IRS Publication 463 (Travel, Entertainment, Gift, and Car Expenses (for 2015 Tax Returns))
Available at https://www.irs.gov/pub/irs-prior/p463–2015.pdf
The IRS has released its latest version of Publication 463 (Travel, Entertainment, Gift, and Car Expenses) for use in preparing 2015 tax returns. This publication explains when employees and sole proprietors may deduct work-related travel, entertainment, gift, or transportation expenses on their federal income tax returns, and how to calculate the deduction amounts. It also describes the records that must be kept to substantiate the expenses, and where and how deductible expenses must be reported. In addition, the reporting discussion summarizes the rules for accountable plans, which allow employer reimbursements for expenses to be excluded from income (in which case they are not deductible).
Few notable changes have been made from the 2014 version. The standard business mileage rate has been updated to reflect the applicable 2015 rate of 57.5 cents per mile (see our Checkpoint article). The publication also reflects various cost-of-living adjusted amounts related to the business use of cars, trucks, and vans. These include the depreciation limits for vehicle expenses and the fair market value threshold to determine when deductions for lease payments on trucks and vans must be reduced. (The reduction is referred to as the “inclusion amount.”) The adjusted vehicle-related amounts take into account the recent extension of the 50% special first-year depreciation allowance by the Consolidated Appropriations Act, 2016 (the same legislation that permanently restored transit parity—see our Checkpoint article).
EBIA Comment: Publication 463 covers a lot of ground, but it is especially detailed and useful in its handling of the deductions for business use of an employee’s vehicle. Those deductions will not apply if the employee’s expenses are reimbursed under an accountable plan, in which case the employer reimbursements are excluded from income and the vehicle expenses are not deductible by the employee. Business use of an employer-provided vehicle typically avoids income taxation as a working condition fringe benefit under Code § 132(d), and it also does not result in an employee deduction. For more information on accountable plans and employer-provided vehicles, see EBIA’s Fringe Benefits manual at Sections II.E (“Employee Business Expense Reimbursements”) and IV (“Company Cars and Related Benefits”).
Contributing Editors: EBIA Staff.