Publication 463
Introductory Material

This is archived information that pertains only to the 2003 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Standard mileage rate. The standard mileage rate for the cost of operating your car in 2003 is 36 cents a mile for all business miles. Car expenses and use of the standard mileage rate are explained in chapter 4.

Special depreciation allowance. The special depreciation allowance increases from 30% to 50% for most new vehicles acquired after May 5, 2003. If the 50% allowance applies, you can choose to use the 30% allowance or elect out entirely for any class of property. See Special Depreciation Allowance in chapter 4.

Depreciation limits on cars. The total section 179 deduction and depreciation (including the special depreciation allowance) you can claim on cars (other than trucks and vans) you use for business purposes has increased for cars first placed in service in 2003. See Depreciation limits in chapter 4.

Depreciation limits on trucks and vans. Beginning in 2003, the total section 179 deduction and depreciation (including the special depreciation allowance) you can claim on a truck or van is generally higher than the amount you can claim for a car that is not a truck or van. Trucks and vans are passenger automobiles, including minivans and sport utility vehicles (SUVs), that are built on a truck chassis. See Depreciation Limits in chapter 4.

Armed Forces reservists. Beginning in 2003, if you are a member of a reserve component of the Armed Forces of the United States, you may be able to deduct some of your reserve-related travel costs as an adjustment to gross income rather than as an itemized deduction. For more information, see Armed Forces Reservists Traveling More Than 100 Miles From Home under Special Rules, in chapter 6.

Standard meal allowance. The standard meal allowance (also referred to as the limit on meals and incidental expenses (M&IE rate)) for most small localities in the United States is $30 a day from January 1, 2003, through September 30, 2003, and $31 a day from October 1, 2003, through December 31, 2003. However, the standard meal allowance is higher for most major cities and many other localities in the continental United States. See Publication 1542, Per Diem Rates. These rates (allowances/limits) are also listed in Appendix A of Chapter 41, Part 301 of the Code of Federal Regulations. If you have a computer, you can find them on the Internet at www.policyworks.gov/perdiem. Click on “2003 Domestic Per Diem Rates” for the period January 1, 2003, through September 30, 2003, and on “2004 Domestic Per Diem Rates” for the period October 1, 2003, through December 31, 2003. Use of the standard meal allowance is explained in chapter 1.

Important Reminders

Meal expenses when subject to “hours of service” limits. Generally, you can deduct only 50% of your business-related meal expenses while traveling away from your tax home for business purposes. You can deduct a higher percentage if the meals take place during or incident to any period subject to the Department of Transportation's “hours of service” limits. (These limits apply to certain workers who are under certain federal regulations.) The percentage is 65% for 2003. Business meal expenses are covered in chapter 1.

Limits that apply to employee deductions. If you are an employee, deduct your work-related expenses discussed in this publication as a miscellaneous itemized deduction on Schedule A (Form 1040). Generally, the amount of miscellaneous itemized deductions you can deduct is limited to the amount that is more than 2% of your adjusted gross income. It may be further limited if your adjusted gross income is more than $139,500 ($69,750 if you are married filing separately). How to report your expenses is covered in chapter 6.

Photographs of missing children. The Internal Revenue 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 publication 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 recognize a child.

Introduction

You may be able to deduct the ordinary and necessary business-related expenses you have for:

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.

This publication explains:

Who does not need to use this publication.   Partnerships, corporations, trusts, and employers who reimburse their employees for business expenses should refer to their tax form instructions and chapter 13 of Publication 535, Business Expenses, for information on deducting travel, meals, entertainment, and transportation expenses.

  If you are an employee, you will not need to read this publication if all of the following are true.

1. You fully accounted to your employer for your work-related expenses.

2. You received full reimbursement for your expenses.

3. Your employer required you to return any excess reimbursement and you did so.

4. There is no amount shown with a code “L” in box 12 of your Form W–2, Wage and Tax Statement.

If you meet these four conditions, there is no need to show the expenses or the reimbursements on your return. If you would like more information on reimbursements and accounting to your employer, see chapter 6.

  

  If you meet these conditions and your employer included reimbursements on your Form W–2 in error, ask your employer for a corrected Form W–2.

Useful Items - You may want to see:

See chapter 7, How To Get Tax Help, for information about getting these publications and forms.

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