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Publication 535 (2003), Business Expenses
For use in preparing
2003
Returns
Table of Contents
Publication 535 - Introductory Material
Introduction
Important Changes for 2003
Important Changes for 2004
Important Reminders
1. Deducting Business Expenses
Introduction
Topics - This chapter discusses:
Useful Items - You may want to see:
What Can I Deduct?
Cost of Goods Sold
Capital Expenses
Personal Expenses
How Much Can I Deduct?
Not-for-profit limits.
At-risk limits.
Passive activities.
Net operating loss.
When Can I Deduct an Expense?
Economic performance.
Not-for-Profit Activities
Limit on Deductions and Losses
2. Employees' Pay
Introduction
Topics - This chapter discusses:
Useful Items - You may want to see:
Tests for Deducting Pay
Test 1—Reasonable
Test 2—For Services Performed
Kinds of Pay
Awards
Bonuses
Education Expenses
Fringe Benefits
Loans or Advances
Property
Reimbursements for Business Expenses
Sick Pay
Vacation Pay
3. Retirement Plans
Important Changes for 2003
Introduction
Topics - This chapter discusses:
Useful Items - You may want to see:
Simplified Employee Pension (SEP)
Contribution Limits
Deduction Limit
Salary Reduction Simplified Employee Pension (SARSEP)
Reporting SEP Contributions on Form W–2
SIMPLE Retirement Plans
SIMPLE IRA Plan
Qualified Plan
Kinds of Qualified Plans
Setting Up a Plan
Deduction Limits
Figuring Your Deduction
Example
Individual Retirement Arrangement (IRA)
4. Rent Expense
Introduction
Topics - This chapter discusses:
Rent
Conditional sales contract.
Leveraged leases.
Leveraged leases of limited-use property.
Taxes on Leased Property
Cost of Getting a Lease
Improvements by Lessee
Capitalizing Rent Expenses
5. Interest
Introduction
Topics - This chapter discusses:
Useful Items - You may want to see:
Allocation of Interest
Order of funds spent.
Payments from checking accounts.
Amounts paid within 30 days.
Optional method for determining date of reallocation.
Interest on a separate account.
Partnerships and S Corporations
Interest You Can Deduct
Statement.
Expenses paid to obtain a mortgage.
Prepayment penalty.
De minimis OID.
Constant-yield method.
Loan or mortgage ends.
Interest You Cannot Deduct
Penalties.
Who is a key person?
Exceptions for pre-June 1997, contracts.
Interest allocated to unborrowed policy cash value.
Capitalization of Interest
When To Deduct Interest
Prepaid interest.
Discounted loan.
Refunds of interest.
Prepaid interest.
Discounted loan.
Tax deficiency.
Related person.
Below-Market Loans
Limit on forgone interest for gift loans of $100,000 or less.
6. Taxes
Introduction
Topics - This chapter discusses:
Useful Items - You may want to see:
When To Deduct Taxes
Real Estate Taxes
Separate choices.
Making the choice.
Changing.
Income Taxes
Accrual of contested income taxes.
Employment Taxes
Other Taxes
7. Insurance
Important Change for 2003
Introduction
Topics - This chapter discusses:
Useful Items - You may want to see:
Deductible Premiums
Self-Employed Health Insurance Deduction
Nondeductible Premiums
Capitalized Premiums
When To Deduct Premiums
8. Costs You Can Deduct or Capitalize
Important Reminder
Introduction
Topics - This chapter discusses:
Useful Items - You may want to see:
Carrying Charges
Research and Experimental Costs
Product.
Costs not included.
Intangible Drilling Costs
Exploration Costs
Partnerships.
Development Costs
Circulation Costs
Environmental Cleanup Costs
Hazardous substance.
Qualified contaminated site.
Expenditures for depreciable property.
Individuals.
All other entities.
More than one environmental cleanup cost.
Retired Asset Removal Costs
Barrier Removal Costs
Grading.
Walks.
Parking lots.
Ramps.
Entrances.
Doors and doorways.
Stairs.
Floors.
Toilet rooms.
Water fountains.
Public telephones.
Elevators.
Controls.
Identification.
Warning signals.
Hazards.
International accessibility symbol.
Rail facilities.
Buses.
Rapid and light rail vehicles.
Other barrier removals.
9. Amortization
Introduction
Topics - This chapter discusses:
Useful Items - You may want to see:
How To Deduct Amortization
Going Into Business
Business Start-Up Costs
Costs of Organizing a Corporation
Costs of Organizing a Partnership
How To Amortize
Getting a Lease
Section 197 Intangibles
Section 197 Intangibles Defined
Assets That Are Not Section 197 Intangibles
Anti-Churning Rules
Incorrect Amount of Amortization Deducted
Disposition of Section 197 Intangibles
Reforestation Costs
Partnerships and S corporations.
Estates.
Maximum annual amortization deduction.
Partner or shareholder.
Estate.
Pollution Control Facilities
New identifiable treatment facility.
Research and Experimental Costs
10. Depletion
Important Reminder
Introduction
Topics - This chapter discusses:
Who Can Claim Depletion?
Mineral Property
Cost Depletion
Percentage Depletion
Oil and Gas Wells
Mines and Geothermal Deposits
Lessor's Gross Income
Timber
Timber units.
Depletion unit.
11. Business Bad Debts
Introduction
Topics - This chapter discusses:
Useful Items - You may want to see:
Business Bad Debt Defined
Accrual method.
Cash method.
Debt acquired from a decedent.
Liquidation.
Types of Business Bad Debts
When Debt Is Worthless
How To Treat
Specific Charge-Off Method
Nonaccrual-Experience Method
Recovery
Net operating loss (NOL) carryover.
More information.
Where To Deduct
12. Electric and Clean-Fuel Vehicles
Important Reminder
Introduction
Topics - This chapter discusses:
Useful Items - You may want to see:
Definitions
Deductions for Clean-Fuel Vehicle and Refueling Property
Deduction for Clean-Fuel Vehicle Property
Deduction for Clean-Fuel Vehicle Refueling Property
How To Claim the Deductions
Recapture of the Deductions
Basis Adjustments
Electric Vehicle Credit
Qualified Electric Vehicle
Amount of the Credit
How To Claim the Credit
Recapture of the Credit
Basis Adjustments
13. Other Expenses
Important Change for 2003
Important Changes for 2004
Introduction
Topics - This chapter discusses:
Useful Items - You may want to see:
Travel, Meals, and Entertainment
Reimbursements
Miscellaneous Expenses
Foreign expenses.
Meaning of generally enforced.
Kickbacks.
Medicare or Medicaid.
Form 1099–MISC.
Inventory.
Exception.
Property acquired after August 10, 1993 (or after July 25, 1991, if elected).
Property acquired before August 11, 1993.
Contracts entered into before October 3, 1989.
Disposition of franchise, trademark, or trade name.
Tax preparation fees.
Covered executive branch official.
Exceptions to denial of deduction.
Nonconformance penalty.
Indirect political contributions.
Type of deduction.
Repayment—$3,000 or less.
Repayment—over $3,000.
Method 1.
Method 2.
Repayment does not apply.
Year of deduction (or credit).
Telephone.
14. How To Get Tax Help
Publication 535 - Additional Material
Index
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