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2002 Inst 2106 Instructions

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2002 Inst 2106 Instructions Powered By Docstoc
					2007                                                                                                                 Department of the Treasury
                                                                                                                     Internal Revenue Service



Instructions for Form 2106
Employee Business Expenses
Section references are to the Internal                                                                   • Were not reimbursed by your
Revenue Code unless otherwise noted.            Purpose of Form                                          employer for any expense (amounts
                                                Use Form 2106 if you were an                             your employer included in box 1 of
General Instructions                            employee deducting ordinary and                          your Form W-2 are not considered
                                                necessary expenses for your job. See                     reimbursements for this purpose).
What’s New                                      the flowchart below to find out if you
                                                                                                         See Form 2106-EZ to find out if you
                                                must file this form.
Standard mileage rate. For 2007,                                                                         qualify to file it.
the standard mileage rate for each                 An ordinary expense is one that is
mile of business use is 481/2 cents.            common and accepted in your field of
Limit on depreciation and section               trade, business, or profession. A                        Recordkeeping
179 deduction. For 2007, the                    necessary expense is one that is                         You cannot deduct expenses for
first-year limit on depreciation and            helpful and appropriate for your                         travel (including meals unless you
section 179 deduction for most                  business. An expense does not have                       used the standard meal allowance),
vehicles has increased to $3,060. For           to be required to be considered                          entertainment, gifts, or use of a car or
trucks and vans, the first-year limit           necessary.                                               other listed property, unless you keep
remains $3,260. There is no longer a            Form 2106-EZ. You may be able to                         records to prove the time, place,
higher limit for electric automobiles.          file Form 2106-EZ, Unreimbursed                          business purpose, business
For more details, see page 8.                   Employee Business Expenses,                              relationship (for entertainment and
                                                provided you:                                            gifts), and amounts of these
                                                • Use the standard mileage rate (if                      expenses. Generally, you must also
                                                claiming vehicle expense), and                           have receipts for all lodging expenses


 Who Must File Form 2106
                                                             No          Do not file Form 2106.
     A Were you an employee during the year?
                                                                         See the instructions for Schedule C, C-EZ, E, or F.
               Yes

     B Did you have job-related business expenses?           No
                                                                        Do not file Form 2106.
               Yes                                                                                                                         Yes
                                                                           D Are you claiming job-related vehicle,
     C Were you reimbursed for any of your business               No         travel, transportation, meals, or
       expenses (count only reimbursements your employer                     entertainment expenses?                            File Form 2106 (but
       did not include in box 1 of your Form W-2)?                                                                              see Notes below).
                                                                                            No
               Yes
                                                                       E Are you a reservist, a qualified performing artist, a fee-basis   Yes
     F Did you use a vehicle in your job in 2007 that                    state or local government official, or an individual with a
                                                        No               disability claiming impairment-related work expenses? See
       you also used for business in a prior year?
                                                                         the line 10 instructions for definitions.

                                                                                        Do not file Form 2106. Enter expenses on Schedule A
            H Are your deductible expenses more than your                     No        (Form 1040), line 21 (or Schedule A (Form 1040NR), line
              reimbursements (count only reimbursements your                            9). These expenses include business gifts, education
              employer did not include in box 1 of your Form W-2)?         No           (tuition and books), home office, trade publications, etc.
              For rules covering employer reporting of reimbursed
   Yes        expenses, see the instructions for line 7.
                                                                                Do not file Form 2106.
     G Is either (1) or (2) true?                            No        Yes                   Notes
          1 You owned this vehicle and used the actual                                       ● Generally, employee expenses are deductible only on
       expense method in the first year you used the                                         line 21 of Schedule A (Form 1040) (or line 9 of Schedule A
       vehicle for business.                                      File Form 2106 (but
                                                                                             (Form 1040NR)). But reservists, qualified performing artists,
                                                                  see Notes).                fee-based state or local government officials, and
          2 You used a depreciation method other than
                                                                                             individuals with disabilities should see the instructions for
       straight line for this vehicle in a prior year.                                       line 10 to find out where to deduct employee expenses.
              Yes                                                                            ● Do not file Form 2106 if none of your expenses are
                                                                                             deductible because of the 2% limit on miscellaneous
            File Form 2106.                                                                  itemized deductions.


                                                                  Cat. No. 64188V
(regardless of the amount) and any         expenses. If you have deductible              • Transportation between places of
other expense of $75 or more.              expenses other than vehicle                   lodging or business and places where
                                           expenses, skip line 1 and do not              meals are taken, if suitable meals can
Additional Information                     include any qualified reimbursements          be obtained at the temporary duty
For more details about employee            in column A on line 7.                        site; and
business expenses, see:                    • More than your qualified                    • Mailing cost associated with filing
• Pub. 463, Travel, Entertainment,         reimbursements, complete Part II of           travel vouchers and payment of
Gift, and Car Expenses.                    Form 2106. Enter your total vehicle           employer-sponsored charge card
• Pub. 529, Miscellaneous                  expenses from line 29 on line 1 and           billings.
Deductions.                                the amount of your qualified                     Incidental expenses do not include
• Pub. 587, Business Use of Your           reimbursements in column A on                 expenses for laundry, cleaning and
Home (Including Use by Daycare             line 7.                                       pressing of clothing, lodging taxes, or
Providers).                                        If you are a rural mail carrier       the costs of telegrams or telephone
• Pub. 946, How To Depreciate
Property.                                     !    and received a qualified
                                           CAUTION reimbursement, you cannot
                                                                                         calls.
                                                                                            You can use an optional method
                                           use the standard mileage rate.                (instead of actual cost) for deducting
                                           Line 2. The expenses of commuting             incidental expenses only. The amount
Specific Instructions                      to and from work are not deductible.          of the deduction is $3 a day for
                                           See the line 15 instructions for the          incidental expenses paid or incurred
Part I—Employee                            definition of commuting.                      for travel away from home in 2007.
                                                                                         You can use this method only if you
Business Expenses and                      Line 3. Enter lodging and                     did not pay or incur any meal
                                           transportation expenses connected             expenses. You cannot use this
Reimbursements                             with overnight travel away from your          method on any day you use the
Fill in all of Part I if you were          tax home (defined next). Do not               standard meal allowance (defined in
reimbursed for employee business           include expenses for meals and                the instructions for line 5).
expenses. If you were not reimbursed       entertainment. For more details,
for your expenses, skip line 7 and         including limits, see Pub. 463.               Line 4. Enter other job-related
complete the rest of Part I.                                                             expenses not listed on any other line
                                               Tax home. Generally, your tax             of this form. Include expenses for
Step 1—Enter Your                          home is your regular or main place of         business gifts, education (tuition, fees
                                           business or post of duty regardless of        and books), home office, trade
Expenses                                   where you maintain your family                publications, etc. For details,
Line 1. If you were a rural mail           home. If you do not have a regular or         including limits, see Pub. 463 and
carrier, you can treat the amount of       main place of business because of             Pub. 529.
qualified reimbursement you received       the nature of your work, then your tax
as the amount of your allowable            home is the place where you                      If you are deducting home office
expense. Because the qualified             regularly live. If you do not fit in either   expenses, see Pub. 587 for special
reimbursement is treated as paid           of these categories, you are                  instructions on how to report these
under an accountable plan, your            considered an itinerant and your tax          expenses.
employer should not include the            home is wherever you work. As an                 If you are deducting depreciation
amount of reimbursement in your            itinerant, you are never away from            or claiming a section 179 deduction
income.                                    home and cannot claim a travel                for a cellular telephone or other
   You were a rural mail carrier if you    expense deduction. For more details           similar telecommunications
were an employee of the United             on the definition of a tax home, see          equipment, a home computer, etc.,
States Postal Service (USPS) who           Pub. 463.                                     see Form 4562, Depreciation and
performed services involving the              Generally, you cannot deduct any           Amortization, to figure the
collection and delivery of mail on a       expenses for travel away from your            depreciation and section 179
rural route.                               tax home for any period of temporary          deduction to enter on Form 2106,
   Qualified reimbursements.               employment of more than 1 year.               line 4.
These are the amounts paid by the          However, this 1-year rule does not               Do not include on line 4 any
USPS as an equipment maintenance           apply for a temporary period in which         educator expenses you deducted on
allowance under a collective               you were a federal employee certified         Form 1040, line 23, or any tuition and
bargaining agreement between the           by the Attorney General (or his or her        fees you deducted on Form 1040,
USPS and the National Rural Letter         designee) as traveling in temporary           line 34.
Carriers’ Association, but only if such    duty status for the U.S. government
amounts do not exceed the amount           to investigate or prosecute a federal                 You may be able to take a
that would have been paid under the        crime (or to provide support services           TIP credit for your educational
1991 collective bargaining agreement       for the investigation or prosecution of               expenses instead of a
(adjusted for changes in the               a federal crime).                             deduction. See Form 8863, Education
Consumer Price Index since 1991).             Incidental expenses. The term              Credits, for details.
    If you were a rural mail carrier and   “incidental expenses” means:                     Do not include expenses for meals
your vehicle expenses were:                • Fees and tips given to porters,             and entertainment, taxes, or interest
• Less than or equal to your qualified     baggage carriers, bellhops, hotel             on line 4. Deductible taxes are
reimbursements, do not file Form           maids, stewards or stewardesses and           entered on Schedule A (Form 1040),
2106 unless you have deductible            others on ships, and hotel servants in        lines 5 through 9 (or Schedule A
expenses other than vehicle                foreign countries;                            (Form 1040NR), lines 1 through 3).
                                                               -2-
Employees cannot deduct car loan          month. You can find these rates on         entertainment as well as other
interest.                                 the Internet at www.state.gov.             business expenses, you must
Note. If line 4 is your only entry, do       See Pub. 463 for details on how to      allocate the reimbursement so that
not complete Form 2106 unless you         figure your deduction using the            you know how much to enter in
are claiming:                             standard meal allowance, including         Column A and Column B of line 7.
• Performing-arts-related business        special rules for partial days of travel   Use the following worksheet to figure
expenses as a qualified performing        and transportation workers.                this allocation.
artist,
• Expenses for performing your job        Step 2—Enter                                     Reimbursement Allocation
as a fee-basis state or local             Reimbursements Received                                 Worksheet
government official, or                                                                      (keep for your records)
                                          From Your Employer for
• Impairment-related work expenses        Expenses Listed in Step 1
as an individual with a disability.                                                  1. Enter the total amount of
                                          Line 7. Enter reimbursements                  reimbursements your
    See the line 10 instructions for      received from your employer (or third         employer gave you that
definitions. If you are not required to   party) for expenses shown in Step 1           were not reported to you
file Form 2106, enter your expenses       that were not reported to you in box 1        in box 1 of Form W-2 . . . .
directly on Schedule A (Form 1040),       of your Form W-2. This includes
line 21 (or Schedule A (Form                                                         2. Enter the total amount of
                                          reimbursements reported under code            your expenses for the
1040NR), line 9).                         “L” in box 12 of Form W-2. Amounts            periods covered by this
Line 5. Enter your allowable meals        reported under code “L” are                   reimbursement . . . . . . . . .
and entertainment expense. Include        reimbursements you received for
meals while away from your tax home       business expenses that were not            3. Of the amount on line 2,
overnight and other business meals        included as wages on Form W-2                 enter your total expense for
                                          because the expenses met specific             meals and entertainment . .
and entertainment.
                                          IRS substantiation requirements.           4. Divide line 3 by line 2.
   Standard meal allowance.
                                              Generally, when your employer             Enter the result as a
Instead of actual cost, you may be
                                          pays for your expenses, the                   decimal (rounded to
able to claim the standard meal                                                         three places) . . . . . . . . . .
allowance for your daily meals and        payments should not be included in
incidental expenses while away from       box 1 of your Form W-2 if, within a        5. Multiply line 1 by line 4.
your tax home overnight. Under this       reasonable period of time, you:               Enter the result here and
method, instead of keeping records of     • Accounted to your employer for the          in Column B, line 7 . . . . . .
your actual meal expenses, you            expenses, and
deduct a specified amount,                • Were required to return, and did         6. Subtract line 5 from line 1.
                                          return, any payment not spent (or             Enter the result here and
depending on where you travel.                                                          in Column A, line 7 . . . . . .
However, you must still keep records      considered not spent) for business
to prove the time, place, and             expenses.
business purpose of your travel.              If these payments were included in     Step 3—Figure Expenses
   The standard meal allowance is         box 1, ask your employer for a             To Deduct on Schedule A
the federal M&IE rate. For most small     corrected Form W-2.
                                                                                     (Form 1040 or Form 1040NR)
localities in the United States, this         Accounting to your employer.
rate is $39 a day for the period from     This means that you gave your              Line 9. Generally, you can deduct
January 1 through December 31,            employer documentary evidence and          only 50% of your business meal and
2007. Most major cities and many          an account book, diary, or similar         entertainment expenses, including
other localities in the United States     statement to verify the amount, time,      meals incurred while away from home
qualify for higher rates. You can find    place, and business purpose of each        on business. However, if you were an
these rates on the Internet at www.       expense. You are also treated as           employee subject to the Department
gsa.gov. At the GSA home page click       having accounted for your expenses         of Transportation (DOT) hours of
on “Per Diem Rates.” At the Domestic      if either of the following applies.        service limits, that percentage is
Per Diem Rates page select “2007”         • Your employer gave you a fixed           increased to 75% for business meals
for the rates in effect for the period    travel allowance that is similar in form   consumed during, or incident to, any
January 1, 2007 –September 30,            to the per diem allowance specified        period of duty for which those limits
2007. Select “2008” for the period        by the Federal Government and you          are in effect.
October 1, 2007 –December 31,             verified the time, place, and business        Employees subject to the DOT
2007. However, you can apply the          purpose of the travel for that day.        hours of service limits include certain
rates in effect before October 1,         • Your employer reimbursed you for         air transportation employees, such as
2007, for expenses of all travel within   vehicle expenses at the standard           pilots, crew, dispatchers, mechanics,
the United States for 2007 instead of     mileage rate or according to a flat        and control tower operators;
the updated rates. For the period         rate or stated schedule, and you           interstate truck operators and
October 1, 2007 –December 31,             verified the date of each trip, mileage,   interstate bus drivers; certain railroad
2007, you must consistently use           and business purpose of the vehicle        employees, such as engineers,
either the rates for the first 9 months   use.                                       conductors, train crews, dispatchers,
of 2007 or the updated rates.                 See Pub. 463 for more details.         and control operations personnel; and
  For locations outside the                   Allocating your reimbursement.         certain merchant mariners.
continental United States, the            If your employer paid you a single         Line 10. If you are one of the
applicable rates are published each       amount that covers meals and               individuals discussed below, special
                                                            -3-
rules apply to deducting your                 4. Had adjusted gross income of           find the method most beneficial to
employee business expenses. Any             $16,000 or less before deducting            you. But when completing Form
part of the line 10 total that is not       expenses as a performing artist.            2106, fill in only the sections that
deducted according to the special                                                       apply to the method you choose.
                                            In addition, if you are married, you
rules should be entered on Schedule                                                        If you were a rural mail carrier and
                                            must file a joint return unless you
A (Form 1040), line 21 (or Schedule                                                     received an equipment maintenance
                                            lived apart from your spouse for all of
A (Form 1040NR), line 9).                                                               allowance, see the line 1 instructions.
                                            2007. If you file a joint return, you
   Ministers. Before entering your          must figure requirements (1), (2), and         For more information on the
total expenses on line 10, you must         (3) separately for both you and your        standard mileage rate and actual
reduce them by the amount allocable         spouse. However, requirement (4)            expenses, see Pub. 463.
to your tax-free allowance(s). See          applies to the combined adjusted
Pub. 517 for more information.              gross income of both you and your           Section A—General
   Armed Forces reservist                   spouse.                                     Information
(member of a reserve component).               If you meet all the requirements,        If you used two vehicles for business
You are a member of a reserve               include the part of the line 10 amount      during the year, use a separate
component of the Armed Forces of            attributable to performing-arts-related     column in Sections A, C, and D for
the United States if you are in the         expenses in the total on Form 1040,         each vehicle. If you used more than
Army, Navy, Marine Corps, Air Force,        line 24 (or Form 1040NR, line 34),          two vehicles, complete and attach a
or Coast Guard Reserve; the Army            and attach Form 2106 to your return.        second Form 2106, page 2.
National Guard of the United States;        Your performing-arts-related business       Line 11. Date placed in service is
the Air National Guard of the United        expenses are deductible whether or          generally the date you first start using
States; or the Reserve Corps of the         not you itemize deductions.                 your vehicle. However, if you first
Public Health Service.                         Disabled employee with                   start using your vehicle for personal
   If you qualify, include the part of      impairment-related work expenses.           use and later convert it to business
the line 10 amount attributable to the      Impairment-related work expenses            use, the vehicle is treated as placed
expenses for travel more than 100           are the allowable expenses of an            in service on the date you started
miles away from home in connection          individual with physical or mental          using it for business.
with your performance of services as        disabilities for attendant care at his or   Line 12. Enter the total number of
a member of the reserves on Form            her place of employment. They also          miles you drove each vehicle during
1040, line 24, and attach Form 2106         include other expenses in connection        2007. But if you converted your
to your return. These reserve-related       with the place of employment that           vehicle during the year from personal
travel expenses are deductible              enable the employee to work. See            to business use (or vice versa), enter
whether or not you itemize                  Pub. 463 for more details.                  the total miles for only the months
deductions. See Pub. 463 for                   If you qualify, enter the part of the    you drove the vehicle for business.
additional details on how to report         line 10 amount attributable to              Line 13. Do not include commuting
these expenses.                             impairment-related work expenses on         miles on this line; commuting miles
   Fee-basis state or local                 Schedule A (Form 1040), line 28 (or         are not considered business miles.
government official. You are a              Schedule A (Form 1040NR), line 16).         See the line 15 instructions for the
qualifying fee-basis official if you are    These expenses are not subject to           definition of commuting.
employed by a state or political            the 2% limit that applies to most other     Line 14. Divide line 13 by line 12 to
subdivision of a state and are              employee business expenses.                 figure your business use percentage.
compensated, in whole or in part, on                                                    However, if you converted your
a fee basis.                                Part II—Vehicle                             vehicle during the year from personal
   If you qualify, include the part of      Expenses                                    to business use (or vice versa),
the line 10 amount attributable to the                                                  multiply this percentage by the
expenses you incurred for services          There are two methods for computing         number of months you drove the
performed in that job in the total on       vehicle expenses —the standard              vehicle for business and divide the
Form 1040, line 24, and attach Form         mileage rate and the actual expense         result by 12.
2106 to your return. These employee         method. You can use the standard
                                            mileage rate for 2007 only if:              Line 15. Enter your average daily
business expenses are deductible                                                        round trip commuting distance. If you
whether or not you itemize                  • You owned the vehicle and used            went to more than one work location,
deductions.                                 the standard mileage rate for the first     figure the average.
   Qualified performing artist. You         year you placed the vehicle in
                                            service, or                                     Commuting. Generally,
are a qualified performing artist if you:                                               commuting is travel between your
   1. Performed services in the
                                            • You leased the vehicle and are            home and a work location. However,
                                            using the standard mileage rate for
performing arts as an employee for at       the entire lease period (except the         travel that meets any of the following
least two employers during the tax          period, if any, before 1998).               conditions is not commuting.
year,                                                                                   • You have at least one regular work
   2. Received from at least two of            You cannot use actual expenses           location away from your home and
those employers wages of $200 or            for a leased vehicle if you previously      the travel is to a temporary work
more per employer,                          used the standard mileage rate for          location in the same trade or
   3. Had allowable business                that vehicle.                               business, regardless of the distance.
expenses attributable to the                   If you have the option of using          Generally, a temporary work location
performing arts of more than 10% of         either the standard mileage rate or         is one where your employment is
gross income from the performing            actual expense method, you should           expected to last 1 year or less. See
arts, and                                   figure your expenses both ways to           Pub. 463 for more details.
                                                               -4-
• The travel is to a temporary work       schedule (for example, Form 2106 or                     Section D—Depreciation of
location outside the metropolitan area    Schedule C, C-EZ, E, or F).
where you live and normally work.
                                                                                                  Vehicles
• Your home is your principal place       Section C—Actual Expenses                               Depreciation is an amount you can
of business under section                                                                         deduct to recover the cost or other
                                          Line 23. Enter your total annual                        basis of your vehicle over a certain
280A(c)(1)(A) (for purposes of            expenses for gasoline, oil, repairs,
deducting expenses for business use                                                               number of years. In some cases, you
                                          insurance, tires, license plates, and                   can elect to expense, under section
of your home) and the travel is to        similar items. Do not include state
another work location in the same                                                                 179, part of the cost of your vehicle in
                                          and local personal property taxes or                    the year of purchase. For details, see
trade or business, regardless of          interest expense you paid. Deduct
whether that location is regular or                                                               Pub. 463.
                                          state and local personal property
temporary and regardless of distance.     taxes on Schedule A (Form 1040),                           Vehicle trade-in. If you traded
Line 16. If you do not know the total     line 7. Employees cannot deduct car                     one vehicle (the “old vehicle”) in on
actual miles you used your vehicle for    loan interest.                                          another vehicle (the “new vehicle”) in
commuting during the year, figure the     Line 24a. If during 2007 you rented                     2007, there are two ways you can
amount to enter on line 16 by             or leased instead of using your own                     treat the transaction.
multiplying the number of days during     vehicle, enter the cost of renting.                        1. You can elect to treat the
the year that you used each vehicle       Also, include on this line any                          transaction as a tax-free disposition
for commuting by the average daily        temporary rentals, such as when your                    of the old vehicle and the purchase of
round trip commuting distance in          car was being repaired, except for                      the new vehicle. If you make this
miles. However, if you converted your     amounts included on line 3.                             election, you treat the old vehicle as
vehicle during the year from personal                                                             disposed of at the time of the trade-in.
to business use (or vice versa), enter    Line 24b. If you leased a vehicle for                   The depreciable basis of the new
your commuting miles only for the         a term of 30 days or more, you may                      vehicle is the adjusted basis of the
period you drove your vehicle for         have to reduce your deduction for                       old vehicle (figured as if 100% of the
business.                                 vehicle lease payments by an amount                     vehicle’s use had been for business
                                          called the inclusion amount. You may                    purposes) plus any additional amount
Section B—Standard                        have an inclusion amount if:                            you paid for the new vehicle. You
Mileage Rate                                                            And the vehicle’s         then figure your depreciation
You may be able to use the standard                                  fair market value on         deduction for the new vehicle
mileage rate instead of actual            The lease term               the first day of the       beginning with the date you placed it
expenses to figure the deductible         began in:                       lease exceeded:         in service. You make this election by
costs of operating a passenger                                                                    completing Form 2106, Part II,
vehicle, including a van, sport utility   2007 . . . . . . . . . . . . . . . . . . . . $15,500    Section D.
vehicle (SUV), pickup, or panel truck.    2005 or 2006 . . . . . . . . . . . . . .       15,200      2. If you do not make the election
                                                                                                  described in (1), you must figure
   If you want to use the standard        2004 . . . . . . . . . . . . . . . . . . . .   17,500   depreciation separately for the
mileage rate for a vehicle you own,                                                               remaining basis of the old vehicle and
you must do so in the first year you      2003 . . . . . . . . . . . . . . . . . . . .   18,000
                                                                                                  for any additional amount you paid for
place your vehicle in service. In later   1999 through 2002 . . . . . . . . . .          15,500   the new vehicle. You must apply two
years, you can deduct actual                                                                      depreciation limits (see page 8). The
expenses instead, but you must use        1997 or 1998 . . . . . . . . . . . . . .       15,800
                                                                                                  limit that applies to the remaining
straight line depreciation.                                                                       basis of the old vehicle generally is
                                          If the lease term began before 1997, see
   If you lease your vehicle, you can     Pub. 463 to find out if you have an                     the amount that would have been
use the standard mileage rate, but        inclusion amount.                                       allowed had you not traded in the old
only if you use the rate for the entire                                                           vehicle. The limit that applies to the
lease period (except for the period, if                                                           additional amount you paid for the
any, before January 1, 1998).                 See Pub. 463 to figure the                          new vehicle generally is the limit that
                                          inclusion amount.                                       applies for the tax year it was placed
   If you use more than two vehicles,                                                             in service, reduced by the
complete and attach a second Form         Line 25. If during 2007 your
                                          employer provided a vehicle for your                    depreciation allowance for the
2106, page 2, providing the                                                                       remaining basis of the old vehicle.
information requested in lines 11         business use and included 100% of
                                          its annual lease value in box 1 of your                 You must use Form 4562 to compute
through 22. Be sure to include the                                                                your depreciation deduction. You
amount from line 22 of both pages in      Form W-2, enter this amount on line
                                          25. If less than 100% of the annual                     cannot use Form 2106, Part II,
the total on Form 2106, line 1.                                                                   Section D.
                                          lease value was included in box 1 of
   You can also deduct state and          your Form W-2, skip line 25.
local personal property taxes. Enter                                                                 If you elect to use the method
                                          Line 28. If you completed Section D,
these taxes on Schedule A (Form                                                                   described in (1), you must do so on a
                                          enter the amount from line 38. If you
1040), line 7. (Personal property                                                                 timely filed tax return (including
                                          used Form 4562 to figure your
taxes are not deductible on Form                                                                  extensions). Otherwise, you must use
                                          depreciation deduction, enter the total
1040NR.)                                                                                          the method described in (2).
                                          of the following amounts.
   If you are claiming the standard       • Depreciation allocable to your                        Line 30. Enter the vehicle’s actual
mileage rate for mileage driven in        vehicle(s) (from Form 4562, line 28).                   cost (including sales tax, unless
more than one business activity, you      • Any section 179 deduction                             deducted) or other basis (unadjusted
must figure the deduction for each        allocable to your vehicle(s) (from                      for prior years’ depreciation). If you
business on a separate form or            Form 4562, line 29).                                    traded in your vehicle, your basis is
                                                                    -5-
the adjusted basis of the old vehicle                   Limit for sport utility and certain      allowance and the class of property
(figured as if 100% of the vehicle’s                other vehicles. For sport utility and        for which you are making the election.
use had been for business purposes)                 certain other vehicles placed in                See Pub. 463, chapter 4, for more
plus any additional amount you pay                  service in 2007, the portion of              information on the special
for your new vehicle. Reduce your                   vehicle’s cost taken into account in         depreciation allowance.
basis by any deductible casualty loss,              figuring your section 179 deduction is
alternative motor vehicle credit,                   limited to $25,000. This rule applies           Use the worksheet below to figure
qualified electric vehicle credit, gas              to any 4-wheeled vehicle primarily           the amount of the special
guzzler tax, or deduction for                       designed or used to carry passengers         depreciation allowance.
clean-fuel vehicles you claimed.                    over public streets, roads, or
                                                    highways, that is not subject to any of             Worksheet for the Special
    If you converted the vehicle from
                                                    the passenger automobile limits                      Depreciation Allowance
personal use to business use, your
basis for depreciation is the smaller of            explained in the line 36 instructions,                (keep for your records)
the vehicle’s adjusted basis or its fair            and is rated at no more than 14,000
market value on the date of                         pounds gross vehicle weight.                 1. Enter the total amount from
conversion.                                         However, the $25,000 limit does not             line 30 . . . . . . . . . . . . . . . .
                                                    apply to any vehicle:
Line 31. If 2007 is the first year your             • Designed to have a seating                 2. Multiply line 1 by the
vehicle was placed in service and the                                                               percentage on Form 2106,
                                                    capacity of more than nine persons              line 14, and enter the result
percentage on line 14 is more than                  behind the driver’s seat, or
50%, you can elect to deduct as an                  • Equipped with a cargo area of at           3. Enter any section 179
expense a portion of the cost (subject              least 6 feet in interior length that is an      deduction . . . . . . . . . . . . . .
to a yearly limit). To calculate this               open area or is designed for use as          4. Subtract line 3 from line 2 . .
section 179 deduction, multiply the                 an open area but is enclosed by a
part of the cost of the vehicle that you            cap and is not readily accessible            5. Multiply line 4 by 50% (.50)
choose to expense by the percentage                 directly from the passenger                     and enter the result . . . . . . .
on line 14. The total of your                       compartment, or                              6. Multiply the applicable limit
depreciation and section 179                        • That has an integral enclosure,               explained in the line 36
deduction generally cannot be more                  fully enclosing the driver                      instructions by the percentage
than the percentage on line 14                      compartment and load carrying                   on Form 2106, line 14, and
multiplied by the applicable limit                  device, does not have seating                   enter the result. If line 36
explained in the line 36 instructions               rearward of the driver’s seat, and has
                                                                                                    limits do not apply, skip lines
(beginning on page 7). Your section                                                                 6 and 7, and enter the amount
                                                    no body section protruding more than            from line 5 on line 8 . . . . . . .
179 deduction for the year cannot be                30 inches ahead of the leading edge
more than the income from your job                  of the windshield.                           7. Subtract line 3 from line 6 . .
and any other active trade or
business on your Form 1040.                             Special depreciation allowance.          8. Enter the smaller of line 5 or
                                                    You may be able to claim a special              line 7. Add the result to any
         If you are claiming a section              depreciation allowance for your new             section 179 deduction (line 3
   !     179 deduction on other
 CAUTION property, or you placed more
                                                    vehicle if:
                                                    • You purchased it on or after August
                                                                                                    above) and enter the total on
                                                                                                    Form 2106, line 31 . . . . . . .
than $500,000 of section 179                        28, 2005,
property in service during the year,                • You placed it in service during            Line 32. To figure the basis for
use Form 4562 to figure your section                2007,                                        depreciation, multiply line 30 by the
179 deduction. Enter the amount of                  • The percentage on line 14 is more          percentage on line 14. From that
the section 179 deduction allocable to              than 50%, and                                result, subtract the full amount of any
your vehicle (from Form 4562, line                  • Your vehicle is qualified Gulf             section 179 deduction and special
12) on Form 2106, line 31.                          Opportunity (GO) Zone property.              depreciation allowance.
    Note. For section 179 purposes,                     The special allowance is an              Line 33. If you used the standard
the cost of the new vehicle does not                additional first year depreciation           mileage rate in the first year the
include the adjusted basis of the                   deduction of 50% of the depreciable          vehicle was placed in service and
vehicle you traded in.                              basis of your vehicle. However, your         now elect to use the actual expense
    Example.                                        total section 179 deduction, special         method, you must use the straight
                                                    depreciation allowance, and regular          line method of depreciation for the
Cost including taxes . . . . . . . .      $25,000   depreciation deduction cannot be             vehicle’s estimated useful life.
                                                    more than $3,060 for cars and $3,260         Otherwise, use the Depreciation
Adjusted basis of trade-in . . . .        − 3,000
                                                    for trucks and vans. See the line 36         Method and Percentage Chart (page
Section 179 basis . . . . . . . . . .     $22,000   instruction for depreciation limits.         7) to find the depreciation method
Limit on depreciation and                               You can elect not to claim the GO        and percentage to enter on line 33.
section 179 deduction . . . . . . .       $ 3,060   Zone special depreciation allowance             To use the chart, first find the date
                                                    for your car. If you make this election,     you placed the vehicle in service (line
Smaller of:                                         it applies to all property in the same       11). Then, select the depreciation
Section 179 basis, or limit on
                                                    class placed in service during the           method and percentage from column
depreciation and section 179                        year.                                        (a), (b), or (c). For example, if you
deduction . . . . . . . . . . . . . . .   $ 3,060       To make the election, attach a           placed a car in service on July 1,
                                                    statement to your return indicating          2007, and you use the method in
Percentage on line 14 . . . . . . .         × .75
                                                    that you are electing not to claim the       column (a), enter “200 DB 20%” on
Section 179 deduction . . . . . .         $ 2,295   GO Zone special depreciation                 line 33.
                                                                       -6-
                                          Depreciation Method and Percentage Chart — Line 33
           Date Placed in Service                            (a)1                                 (b)1                                 (c)
Oct. 1 – Dec. 31, 2007                               200 DB          5.0 %                150 DB          3.75%                   SL          2.5%
Jan. 1 – Sept. 30, 2007                              200 DB         20.0                  150 DB         15.0                     SL         10.0
Oct. 1 – Dec. 31, 2006                               200 DB         38.0                  150 DB         28.88                    SL         20.0
Jan. 1 – Sept. 30, 2006                              200 DB         32.0                  150 DB         25.5                     SL         20.0
Oct. 1 – Dec. 31, 2005                               200 DB         22.8                  150 DB         20.21                    SL         20.0
Jan. 1 – Sept. 30, 2005                              200 DB         19.2                  150 DB         17.85                    SL         20.0
Oct. 1 – Dec. 31, 2004                               200 DB         13.68                 150 DB         16.4                     SL         20.0
Jan. 1 – Sept. 30, 2004                              200 DB         11.52                 150 DB         16.66                    SL         20.0
Oct. 1 – Dec. 31, 2003                               200 DB         10.94                 150 DB         16.41                    SL         20.0
Jan. 1 – Sept. 30, 2003                              200 DB         11.52                 150 DB         16.66                    SL         20.0
Oct. 1 – Dec. 31, 2002                               200 DB          9.58                 150 DB         14.35                    SL         17.5
Jan. 1 – Sept. 30, 2002                              200 DB          5.76                 150 DB          8.33                    SL         10.0
Prior to   20022
1You can use this column only if the business use of your car is more than 50%.
2If
  your car was subject to the maximum limits for depreciation and you have unrecovered basis in the car, you can continue to claim depreciation.
See Pub. 463 for more information.



   For vehicles placed in service                     Column (c) —straight line                     amount figured by multiplying the
before 2007, use the same method                  method. You must use column (c) if                result in (1) by 50%; or
you used on last year’s return unless             the business use percentage on line                  3. After 2001, from October 1
a decline in your business use                    14 is 50% or less. The method for                 through December 31, enter the
requires a change to the straight line            these vehicles is the straight line               amount figured by multiplying the
method. For vehicles placed in                    method over 5 years. The use of this              result in (1) by the percentage shown
service during 2007, select the                   column is optional for these vehicles             below for the month you disposed of
depreciation method and percentage                if the business use percentage on line            the vehicle.
                                                  14 is more than 50%.
after reading the explanation for each
column.                                           Note. If your vehicle was used more               Month                                 Percentage
                                                  than 50% for business in the year it
   Column (a) —200% declining                     was placed in service and used 50%                Jan., Feb., March . . . . . . . .               12.5%
                                                  or less in a later year, part of the
balance method. You can use                                                                         April, May, June . . . . . . . . .              37.5%
                                                  depreciation and section 179
column (a) only if the business use               deduction previously claimed may                  July, Aug., Sept. . . . . . . . . .             62.5%
percentage on line 14 is more than                have to be added back to your
50%. Of the three depreciation                    income in the later year. Figure the              Oct., Nov., Dec. . . . . . . . . .              87.5%
methods, the 200% declining balance               amount to be included in income on
method may give you the largest                   Form 4797, Sales of Business
depreciation deduction for the first 3                                                              Line 36. Using the applicable chart
                                                  Property.
years (after considering the                                                                        for your type of vehicle, find the date
depreciation limit for your vehicle).                      If you placed other business             you placed your vehicle in service.
See the depreciation limit tables on                 !     property in service in the
                                                   CAUTION same year you placed your
                                                                                                    Then, enter on line 36 the
                                                                                                    corresponding amount from the
page 8.
                                                  vehicle in service or you used your               “Limit” column. Before using the
   Column (b) —150% declining                     vehicle mainly within an Indian                   charts, please read the following
balance method. You can use                       reservation, you may not be able to               definitions.
column (b) only if the business use               use the chart. See Pub. 946 to figure             • A passenger automobile is a
percentage on line 14 is more than                your depreciation.                                4-wheeled vehicle manufactured
50%. The 150% declining balance                   Line 34. If you sold or exchanged                 primarily for use on public roads that
method may give you a smaller                     your vehicle during the year, use the             is rated at 6,000 pounds unloaded
depreciation deduction than in                    following instructions to figure the              gross vehicle weight or less (for a
column (a) for the first 3 years.                 amount to enter on line 34.                       truck or van, gross vehicle weight is
However, you will not have a                          If your vehicle was placed in                 substituted for unloaded gross vehicle
“depreciation adjustment” on this                 service:                                          weight). Certain vehicles, such as
vehicle for the alternative minimum                   1. Before 2002, enter the result of           ambulances, hearses, and taxicabs,
tax. This may result in a smaller tax             multiplying line 32 by the percentage             are not considered passenger
liability if you must file Form 6251,             on line 33;                                       automobiles and are not subject to
Alternative Minimum Tax —                             2. After 2001, from January 1                 the line 36 limits. See Pub. 463 for
Individuals.                                      through September 30, enter the                   more details.
                                                                            -7-
• A truck or van is a passenger               Paperwork Reduction Act Notice.          material in the administration of any
automobile built on a truck chassis,          We ask for the information on this       Internal Revenue law. Generally, tax
including a minivan or a sport utility        form to carry out the Internal           returns and return information are
vehicle built on a truck chassis.             Revenue laws of the United States.       confidential, as required by section
   If your vehicle is not subject to any      You are required to give us the          6103.
of the line 36 limits, skip lines 36 and      information. We need it to ensure that      The average time and expenses
37, and enter the amount from line 35         you are complying with these laws        required to complete and file this form
on line 38.                                   and to allow us to figure and collect    will vary depending on individual
                                              the right amount of tax.                 circumstances. For the estimated
Limits for Passenger Automobiles                 You are not required to provide the   averages, see the instructions for
    (Except Trucks and Vans)                  information requested on a form that     your income tax return.
                                              is subject to the Paperwork Reduction       If you have suggestions for making
Date Vehicle Was
                                              Act unless the form displays a valid     this form simpler, we would be happy
Placed in Service                     Limit
                                              OMB control number. Books or             to hear from you. See the instructions
                                              records relating to a form or its        for your income tax return.
Jan. 1 – Dec. 31, 2007 . . . . . .   $3,060
                                              instructions must be retained as long
Jan. 1 – Dec. 31, 2006 . . . . . .    4,800   as their contents may become
Jan. 1 – Dec. 31, 2005 . . . . . .    2,850
Jan. 1 – Dec. 31, 2004 . . . . . .    1,675
Jan. 1, 1995 – Dec. 31, 2003          1,775

     Limits for Trucks and Vans

Date Vehicle Was
Placed in Service                     Limit

Jan. 1 – Dec. 31, 2007 . . . . . .   $3,260
Jan. 1 – Dec. 31, 2006 . . . . . .    5,200
Jan. 1 – Dec. 31, 2005 . . . . . .    3,150
Jan. 1 – Dec. 31, 2004 . . . . . .    1,875
Jan. 1 – Dec. 31, 2003 . . . . . .    1,975
Jan. 1, 1995 – Dec. 31, 2002          1,775




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