I travel for business and read somewhere that I can deduct on my tax return something like $30 per day for meal expenses when I travel. How does this work and what form do I use to take the deduction?
The IRS does permit business travelers to claim a meal allowance on a per diem basis. Taking a deduction for the meal allowance is done in lieu of directly reporting actual meal and other incidental costs that occur when you conduct business trips. Furthermore there is an assumption that you are not being reimbursed for your business expenses when you take this deduction.
The per diem amount you deduct is supposed to cover meals, laundry, tips, and other miscellaneous expenses, but does not include travel and lodging expenses which would be deductible in addition to the meal allowance. The per diem allowance is based on location, so where you travel makes a difference. The IRS expects that you will spend more on meals in a big city than you would in a small town and the deductible amount takes this into account.
The standard per diem allowance for 1997 was $30. This means that you are entitled to take a deduction for business meals and incidentals of $30 per day while traveling without having to keep receipts and track actual expenditures. However, the rate you use is the rate in effect for the city to which you travel. If your business travel was to Chicago, the per diem jumps to $42 per day. The allowance for business travelers coming to Indianapolis from another location was $38 per day.
The 1998 per diem allowance figures have not yet been published, but this gives you an idea of what the deduction will be, and there's a good chance the rates will remain the same for 1998 as these rates don. t change each year. You can request Publication 1542 from the IRS later this year to see the 1998 rates.
There are a couple of extra things to consider when you take the per diem allowance. First, the per diem amount needs to be pro-rated for the first and last day of your travel. The IRS has a formula for this pro-ration. The day is broken up into four 6-hour chucks: Midnight-6 a.m., 6-noon, noon-6 p.m., and 6-midnight. The allowance is quartered, and you can deduct 25% of the allowance for each chunk of the day in which you are traveling. So, if you leave on your trip at 9 a.m., you will be entitled to three chunks, or 75% of the per diem allowance, for your first day of travel.
The other issue is the fact that the IRS only allows you to deduct 50% of your business meals. So, even though the IRS is the one who is dictating this allowance, they. re going to take away half of it when you put it on your tax return.
There is a another per diem rate which covers lodging in addition to meals and incidental expenses. Again, the rate varies by city. This information is also available in IRS Publication 1542. For travel to Chicago, for example, the total per diem rate for 1997 was $142, made up of $42 for the meals and incidentals and $120 for lodging. The per diem for business trips to Indianapolis was $135 ($38 plus $117). And ultimately only 50% of the meal portion of that per diem will be deductible.
These rates are based on the amount the IRS pays its employees when they travel.
Deductions for business expenses are taken on Form 2106, Employee Business Expenses, if you are an employee, or Schedule C, Profit or Loss from Business, if you are self-employed.
If I have some tractor equipment that I rent to others, where do I put the income from this on my tax return?
If you rent the equipment regularly, and can consider yourself to be in the business of renting equipment, you should report the income on Schedule C. You'll be allowed to offset the rental income with deductions for advertising, repairs and maintenance on the equipment, and for depreciation. Some of the deduction amounts will have to be prorated if you use the equipment personally as well as renting it to others.
If the equipment is considered farm equipment and you have a farming operation, and the equipment rental is considered part of your farming income, report the income and related expense amounts on your Schedule F.
If you rent the equipment to others on a very occasional basis and don't really consider yourself to be in the business of renting equipment, you can report the income on page one of your 1040, on the line for Other Income. If there are expenses associated with renting the equipment such as repairs, show the amount on line 32 of your 1040. This is the line on which you add up adjustments to your income. There is no appropriate description on this line, so just write in a description like, "Expenses for maintaining rental property."
Do not report the rental income on Schedule E, which is a form specifically designed for reporting rental income, but only rentals of real estate