot deduct fines or penalties you pay to a govern-

• The value of wages never received or lost vacation mental unit for violating a law. This includes an amount

time. paid in settlement of your actual or potential liability for a

• Travel expenses for another individual. fine or penalty (civil or criminal). Fines or penalties include

parking tickets, tax penalties, and penalties deducted from

• Voluntary unemployment benefit fund contributions. teachers’ paychecks after an illegal strike.

• Wristwatches.

Health Spa Expenses

Adoption Expenses You cannot deduct health spa expenses, even if there is a

You cannot deduct the expenses of adopting a child but job requirement to stay in excellent physical condition,

you may be able to take a credit for those expenses. For such as might be required of a law enforcement officer.

details, see Form 8839, Qualified Adoption Expenses.

Home Security System

Campaign Expenses You cannot deduct the cost of a home security system as a

miscellaneous deduction. However, you may be able to

You cannot deduct campaign expenses of a candidate for

claim a deduction for a home security system as a busi-

any office, even if the candidate is running for reelection to

ness expense if you have a home office. See Home Office

the office. These include qualification and registration fees

under Unreimbursed Employee Expenses, earlier, and

for primary elections. Publication 587.



Legal fees. You cannot deduct legal fees paid to defend

charges that arise from participation in a political cam- Investment-Related Seminars

paign.

You cannot deduct any expenses for attending a conven-

tion, seminar, or similar meeting for investment purposes.

Capital Expenses

You cannot currently deduct amounts paid to buy property Life Insurance Premiums

that has a useful life substantially beyond the tax year or You cannot deduct premiums you pay on your life insur-

amounts paid to increase the value or prolong the life of ance. You may be able to deduct, as alimony, premiums

property. If you use such property in your work, you may be you pay on life insurance policies assigned to your former

able to take a depreciation deduction. See Publication 946. spouse. See Publication 504, Divorced or Separated Indi-

If the property is a car used in your work, also see Publica- viduals, for information on alimony.

tion 463.



Lobbying Expenses

Check-Writing Fees on Personal Account

You generally cannot deduct amounts paid or incurred for

If you have a personal checking account, you cannot lobbying expenses. These include expenses to:

deduct fees charged by the bank for the privilege of writing

checks, even if the account pays interest. 1. Influence legislation,

2. Participate, or intervene, in any political campaign

Club Dues for, or against, any candidate for public office,

3. Attempt to influence the general public, or segments

Generally, you cannot deduct the cost of membership in of the public, about elections, legislative matters, or

any club organized for business, pleasure, recreation, or referendums, or

other social purpose. This includes business, social, ath-

letic, luncheon, sporting, airline, hotel, golf, and country 4. Communicate directly with covered executive branch

clubs. officials in any attempt to influence the official actions

or positions of those officials.



Commuting Expenses Lobbying expenses also include any amounts paid or

incurred for research, preparation, planning, or coordina-

You cannot deduct commuting expenses (the cost of trans- tion of any of these activities.

portation between your home and your main or regular

place of work). If you haul tools, instruments, or other items Covered executive branch official. A covered executive

in your car to and from work, you can deduct only the branch official, for the purpose of (4) above, is any of the

following officials.

additional cost of hauling the items, such as the rent on a

trailer to carry the items. • The President.

Page 14 Publication 529 (2007)

• The Vice President. of the meals is a deductible entertainment expense, or if

you are traveling away from home. See Publication 463 for

• Any officer or employee of the White House Office of information on deductible entertainment expenses and ex-

the Executive Office of the President, and the two

penses while traveling away from home.

most senior level officers of each of the other agen-

cies in the Executive Office.

• Any individual serving in a position in Level I of the Personal Legal Expenses

Executive Schedule under section 5312 of Title 5,

You cannot deduct personal legal expenses such as those

United States Code, any other individual designated for the following.

by the President as having Cabinet-level status, and

any immediate deputy of one of these individuals. • Custody of children.

• Breach of promise to marry suit.

Dues used for lobbying. If a tax-exempt organization • Civil or criminal charges resulting from a personal

notifies you that part of the dues or other amounts you pay relationship.

to the organization are used to pay nondeductible lobbying

expenses, you cannot deduct that part. • Damages for personal injury (except certain

whistleblower claims and unlawful discrimination

Exceptions. You can deduct certain lobbying expenses if claims), for more information about unlawful discrimi-

they are ordinary and necessary expenses of carrying on nation claims, see Deductions Subject to the 2%

your trade or business. Limit, earlier.

• You can deduct expenses for attempting to influence • Preparation of a title (or defense or perfection of a

the legislation of any local council or similar govern- title).

ing body (local legislation). An Indian tribal govern-

ment is considered a local council or similar • Preparation of a will.

governing body. • Property claims or property settlement in a divorce.

• You can deduct in-house expenses for influencing

You cannot deduct these expenses even if a result of the

legislation or communicating directly with a covered

legal proceeding is the loss of income-producing property.

executive branch official if the expenses for the tax

year are not more than $2,000 (not counting over-

head expenses). Political Contributions

• If you are a professional lobbyist, you can deduct the You cannot deduct contributions made to a political candi-

expenses you incur in the trade or business of lobby-

date, a campaign committee, or a newsletter fund. Adver-

ing on behalf of another person. Payments by the

tisements in convention bulletins and admissions to

other person to you for lobbying activities cannot be

dinners or programs that benefit a political party or political

deducted.

candidate are not deductible.



Lost or Mislaid Cash or Property

Professional Accreditation Fees

You cannot deduct a loss based on the mere disappear-

You cannot deduct professional accreditation fees such as

ance of money or property. However, an accidental loss or

the following.

disappearance of property can qualify as a casualty if it

results from an identifiable event that is sudden, unex- • Accounting certificate fees paid for the initial right to

pected, or unusual. See Publication 547. practice accounting.



Example. A car door is accidentally slammed on your

• Bar exam fees and incidental expenses in securing

initial admission to the bar.

hand, breaking the setting of your diamond ring. The dia-

mond falls from the ring and is never found. The loss of the • Medical and dental license fees paid to get initial

diamond is a casualty. licensing.



Lunches With Co-workers Professional Reputation

You cannot deduct the expenses of lunches with You cannot deduct expenses of radio and TV appearances

co-workers, except while traveling away from home on to increase your personal prestige or establish your profes-

business. See Publication 463 for information on deducti- sional reputation.

ble expenses while traveling away from home.

Relief Fund Contributions

Meals While Working Late

You cannot deduct contributions paid to a private plan that

You cannot deduct the cost of meals while working late. pays benefits to any covered employee who cannot work

However, you may be able to claim a deduction if the cost because of any injury or illness not related to the job.



Publication 529 (2007) Page 15

Residential Telephone Service

How To Report

You cannot deduct any charge (including taxes) for basic

local telephone service for the first telephone line to your You must itemize deductions on Schedule A (Form 1040 or

residence, even if it is used in a trade or business. Form 1040NR) to claim miscellaneous deductions.

• Report your miscellaneous deductions subject to the

Stockholders’ Meetings 2% limit on lines 21 through 23 and the total on

line 24 for Form 1040, or lines 9 through 11 and the

You cannot deduct transportation and other expenses you total on line 12 for Form 1040NR.

pay to attend stockholders’ meetings of companies in

which you own stock but have no other interest. You • Report your miscellaneous deductions not subject to

cannot deduct these expenses even if you are attending the 2% limit on line 28 for Form 1040, or line 16 for

the meeting to get information that would be useful in Form 1040NR.

making further investments.

See Instructions for Schedule A in your Form 1040 or

Form 1040NR instruction booklet for more information.

Tax-Exempt Income Expenses Form 2106 and Form 2106-EZ. If you have deductible

You cannot deduct expenses to produce tax-exempt in- employee business expenses, you usually must file either

come. You cannot deduct interest on a debt incurred or Form 2106 or Form 2106-EZ.

continued to buy or carry tax-exempt securities. You must file Form 2106 or Form 2106-EZ if any of the

If you have expenses to produce both taxable and following applies to you.

tax-exempt income, but you cannot identify the expenses 1. You are a qualified performing artist claiming per-

that produce each type of income, you must divide the forming-artist-related expenses.

expenses based on the amount of each type of income to

determine the amount that you can deduct. 2. You are a fee-basis state or local government official

claiming expenses in performing that job.

Example. During the year, you received taxable inter- 3. You are an individual with a disability and are claim-

est of $4,800 and tax-exempt interest of $1,200. In earning ing impairment-related work expenses. See Impair-

this income, you had total expenses of $500 during the ment-related work expenses, later.

year. You cannot identify the amount of each expense item

that is for each income item. Therefore, 80% ($4,800/ 4. You have travel expenses as a member of the

$6,000) of the expense is for the taxable interest and 20% Armed Forces reserves that you can deduct as an

($1,200/$6,000) is for the tax-exempt interest. You can adjustment to gross income.

deduct, subject to the 2% limit, expenses of $400 (80% of 5. You are claiming job-related vehicle, travel, transpor-

$500). tation, meal, or entertainment expenses. This does

not apply if either of the following is true.

Travel Expenses for Another Individual a. None of your expenses are deductible because of

You generally cannot deduct travel expenses you pay or the 2% limit on miscellaneous itemized deduc-

incur for a spouse, dependent, or other individual who tions.

accompanies you (or your employee) on personal or busi- b. Your only entry on Form 2106 or Form 2106-EZ is

ness travel. See Publication 463 for more information on on line 4. If this is true and (a) above is not true,

deductible travel expenses. enter the expenses directly on Schedule A (Form

1040), line 21, or Schedule A (Form 1040NR),

line 9.

Voluntary Unemployment Benefit Fund

Contributions

Who can use Form 2106-EZ. You can use the shorter

You cannot deduct voluntary unemployment benefit fund Form 2106-EZ instead of Form 2106 if both of the following

contributions you make to a union fund or a private fund. apply.

However, you can deduct contributions as taxes if state

law requires you to make them to a state unemployment 1. You are not reimbursed by your employer for any

fund that covers you for the loss of wages from unemploy- expenses. (Amounts your employer included as

ment caused by business conditions. wages on your Form W-2, box 1, are not considered

reimbursements.)

2. Either:

Wristwatches

a. You are not claiming vehicle expense, or

You cannot deduct the cost of a wristwatch, even if there is

a job requirement that you know the correct time to prop- b. You are using the standard mileage rate for your

erly perform your duties. vehicle.







Page 16 Publication 529 (2007)

Armed Forces reservists. If you have reserve-related schedule. Deduct expenses of preparing the remainder of

travel that takes you more than 100 miles from home, you the return on Form 1040, Schedule A, line 22, or Form

should first complete Form 2106 or Form 2106-EZ. See 1040NR, Schedule A, line 10.

Publication 463 for more information.

Depreciation. Use Part V of Form 4562, Depreciation and Example

Amortization, to claim the depreciation deduction for a cell

phone or for a computer that you did not use only in your Debra Smith is employed as a salesperson. She is not a

home office. Complete Form 4562, Part I, if you are claim- statutory employee. Her adjusted gross income is

ing a section 179 deduction. However, if you file Form $40,000, and she did not receive any reimbursement for

2106 or 2106-EZ, claim your depreciation deduction on her expenses. She has the following qualifying miscellane-

that form and not on Form 4562. ous deductions:

Computer used in a home office. Use Form 4562, Entertainment expenses . . . . . . . . . . . . . . . . . . . . $ 500

Transportation expenses . . . . . . . . . . . . . . . . . . . . 500

Part III, to claim the depreciation deduction for a computer Home office expenses . . . . . . . . . . . . . . . . . . . . . 1,100

you placed in service during 2007 and used only in your Tax return preparation . . . . . . . . . . . . . . . . . . . . . 200

home office. Complete Form 4562, Part I, if you are claim- Investment counseling . . . . . . . . . . . . . . . . . . . . . 300

ing a section 179 deduction. Gambling losses (reported $200 as income) . . . . . . . 200

Do not use Form 4562 to claim the depreciation deduc- Her filled-in Form 2106-EZ and part of her Schedule A

tion for a computer you placed in service before 2007 and (Form 1040) are shown. Of Debra’s deductions, only gam-

used only in your home office, unless you are otherwise bling losses are not subject to the 2%-of-adjusted-

required to file Form 4562. Instead, report the depreciation gross-income limit. She enters the gambling losses on

directly on the appropriate form. But if you are otherwise Schedule A, line 28. The other items are subject to the 2%

required to file Form 4562, report the depreciation in Part limit and are shown on Schedule A, lines 21, 22, and 23.

III, line 17.

Debra completes Form 2106-EZ, Part I. She enters the

Impairment-related work expenses. If you are an em- transportation expenses of $500 on line 2. The home office

ployee, you enter impairment-related work expenses on expenses of $1,100 are entered on line 4. The entertain-

Form 2106 or 2106-EZ. Enter on Schedule A (Form 1040), ment expenses of $500 are subject to the 50% limit and are

line 28, or Schedule A (Form 1040NR), line 16, that part of entered on line 5. She then completes the rest of the form.

the amount on Form 2106, line 10, or Form 2106-EZ, line The total expenses of $1,850, shown on line 6, are entered

6, that is related to your impairment. Enter the amount that on Schedule A, line 21.

is unrelated to your impairment on Schedule A (Form Debra’s expenses for tax return preparation are entered

1040), line 21, or Schedule A (Form 1040NR), line 9. on Schedule A, line 22. Her expenses for investment

If you are self-employed, enter your impairment-related counseling are entered on line 23. She then totals the

work expenses on the appropriate Form (Schedule C, amounts on lines 21, 22, and 23 and enters this total of

C-EZ, E, or F) used to report your business income and $2,350 on line 24. She enters $40,000, her adjusted gross

expenses. income, on line 25. She multiplies this amount by 2% (.02)

Tax preparation fees. Deduct expenses of preparing tax and enters the result of $800 on line 26. She subtracts the

schedules relating to profit or loss from business (Sched- amount on line 26 from the amount on line 24 and enters

ule C or C-EZ), rentals or royalties (Schedule E), or farm $1,550, her allowable deduction, on line 27.

income and expenses (Schedule F) on the appropriate









Publication 529 (2007) Page 17

OMB No. 1545-0074

2106-EZ

Form



Department of the Treasury

Unreimbursed Employee Business Expenses 2007

Attachment

Internal Revenue Service (99) Attach to Form 1040 or Form 1040NR. Sequence No. 54A

Your name Occupation in which you incurred expenses Social security number

Debra Smith Salesperson 111 00 1111

You May Use This Form Only if All of the Following Apply.

● You are an employee deducting ordinary and necessary expenses attributable to your job. 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 required to be considered necessary.

● You do not get reimbursed by your employer for any expenses (amounts your employer included in box 1 of your Form W-2 are

not considered reimbursements for this purpose).

● If you are claiming vehicle expense, you are using the standard mileage rate for 2007.

Caution: You can use the standard mileage rate for 2007 only if: (a) you owned the vehicle and used the standard mileage rate for the first year

you placed the vehicle in service, or (b) you leased the vehicle and used the standard mileage rate for the portion of the lease period after 1997.



Part I Figure Your Expenses





1 Vehicle expense using the standard mileage rate. Complete Part II and multiply line 8a by 48.5¢

(.485) 1



2 Parking fees, tolls, and transportation, including train, bus, etc., that did not involve overnight

travel or commuting to and from work 2 500



3 Travel expense while away from home overnight, including lodging, airplane, car rental, etc.

Do not include meals and entertainment 3



4 Business expenses not included on lines 1 through 3. Do not include meals and

entertainment 4 1,100



5 Meals and entertainment expenses: $ 500 × 50% (.50). (Employees subject to

Department of Transportation (DOT) hours of service limits: Multiply meal expenses incurred

while away from home on business by 75% (.75) instead of 50%. For details, see instructions.) 5 250



6 Total expenses. Add lines 1 through 5. Enter here and on Schedule A (Form 1040), line 21

(or on Schedule A (Form 1040NR, line 9)). (Armed Forces reservists, fee-basis state or local

government officials, qualified performing artists, and individuals with disabilities: See the

instructions for special rules on where to enter this amount.) 6 1,850



SCHEDULES A&B OMB No. 1545-0074

Schedule A—Itemized Deductions

(Form 1040)

Department of the Treasury

(Schedule B is on back) 2007

Attachment

Internal Revenue Service (99) Attach to Form 1040. See Instructions for Schedules A&B (Form 1040). Sequence No. 07





Job Expenses 21 Unreimbursed employee expenses—job travel, union

and Certain dues, job education, etc. Attach Form 2106 or 2106-EZ

Miscellaneous if required. (See page A-9.) 21 1,850

Deductions 22 Tax preparation fees 22 200

(See 23 Other expenses—investment, safe deposit box, etc. List

page A-9.) type and amount Investment counseling

23 300

24 Add lines 21 through 23 24 2,350

25 Enter amount from Form 1040, line 38 25 40,000

26 Multiply line 25 by 2% (.02) 26 800

27 Subtract line 26 from line 24. If line 26 is more than line 24, enter -0- 27 1,550

Other 28 Other—from list on page A-10. List type and amount gambling losses

Miscellaneous

Deductions 28 200









Page 18 Publication 529 (2007)

date you filed your return (3 weeks if you filed elec-

How To Get Tax Help tronically). Have your 2007 tax return available be-

cause you will need to know your social security

You can get help with unresolved tax issues, order free number, your filing status, and the exact whole dollar

publications and forms, ask tax questions, and get informa- amount of your refund.

tion from the IRS in several ways. By selecting the method • Download forms, instructions, and publications.

that is best for you, you will have quick and easy access to

tax help. • Order IRS products online.

• Research your tax questions online.

Contacting your Taxpayer Advocate. The Taxpayer

Advocate Service (TAS) is an independent organization • Search publications online by topic or keyword.

within the IRS whose employees assist taxpayers who are • View Internal Revenue Bulletins (IRBs) published in

experiencing economic harm, who are seeking help in the last few years.

resolving tax problems that have not been resolved

through normal channels, or who believe that an IRS • Figure your withholding allowances using the with-

system or procedure is not working as it should. holding calculator online at www.irs.gov/individuals.

You can contact the TAS by calling the TAS toll-free • Determine if Form 6251 must be filed using our Al-

case intake line at 1-877-777-4778 or TTY/TDD ternative Minimum Tax (AMT) Assistant.

1-800-829-4059 to see if you are eligible for assistance.

You can also call or write to your local taxpayer advocate, • Sign up to receive local and national tax news by

whose phone number and address are listed in your local email.

telephone directory and in Publication 1546, Taxpayer • Get information on starting and operating a small

Advocate Service – Your Voice at the IRS. You can file business.

Form 911, Request for Taxpayer Advocate Service Assis-

tance (And Application for Taxpayer Assistance Order), or

ask an IRS employee to complete it on your behalf. For

Phone. Many services are available by phone.

more information, go to www.irs.gov/advocate.

Taxpayer Advocacy Panel (TAP). The TAP listens to

taxpayers, identifies taxpayer issues, and makes sugges-

tions for improving IRS services and customer satisfaction.

If you have suggestions for improvements, contact the • Ordering forms, instructions, and publications. Call

TAP, toll free at 1-888-912-1227 or go to 1-800-829-3676 to order current-year forms, instruc-

www.improveirs.org. tions, and publications, and prior-year forms and in-

structions. You should receive your order within 10

Low Income Taxpayer Clinics (LITCs). LITCs are in-

days.

dependent organizations that provide low income taxpay-

ers with representation in federal tax controversies with the • Asking tax questions. Call the IRS with your tax

IRS for free or for a nominal charge. The clinics also questions at 1-800-829-1040.

provide tax education and outreach for taxpayers with

limited English proficiency or who speak English as a

• Solving problems. You can get face-to-face help

solving tax problems every business day in IRS Tax-

second language. Publication 4134, Low Income Taxpayer

payer Assistance Centers. An employee can explain

Clinic List, provides information on clinics in your area. It is

IRS letters, request adjustments to your account, or

available at www.irs.gov or at your local IRS office.

help you set up a payment plan. Call your local

Free tax services. To find out what services are avail- Taxpayer Assistance Center for an appointment. To

able, get Publication 910, IRS Guide to Free Tax Services. find the number, go to www.irs.gov/localcontacts or

It contains a list of free tax publications and describes other look in the phone book under United States Govern-

free tax information services, including tax education and ment, Internal Revenue Service.

assistance programs and a list of TeleTax topics. • TTY/TDD equipment. If you have access to TTY/

Accessible versions of IRS published products are TDD equipment, call 1-800-829-4059 to ask tax

available on request in a variety of alternative formats for questions or to order forms and publications.

people with disabilities.

• TeleTax topics. Call 1-800-829-4477 to listen to

Internet. You can access the IRS website at pre-recorded messages covering various tax topics.

www.irs.gov 24 hours a day, 7 days a week to:

• Refund information. To check the status of your

2007 refund, call 1-800-829-4477 and press 1 for

automated refund information or call

1-800-829-1954. Be sure to wait at least 6 weeks

• E-file your return. Find out about commercial tax from the date you filed your return (3 weeks if you

preparation and e-file services available free to eligi-

filed electronically). Have your 2007 tax return avail-

ble taxpayers.

able because you will need to know your social se-

• Check the status of your 2007 refund. Click on curity number, your filing status, and the exact whole

Where’s My Refund. Wait at least 6 weeks from the dollar amount of your refund.



Publication 529 (2007) Page 19

• Current-year forms, instructions, and publications.

Evaluating the quality of our telephone services. To

ensure IRS representatives give accurate, courteous, and

• Prior-year forms, instructions, and publications.

professional answers, we use several methods to evaluate • Bonus: Historical Tax Products DVD - Ships with the

the quality of our telephone services. One method is for a final release.

second IRS representative to listen in on or record random

telephone calls. Another is to ask some callers to complete

• Tax Map: an electronic research tool and finding aid.

a short survey at the end of the call. • Tax law frequently asked questions.

• Tax Topics from the IRS telephone response sys-

Walk-in. Many products and services are avail- tem.

able on a walk-in basis.

• Fill-in, print, and save features for most tax forms.

• Internal Revenue Bulletins.



• Products. You can walk in to many post offices, • Toll-free and email technical support.

libraries, and IRS offices to pick up certain forms, • The CD which is released twice during the year.

instructions, and publications. Some IRS offices, li- – The first release will ship the beginning of January

braries, grocery stores, copy centers, city and county 2008.

government offices, credit unions, and office supply – The final release will ship the beginning of March

stores have a collection of products available to print 2008.

from a CD or photocopy from reproducible proofs.

Also, some IRS offices and libraries have the Inter- Purchase the CD/DVD from National Technical Informa-

nal Revenue Code, regulations, Internal Revenue tion Service (NTIS) at www.irs.gov/cdorders for $35 (no

Bulletins, and Cumulative Bulletins available for re- handling fee) or call 1-877-CDFORMS (1-877-233-6767)

search purposes. toll free to buy the CD/DVD for $35 (plus a $5 handling

• Services. You can walk in to your local Taxpayer fee). Price is subject to change.

Assistance Center every business day for personal, CD for small businesses. Publication 3207, The

face-to-face tax help. An employee can explain IRS Small Business Resource Guide CD for 2007, is a

letters, request adjustments to your tax account, or must for every small business owner or any tax-

help you set up a payment plan. If you need to payer about to start a business. This year’s CD includes:

resolve a tax problem, have questions about how the

tax law applies to your individual tax return, or you’re • Helpful information, such as how to prepare a busi-

more comfortable talking with someone in person, ness plan, find financing for your business, and

visit your local Taxpayer Assistance Center where much more.

you can spread out your records and talk with an • All the business tax forms, instructions, and publica-

IRS representative face-to-face. No appointment is tions needed to successfully manage a business.

necessary, but if you prefer, you can call your local

Center and leave a message requesting an appoint- • Tax law changes for 2007.

ment to resolve a tax account issue. A representa- • Tax Map: an electronic research tool and finding aid.

tive will call you back within 2 business days to

schedule an in-person appointment at your conve- • Web links to various government agencies, business

nience. To find the number, go to www.irs.gov/local- associations, and IRS organizations.

contacts or look in the phone book under United • “Rate the Product” survey —your opportunity to sug-

States Government, Internal Revenue Service. gest changes for future editions.



Mail. You can send your order for forms, instruc- • A site map of the CD to help you navigate the pages

tions, and publications to the address below. You of the CD with ease.

should receive a response within 10 days after • An interactive “Teens in Biz” module that gives prac-

your request is received. tical tips for teens about starting their own business,

creating a business plan, and filing taxes.

National Distribution Center

P.O. Box 8903 An updated version of this CD is available each year in

Bloomington, IL 61702-8903 early April. You can get a free copy by calling

1-800-829-3676 or by visiting www.irs.gov/smallbiz.

CD/DVD for tax products. You can order Publi-

cation 1796, IRS Tax Products CD/DVD, and

obtain:









Page 20 Publication 529 (2007)

To help us develop a more useful index, please let us know if you have ideas for index entries.

Index See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.







A Criminal prosecutions: Home office . . . . . . . . . . . . . . . . . . . . . . 5

Activities not for profit . . . . . . . . . . . 9 Travel expenses for federal Impairment-related . . . . . . . . . . . . . 12

Adjustments to gross income: staff . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Investment . . . . . . . . . . . . . . . . . . 10, 14

Armed forces reservists’ travel Job search . . . . . . . . . . . . . . . . . . . . . . . 5

expenses . . . . . . . . . . . . . . . . . . . . . . 6 D Legal (See Legal expenses)

local lodging . . . . . . . . . . . . . . . . . . . . . 6

Performing artists . . . . . . . . . . . . . . . 13 Damages:

Meals . . . . . . . . . . . . . . . . . . . . . . . . 7, 15

State or local government officials Breach of employment

Meals and entertainment . . . . . . . . 6

paid on fee basis . . . . . . . . . . . . . 13 contract . . . . . . . . . . . . . . . . . . . . . . . 3

Nondeductible . . . . . . . . . . . . . . . . . . 13

Administrative fees: Deposits:

Personal . . . . . . . . . . . . . . . . . . . . . . . . 13

IRA trustees . . . . . . . . . . . . . . . . . . . . 11 Losses on . . . . . . . . . . . . . . . . . . . . . . 10

Production of income . . . . . . . . . . . . 8

Adoption expenses . . . . . . . . . . . . . . 14 Depreciation: Professional promotion . . . . . . . . . 15

Amortizable bond Cell phones . . . . . . . . . . . . . . . . . . . . . . 3 Tax-exempt income . . . . . . . . . . . . . 16

premium . . . . . . . . . . . . . . . . . . . . 11-12 Computers . . . . . . . . . . . . . . . . . . . . . 3, 9 Travel and transportation . . . . . . . . 6

Appraisal fees . . . . . . . . . . . . . . . . . . . . 9 Disabilities, persons with:

Armed forces: Work-related expenses . . . . . . . . . 12

Military uniforms . . . . . . . . . . . . . . . . . 8 Dividends: F

Fees to collect . . . . . . . . . . . . . . . . . . . 9 Federal estate tax . . . . . . . . . . . . . . . . 12

Reservists, travel expenses . . . . . 6

Service charges on reinvestment Fees (See also Dues;

Assistance (See Tax help)

plans . . . . . . . . . . . . . . . . . . . . . . . . . 11 Expenses) . . . . . . . . . . . . . . . . . . . . . . . 4

Dues (See also Expenses; Appraisal . . . . . . . . . . . . . . . . . . . . . . . . 9

B Fees) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Check-writing . . . . . . . . . . . . . . . . . . . 14

Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . 3 Chambers of Commerce . . . . . . . . . 4 Employment and outplacement

Bank accounts: Club . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 agency . . . . . . . . . . . . . . . . . . . . . . . . 5

Check-writing fees . . . . . . . . . . . . . . 14 Lobbying . . . . . . . . . . . . . . . . . . . . . . . . 15 Investment . . . . . . . . . . . . . . . . . . . 9, 10

Losses on deposits . . . . . . . . . . . . . 10 Professional societies . . . . . . . . . . . 4 IRA trustee . . . . . . . . . . . . . . . . . . . . . 11

Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Legal (See Legal expenses)

Bonds:

License . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Amortizable premium . . . . . . . . . . . 11

Professional accreditation . . . . . . 15

Breach of contract: E

Fines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Damages . . . . . . . . . . . . . . . . . . . . . . . . 3 Education expenses . . . . . . . . . . . . . . 8

Form 2106:

Bribes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Employee business expenses:

Employee business

Burial expenses . . . . . . . . . . . . . . . . . 13 Form 2106 and Form

expenses . . . . . . . . . . . . . . . . . . . . . 16

Business expenses (See Employee 2106-EZ . . . . . . . . . . . . . . . . . . . . . . 16

Performing artists . . . . . . . . . . . . . . . 13 Form 2106-EZ:

business expenses) Employee business

Business gifts . . . . . . . . . . . . . . . . . . . . 7 Unreimbursed . . . . . . . . . . . . . . . . . . . 3

expenses . . . . . . . . . . . . . . . . . . . . . 16

Employment:

Agency fees . . . . . . . . . . . . . . . . . . . . . 5 Form 4562:

C Breach of contract . . . . . . . . . . . . . . . 3 Depreciation and

Campaign contributions . . . . . . 4, 15 amortization . . . . . . . . . . . . . . . 4, 17

Entertainers and musicians (See

Campaign expenses . . . . . . . . . . . . . 14 Performing artists) Free tax services . . . . . . . . . . . . . . . . 19

Capital expenditures . . . . . . . . . . . . 14 Entertainment expenses . . . . . . . . . 7 Funeral expenses . . . . . . . . . . . . . . . . 13

Casualty losses . . . . . . . . . . . . . . . 9, 12 Estates:

Cell phones . . . . . . . . . . . . . . . . . . . . . . . 3 Federal estate tax . . . . . . . . . . . . . . 12 G

Chambers of Commerce Expenses (See also Dues; Gambling winnings and

dues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Fees) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 losses . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Check-writing fees . . . . . . . . . . . . . . . 14 Adoption . . . . . . . . . . . . . . . . . . . . . . . . 14 Government employees:

Claim of right repayments . . . . . . . 13 Campaign . . . . . . . . . . . . . . . . . . . . . . 14 Federal criminal investigation and

Clerical help, deductibility of . . . . . 9 Capital . . . . . . . . . . . . . . . . . . . . . . . . . . 14 prosecution travel

Commuting . . . . . . . . . . . . . . . . . . . . . 14 expenses . . . . . . . . . . . . . . . . . . . . . . 6

Clothes:

Education . . . . . . . . . . . . . . . . . . . . . . . . 8 State or local government officials

Protective . . . . . . . . . . . . . . . . . . . . . . . . 8

Employee business (See Employee paid on fee basis . . . . . . . . . . . . . 13

Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 business expenses)

Club dues . . . . . . . . . . . . . . . . . . . . . . . . 14 Entertainment . . . . . . . . . . . . . . . . . . . . 7

Comments on publication . . . . . . . . 2 Funeral and burial . . . . . . . . . . . . . . 13 H

Commuting expenses . . . . . . . . . . . 14 Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 7 Health spa . . . . . . . . . . . . . . . . . . . . . . . . 14

Computers: Health spa . . . . . . . . . . . . . . . . . . . . . . 14 Help (See Tax help)

Depreciation . . . . . . . . . . . . . . . . . . . 3, 9 Hobby . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Hobbies . . . . . . . . . . . . . . . . . . . . . . . . . . . 9



Publication 529 (2007) Page 21

Home: Losses: R

Security system . . . . . . . . . . . . . . . . . 14 Casualties and thefts . . . . . . . . 9, 12 Recordkeeping requirements:

Telephone service . . . . . . . . . . . . . . 16 Deposits . . . . . . . . . . . . . . . . . . . . . . . . 10 Computer used for home and

Home office: Gambling . . . . . . . . . . . . . . . . . . . . . . . 12 business . . . . . . . . . . . . . . . . . . . . . . 4

Computers . . . . . . . . . . . . . . . . . . . . . . 17 IRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Deductions, to verify . . . . . . . . . . . . . 2

Expenses . . . . . . . . . . . . . . . . . . . . . . . . 5 Mislaid cash or property . . . . . . . . 15 Gambling winnings and

Principal place of business . . . . . . 5 Partnership . . . . . . . . . . . . . . . . . . . . . 13 losses . . . . . . . . . . . . . . . . . . . . . . . . 12

Travel and transportation Roth IRA . . . . . . . . . . . . . . . . . . . . . . . . 10 Home office . . . . . . . . . . . . . . . . . . . . . . 5

expenses . . . . . . . . . . . . . . . . . . . . . . 7 Relief fund contributions . . . . . . . . 15

M Rent:

I Mail carriers, rural . . . . . . . . . . . . . . . . 6 Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Safe deposit box . . . . . . . . . . . . . . . . 11

Impairment-related work Malpractice insurance . . . . . . . . . . . . 3

expenses . . . . . . . . . . . . . . . . . . . . . . 12 Repayments:

Meal and lodging expenses . . . . . . 7

Claim of right . . . . . . . . . . . . . . . . . . . 13

Income aid payment . . . . . . . . . . . . . . 6 Lunches with coworkers . . . . . . . . 15

Income . . . . . . . . . . . . . . . . . . . . . . . . . 11

Income in respect of decedent: Working late . . . . . . . . . . . . . . . . . . . . 15

Income aid payments . . . . . . . . . . . . 3

Estate tax . . . . . . . . . . . . . . . . . . . . . . . 12 Medical examinations . . . . . . . . . . . . 3 Social Security benefits . . . . . . . . . 11

Individual retirement arrangements Mileage rate . . . . . . . . . . . . . . . . . . . . . . . 1 Reporting requirements:

(IRAs): Missing children, photographs Armed Forces reservists . . . . . . . . 17

Trustees’ fees . . . . . . . . . . . . . . . . . . 11 of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Computer used in a home

Insurance: More information (See Tax help) office . . . . . . . . . . . . . . . . . . . . . . . . . 17

Business liability . . . . . . . . . . . . . . . . . 3 Mutual funds: Depreciation . . . . . . . . . . . . . . . . . . . . 17

Life insurance . . . . . . . . . . . . . . . . . . . 14 Indirect deductions . . . . . . . . . . . . . . 9 Form 2106 and Form

Malpractice . . . . . . . . . . . . . . . . . . . . . . 3 2106-EZ . . . . . . . . . . . . . . . . . . . . . . 16

Personal disability . . . . . . . . . . . . . . 13 Impairment-related work

Interest income: N expenses . . . . . . . . . . . . . . . . . . . . . 17

Fees to collect . . . . . . . . . . . . . . . . . . . 9 Nondeductible expenses . . . . . 13-16 Itemized deductions . . . . . . . . . . . . 16

Investments: Not-for-profit activities . . . . . . . . . . . 9 Tax preparation fees . . . . . . . . . . . . 17

Annuity, unrecovered Investment Research expenses . . . . . . . . . . . . . . . 6

in . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 O ´ ´

Resume . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Deposits, losses on . . . . . . . . . . . . . 10 Rural mail carriers . . . . . . . . . . . . . . . . 6

Occupational taxes . . . . . . . . . . . . . . . 5

Fees and expenses . . . . . . . . . . . . . 10

Office:

Seminars . . . . . . . . . . . . . . . . . . . . . . . 14

Home (See Home office) S

Itemized deductions:

Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Deductions not subject to 2% S corporations:

Outplacement agency fees . . . . . . . 5 Indirect deductions . . . . . . . . . . . . . . 9

limit . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Deductions subject to 2% Safe deposit box . . . . . . . . . . . . . . . . . 11

limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 P Security systems, home . . . . . . . . . 14

How to report . . . . . . . . . . . . . . . . . . . 16 Partnerships: Seminars,

Indirect deductions . . . . . . . . . . . . . . 9 investment-related . . . . . . . . . . . . 14

J Passport expense . . . . . . . . . . . . . . . . 3 Service charges on dividend

Pass-through entities . . . . . . . . . . . . 9 reinvestment plans . . . . . . . . . . . . 11

Job search . . . . . . . . . . . . . . . . . . . . . . . . 5

Penalties . . . . . . . . . . . . . . . . . . . . . . . . . 14 Social Security repayments . . . . . 11

Performing artists . . . . . . . . . . . . . . . 13 State or local governments:

K Work clothes . . . . . . . . . . . . . . . . . . . . . 7 Officials paid on fee basis . . . . . . 13

Kickbacks . . . . . . . . . . . . . . . . . . . . . . . . 13 Personal expenses . . . . . . . . . . 13, 16 Stockholders’ meeting

Political contributions . . . . . . . . 4, 15 expenses . . . . . . . . . . . . . . . . . . . . . . 16

Campaign expenses . . . . . . . . . . . . 14 Suggestions for publication . . . . . 2

L

Legal expenses: Postal workers . . . . . . . . . . . . . . . . . . . . 6

Job-related . . . . . . . . . . . . . . . . . . . . . . 5 Production of income T

Personal . . . . . . . . . . . . . . . . . . . . . . . . 15 expenses . . . . . . . . . . . . . . . . . . . . 8-10 Tax help . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Political campaigns . . . . . . . . . . . . . 14 Professional accreditation Taxes:

Production of income . . . . . . . . . . . 10 fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Estate tax . . . . . . . . . . . . . . . . . . . . . . . 12

Unlawful discrimination Professional journals . . . . . . . . . . . . . 3 Occupational . . . . . . . . . . . . . . . . . . . . 5

claims . . . . . . . . . . . . . . . . . . . . . . . . 10 Professional reputation and Tax-exempt income

Licenses: marketing . . . . . . . . . . . . . . . . . . . . . . 15 expenses . . . . . . . . . . . . . . . . . . . . . . 16

Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Professional societies dues . . . . . . 4 Taxpayer Advocate . . . . . . . . . . . . . . 19

Life insurance . . . . . . . . . . . . . . . . . . . . 14 Prosecution travel expenses . . . . . 6 Telephones:

Lobbying . . . . . . . . . . . . . . . . . . . 4, 14, 15 Protective clothing . . . . . . . . . . . . . . . 8 Cell phone . . . . . . . . . . . . . . . . . . . . . . . 3

Local transportation . . . . . . . . . . . . . . 6 Publications (See Tax help) Residential service . . . . . . . . . . . . . 16



Page 22 Publication 529 (2007)

Theft losses . . . . . . . . . . . . . . . . . . . 9, 12 Trustees: Work:

Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 IRA administrative fees . . . . . . . . . 11 Clothes and uniforms . . . . . . . . . . . . 7

Travel and transportation TTY/TDD information . . . . . . . . . . . . 19 Impairment-related

expenses . . . . . . . . . . . . . . . . . . . . . . . 7 expenses . . . . . . . . . . . . . . . . . . . . . 12

Another individual, paid by U Supplies . . . . . . . . . . . . . . . . . . . . . . . . . 3

taxpayer . . . . . . . . . . . . . . . . . . . . . . 16 Tools . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 6

Unemployment benefit fund

Armed forces reservists . . . . . . . . . . 6 Travel and transportation

contributions . . . . . . . . . . . . . . . . . . 16

Commuting . . . . . . . . . . . . . . . . . . . . . 14 expenses . . . . . . . . . . . . . . . . . . . . . . 6

Uniforms, military . . . . . . . . . . . . . . . . . 8

Criminal investigations and Wristwatches . . . . . . . . . . . . . . . . 14, 16

Union dues . . . . . . . . . . . . . . . . . . . . . . . . 7

prosecutions . . . . . . . . . . . . . . . . . . 6

Education . . . . . . . . . . . . . . . . . . . . . . . . 8

Unreimbursed employee ■

expenses . . . . . . . . . . . . . . . . . . . . . 3-8

Indefinite work assignments . . . . . 6

Job search . . . . . . . . . . . . . . . . . . . . . . . 5

Local transportation . . . . . . . . . . . . . . 6 W

Research . . . . . . . . . . . . . . . . . . . . . . . . 6 Wagering winnings and

Temporary work assignments . . . 6 losses . . . . . . . . . . . . . . . . . . . . . . . . . . 12









Publication 529 (2007) Page 23