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Publication 535
Business Expenses
For use in preparing
2002
Returns
Table of Contents
[ Click for Index ]
Publication 535, Business Expenses
Important Changes for 2002
Important Change for 2003
Important Reminder
1. Deducting Business Expenses
What Can I Deduct?
Cost of Goods Sold
Capital Expenses
Going Into Business
Business Assets
Improvements
Capital or Deductible Expenses
Personal Expenses
How Much Can I Deduct?
When Can I Deduct an Expense?
Not-for-Profit Activities
Limit on Deductions and Losses
2. Employees' Pay
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 Change for 2002
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
Who Can Set Up a SIMPLE IRA Plan?
Who Can Participate in a SIMPLE IRA Plan?
How To Set Up a SIMPLE IRA Plan
Notification Requirement
Contribution Limits
When To Deduct Contributions
Where To Deduct Contributions
Tax Treatment of Contributions
Distributions (Withdrawals)
More Information on SIMPLE IRA Plans
Qualified Plan
Kinds of Qualified Plans
Defined Contribution Plan
Defined Benefit Plan
Setting Up a Plan
Deduction Limits
Figuring Your Deduction
Example
Individual Retirement Arrangement (IRA)
4. Rent Expense
Rent
Taxes on Leased Property
Cost of Getting a Lease
Improvements by Lessee
Capitalizing Rent Expenses
5. Interest
Allocation of Interest
Partnerships and S Corporations
Interest You Can Deduct
Interest You Cannot Deduct
Capitalization of Interest
When To Deduct Interest
Below-Market Loans
6. Taxes
When To Deduct Taxes
Real Estate Taxes
Income Taxes
Employment Taxes
Other Taxes
7. Insurance
Important Changes for 2002
Important Change for 2003
Deductible Premiums
Self-Employed Health Insurance Deduction
Nondeductible Premiums
Capitalized Premiums
When To Deduct Premiums
8. Costs You Can Deduct or Capitalize
Important Change for 2002
Carrying Charges
Research and Experimental Costs
Intangible Drilling Costs
Exploration Costs
Development Costs
Circulation Costs
Environmental Cleanup Costs
Retired Asset Removal Costs
Barrier Removal Costs
9. Amortization
How To Deduct Amortization
Going Into Business
Business Start-Up Costs
Costs of Organizing a Corporation
Costs of Organizing a Partnership
How To Amortize
How To Make the Choice
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
Amended Return
Changing Your Accounting Method
Disposition of Section 197 Intangibles
Reforestation Costs
Pollution Control Facilities
Research and Experimental Costs
10. Depletion
Important Change
Important Reminder
Who Can Claim Depletion?
Mineral Property
Cost Depletion
Percentage Depletion
Oil and Gas Wells
Independent Producers and Royalty Owners
Partnerships and S Corporations
Natural Gas Wells
Mines and Geothermal Deposits
Lessor's Gross Income
Timber
11. Business Bad Debts
Business Bad Debt Defined
Types of Business Bad Debts
When Debt Is Worthless
How To Treat
Specific Charge-Off Method
Nonaccrual-Experience Method
Recovery
Where To Deduct
12. Electric and Clean-Fuel Vehicles
Important Change for 2002
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
Clean-Fuel Vehicle Property
Clean-Fuel Vehicle Refueling Property
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 Changes for 2002
Travel, Meals, and Entertainment
Reimbursements
Accountable Plans
Per Diem and Car Allowances
Meals and Entertainment
Nonaccountable Plans
Other Reimbursed Expenses
Miscellaneous Expenses
14. How To Get Tax Help
Index
[ Click for Table of Contents ]
A
Accountable plan
Advertising
Advertising
Amortization, Anti-abuse rule
Amortization, Anti-churning rules
Amortization, Dispositions of section 197 intangibles
Amortization, How to amortize
Amortization, How to deduct
Amortization, Incorrect amount deducted
Amortization, Partnership organization costs
Amortization, Pollution control facilities
Amortization, Related person
Amortization, Section 197 intangibles defined
Anticipated liabilities
Assessments, local
Attorney fees
Awards, Length-of-service
Awards, Safety achievement
B
Bad debts (
See
Business bad debts )
Black lung payments
Bonuses, Employee
Business bad debts, Defined
Business bad debts, How to treat
Business bad debts, Recovery
Business bad debts, Types of
Business bad debts, When worthless
Business bad debts, Where to deduct
Business, Assets
Business, Books and records
Business, Meal expenses
Business, Use of car
Business, Use of car
C
Campaign contribution
Capital expenses
Capital expenses
Capitalization of interest
Car allowance
Charitable, Contributions
Circulation costs, newspapers and periodicals
Clean-fuel property
Clean-fuel property
Clean-fuel property
Cleanup costs, environmental
Club dues
Commitment fees
Computer software
Constant-yield method, OID
Contested liability
Copyrights
Cost depletion
Cost of getting lease
Cost of getting lease
Cost of goods sold
Covenant not to compete
D
De minimis OID
Debt-financed, Acquisition
Debt-financed, Distributions
Definitions, Achievement award
Definitions, Clean-burning fuel
Definitions, Clean-fuel vehicle property
Definitions, Clean-fuel vehicle refueling property
Definitions, Motor vehicle
Definitions, Nonqualifying property
Definitions, Qualified electric vehicle
Demolition expenses
Depletion, Mineral property
Depletion, Oil and gas wells
Depletion, Percentage table
Depletion, Timber
Depreciation
Driveways
E
Economic interest
Economic performance
Education expenses
Education expenses
Election, SIMPLE IRA period
Electric vehicle credit
Employee benefit programs
Employment taxes
Entertainment tickets
Environmental remediation costs (
See
Environmental cleanup costs )
Experimentation costs
Experimentation costs
F
Fees, Tax return preparation
Forgone interest
Form, 1098
Form, 3115
Form, 4562
Form, 4562
Form, 4952
Form, 5213
Form, 5304-SIMPLE
Form, 5305-S
Form, 5305-SA
Form, 5305-SEP
Form, 5305-SIMPLE
Form, 8582
Form, 8826
Form, 8834
Form, 8885
Form, T
Form, W-2
Fringe benefits
Fuel taxes
G
Gas wells
Geothermal wells
Gifts, nominal value
Going into business
Going into business
Goodwill
H
Health insurance, deduction for self-employed
Heating equipment
Home, business use
I
Improvements, By lessee
Improvements, To business assets
Income taxes
Insurance, Capitalized premiums
Insurance, Deductible premiums
Insurance, Nondeductible premiums
Intangible drilling costs
Intangibles, amortization
Interest, Allocation of
Interest, Below-market
Interest, Business expense for
Interest, Capitalized
Interest, Deductible
Interest, Life insurance policies
Interest, Not deductible
Interest, Refunds of
Interest, When to deduct
Interview expenses
K
Key person
Kickbacks
L
Leases, Canceling
Leases, Leveraged
Leases, Oil and gas
Leases, Sales distinguished
Leases, Taxes on
Licenses
Licenses
Line of credit
Loans, Discounted
Loans, To employees
Lobbying expenses
Lodging and meals
Long-term care insurance
Losses, At-risk limits
Losses, Limits
Losses, Net operating
Losses, Not-for-profit rules
Losses, Passive activities
M
Machinery parts
Medical expenses
Mining, Development costs
Mining, Exploration costs
Mortgage, Cost of acquiring
Mortgage, Interest
Moving expenses, machinery
N
Necessary expense
Nonaccountable plan
Nonqualifying intangibles
O
Oil and gas wells, Partnerships, S corporations
Organization costs, Corporate
Original issue discount
Outplacement services
P
Payments in kind
Penalties, Nondeductible
Penalties, Prepayment
Per diem and car allowances, High-low rate, Regular rate, Reporting allowance, Standard meal allowance, Standard mileage rate
Percentage depletion
Personal expenses
Points
Prepaid expense, Extends useful life
Prepaid expense, General rule
Prepaid expense, Interest
Prepaid expense, Interest
Prepaid expense, Rent
R
Rate Worksheet for Self-Employed
Real estate taxes
Recapture, Clean-fuel deductions
Recapture, Electric vehicle credit
Recapture, Exploration expenses
Recapture, Timber property
Recovery of amount deducted
Related persons, Clean-fuel vehicle deduction
Related persons, Coal or iron ore
Related persons, Payments to
Related persons, Refiners
Related persons, Unreasonable rent
Removal, Barrier
Removal, Costs
Removal, Retired asset
Rent expense, capitalizing
Repairs
Repayments (claim of right)
Replacements
Retirement plans, Defined benefit
Retirement plans, Defined contribution
Retirement plans, IRA
Retirement plans, Money purchase
Retirement plans, Profit-sharing
Retirement plans, Qualified
Retirement plans, Salary reduction arrangement
Retirement plans, SEP
Retirement plans, SIMPLE
S
Sales taxes
Self-employment tax
Self-insurance, reserve for
Sick pay
SIMPLE plans
SIMPLE plans
SIMPLE plans
SIMPLE plans
SIMPLE plans
SIMPLE plans
SIMPLE plans
SIMPLE plans
Standard meal allowance
Start-up costs
Subscriptions
Suggestions
Supplies and materials
T
Taxes, Carrying charge
Taxes, Excise
Taxes, Franchise
Taxes, Personal property
Taxes, Unemployment fund
Taxpayer Advocate
Telephone
Timber
Tools
Trademark, trade name
Trademark, trade name
Travel
TTY/TDD information
U
Unpaid expenses, related person
Utilities
V
Vacation pay
W
Wages and salaries
Welfare benefit funds