Department of the Treasury

Internal Revenue Service

Publication 463

Cat. No. 11081L

Travel,

Gift, and Car

Expenses

For use in preparing

2023 Returns

Get forms and other information faster and easier at:

• IRS.gov (English) 

• IRS.gov/Spanish (Español) 

• IRS.gov/Chinese (中文) 

• IRS.gov/Korean (한국어) 

• IRS.gov/Russian (Pусский) 

• IRS.gov/Vietnamese (Tiếng Việt) 

Contents

Future Developments ....................... 2

What's New ............................... 2

Reminder ................................ 2

Introduction .............................. 2

Chapter 1. Travel .......................... 3

Traveling Away From Home ................. 4

Tax Home .......................... 4

Tax Home Different From Family Home ...... 5

Temporary Assignment or Job ............... 5

What Travel Expenses Are Deductible? ........ 6

Meals ............................. 7

Travel in the United States ............... 9

Travel Outside the United States ......... 10

Luxury Water Travel .................. 12

Conventions ........................ 13

Chapter 2. Meals and Entertainment ......... 14

50% Limit ............................. 16

Exception to the 50% Limit for Meals ...... 17

Chapter 3. Gifts .......................... 17

Chapter 4. Transportation .................. 18

Car Expenses ......................... 21

Standard Mileage Rate ................ 21

Actual Car Expenses ................. 22

Leasing a Car ....................... 33

Disposition of a Car ...................... 34

Chapter 5. Recordkeeping ................. 35

How To Prove Expenses .................. 36

What Are Adequate Records? ........... 36

What if I Have Incomplete Records? ....... 37

Separating and Combining Expenses ...... 38

How Long To Keep Records and 

Receipts ........................ 38

Examples of Records ................. 38

Chapter 6. How To Report .................. 41

Where To Report ....................... 41

Vehicle Provided by Your Employer ....... 42

Reimbursements ....................... 42

Accountable Plans ................... 42

Nonaccountable Plans ................ 46

Rules for Independent Contractors and 

Clients .......................... 47

How To Use Per Diem Rate Tables ........... 48

The Two Substantiation Methods ......... 48

Transition Rules ..................... 48

Completing Form 2106 ................... 48

Special Rules ....................... 50

How To Get Tax Help ....................... 52

Appendices ............................. 55

Jan 29, 2024
Index .................................. 59

Future Developments

For the latest information about developments related to 

Pub. 463, such as legislation enacted after it was 

published, go to IRS.gov/Pub463.

What's New

Standard mileage rate. For 2023, the standard mileage 

rate for the cost of operating your car for business use is 

65.5 cents ($0.655) per mile. Car expenses and use of the 

standard mileage rate are explained in chapter 4.

Depreciation limits on cars, trucks, and vans. The 

first-year limit on the depreciation deduction, special depreciation allowance, and section 179 deduction for vehicles acquired before September 28, 2017, and placed in 

service during 2023, is $12,200. The first-year limit on depreciation, special depreciation allowance, and section 

179 deduction for vehicles acquired after September 27, 

2017, and placed in service during 2023 increases to 

$20,200. If you elect not to claim a special depreciation allowance for a vehicle placed in service in 2023, the 

amount increases to $12,200. Depreciation limits are explained in chapter 4.

Section 179 deduction. The maximum amount you can 

elect to deduct for section 179 property (including cars, 

trucks, and vans) you placed in service in tax years beginning in 2023 is $1,160,000. This limit is reduced by the 

amount by which the cost of section 179 property placed 

in service during the tax year exceeds $2,890,000. Section 179 deduction is explained in chapter 4.

Also, the maximum section 179 expense deduction for 

sport utility vehicles placed in service in tax years beginning in 2023 is $28,900.

Temporary deduction of 100% business meals. The 

100% deduction on certain business meals expenses as 

amended under the Taxpayer Certainty and Disaster Tax 

Relief Act of 2020, and enacted by the Consolidated Appropriations Act, 2021, has expired. Generally, the cost of 

business meals remains deductible, subject to the 50% 

limitation. See 50% Limit in chapter 2 for more information.

Reminder

Photographs of missing children. The IRS is a proud 

partner with the National Center for Missing & Exploited 

Children® (NCMEC). 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 800-THE-LOST (800-843-5678) if you recognize a 

child.

Per diem rates. Current and prior per diem rates may be 

found on the U.S. General Services Administration (GSA) 

website at GSA.gov/travel/plan-book/per-diem-rates.

Introduction

You may be able to deduct the ordinary and necessary 

business-related expenses you have for:

• Travel,

• Non-entertainment-related meals,

• Gifts, or

• Transportation.

An ordinary expense is one that is common and accepted 

in your trade or business. A necessary expense is one that 

is helpful and appropriate for your business. An expense 

doesn’t have to be required to be considered necessary.

This publication explains:

• What expenses are deductible,

• How to report them on your return,

• What records you need to prove your expenses, and

• How to treat any expense reimbursements you may 

receive.

Who should use this publication. You should read this 

publication if you are an employee or a sole proprietor who 

has business-related travel, non-entertainment-related 

meals, gift, or transportation expenses.

Users of employer-provided vehicles. If an employer-provided vehicle was available for your use, you received a fringe benefit. Generally, your employer must include the value of the use or availability of the vehicle in 

your income. However, there are exceptions if the use of 

the vehicle qualifies as a working condition fringe benefit 

(such as the use of a qualified nonpersonal use vehicle).

A working condition fringe benefit is any property or 

service provided to you by your employer, the cost of 

which would be allowable as an employee business expense deduction if you had paid for it.

A qualified nonpersonal use vehicle is one that isn’t 

likely to be used more than minimally for personal purposes because of its design. See Qualified nonpersonal use 

vehicles under Actual Car Expenses in chapter 4.

For information on how to report your car expenses that 

your employer didn’t provide or reimburse you for (such as 

when you pay for gas and maintenance for a car your employer provides), see Vehicle Provided by Your Employer 

in chapter 6.

Who doesn’t need to use this publication. Partnerships, corporations, trusts, and employers who reimburse 

their employees for business expenses should refer to the 

instructions for their required tax forms, for information on 

deducting travel, meals, and entertainment expenses.

2 Publication 463 (2023)
If you are an employee, you won’t need to read this 

publication if all of the following are true.

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

• You received full reimbursement for your expenses.

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

• There is no amount shown with a code L in box 12 of 

your Form W-2, Wage and Tax Statement.

If you meet all of these 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.

Volunteers. If you perform services as a volunteer 

worker for a qualified charity, you may be able to deduct 

some of your costs as a charitable contribution. See 

Out-of-Pocket Expenses in Giving Services in Pub. 526, 

Charitable Contributions, for information on the expenses 

you can deduct.

Comments and suggestions. We welcome your comments about this publication and suggestions for future 

editions.

You can send us comments through IRS.gov/

FormComments. Or, you can write to the Internal Revenue 

Service, Tax Forms and Publications, 1111 Constitution 

Ave. NW, IR-6526, Washington, DC 20224.

Although we can’t respond individually to each comment received, we do appreciate your feedback and will 

consider your comments and suggestions as we revise 

our tax forms, instructions, and publications. Don’t send 

tax questions, tax returns, or payments to the above address.

Getting answers to your tax questions. If you have 

a tax question not answered by this publication or the How 

To Get Tax Help section at the end of this publication, go 

to the IRS Interactive Tax Assistant page at IRS.gov/

Help/ITA where you can find topics by using the search 

feature or viewing the categories listed.

Getting tax forms, instructions, and publications. 

Go to IRS.gov/Forms to download current and prior-year 

forms, instructions, and publications.

Ordering tax forms, instructions, and publications. 

Go to IRS.gov/OrderForms to order current forms, instructions, and publications; call 800-829-3676 to order 

prior-year forms and instructions. The IRS will process 

your order for forms and publications as soon as possible. 

Don’t resubmit requests you’ve already sent us. You can 

get forms and publications faster online.

TIP

Useful Items

You may want to see:

Publication

How To Depreciate Property

Form (and Instructions)

Itemized Deductions

Profit or Loss From 

Business (Sole Proprietorship)

Profit or Loss From 

Farming

Employee Business Expenses

Depreciation and Amortization (Including 

Information on Listed Property)

See How To Get Tax Help for information about getting 

these publications and forms.

1.

Travel

If you temporarily travel away from your tax home, you can 

use this chapter to determine if you have deductible travel 

expenses.

This chapter discusses:

• Traveling away from home,

• Temporary assignment or job, and

• What travel expenses are deductible.

It also discusses the standard meal allowance, rules for 

travel inside and outside the United States, luxury water 

travel, and deductible convention expenses.

Travel expenses defined. For tax purposes, travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or 

job.

An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one 

that is helpful and appropriate for your business. An expense doesn’t have to be required to be considered necessary.

You will find examples of deductible travel expenses in 

Table 1-1 .

 946

 Schedule A (Form 1040)

 Schedule C (Form 1040)

 Schedule F (Form 1040)

 2106

 4562

Publication 463 (2023) Chapter 1 Travel 3
Traveling Away From Home

You are traveling away from home if:

• Your duties require you to be away from the general 

area of your tax home (defined later) substantially longer than an ordinary day's work, and

• You need to sleep or rest to meet the demands of your 

work while away from home.

This rest requirement isn’t satisfied by merely napping in 

your car. You don’t have to be away from your tax home for 

a whole day or from dusk to dawn as long as your relief 

from duty is long enough to get necessary sleep or rest.

Example 1. You are a railroad conductor. You leave 

your home terminal on a regularly scheduled round-trip 

run between two cities and return home 16 hours later. 

During the run, you have 6 hours off at your turnaround 

point where you eat two meals and rent a hotel room to 

get necessary sleep before starting the return trip. You are 

considered to be away from home.

Example 2. You are a truck driver. You leave your terminal and return to it later the same day. You get an hour 

off at your turnaround point to eat. Because you aren’t off 

to get necessary sleep and the brief time off isn’t an adequate rest period, you aren’t traveling away from home.

Members of the Armed Forces. If you are a member of 

the U.S. Armed Forces on a permanent duty assignment 

overseas, you aren’t traveling away from home. You can’t 

deduct your expenses for meals and lodging. You can’t 

deduct these expenses even if you have to maintain a 

home in the United States for your family members who 

aren’t allowed to accompany you overseas. If you are 

transferred from one permanent duty station to another, 

you may have deductible moving expenses, which are explained in Pub. 3, Armed Forces' Tax Guide.

A naval officer assigned to permanent duty aboard a 

ship that has regular eating and living facilities has a tax 

home (explained next) aboard the ship for travel expense 

purposes.

Tax Home

To determine whether you are traveling away from home, 

you must first determine the location of your tax home.

Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain 

your family home. It includes the entire city or general area 

in which your business or work is located.

If you have more than one regular place of business, 

your tax home is your main place of business. See Main 

place of business or work, later.

If you don’t have a regular or a main place of business 

because of the nature of your work, then your tax home 

may be the place where you regularly live. See No main 

place of business or work, later.

If you don’t have a regular or main place of business or 

post of duty and there is no place where you regularly live, 

you are considered an itinerant (a transient) and your tax 

home is wherever you work. As an itinerant, you can’t 

claim a travel expense deduction because you are never 

considered to be traveling away from home.

Main place of business or work. If you have more than 

one place of work, consider the following when determining which one is your main place of business or work.

• The total time you ordinarily spend in each place.

• The level of your business activity in each place.

• Whether your income from each place is significant or 

insignificant.

Example. You live in Cincinnati where you have a seasonal job for 8 months each year and earn $40,000. You 

work the other 4 months in Miami, also at a seasonal job, 

and earn $15,000. Cincinnati is your main place of work 

because you spend most of your time there and earn most 

of your income there.

No main place of business or work. You may have a 

tax home even if you don’t have a regular or main place of 

work. Your tax home may be the home where you regularly live.

Factors used to determine tax home. If you don’t 

have a regular or main place of business or work, use the 

following three factors to determine where your tax home 

is.

1. You perform part of your business in the area of your 

main home and use that home for lodging while doing 

business in the area.

2. You have living expenses at your main home that you 

duplicate because your business requires you to be 

away from that home.

3. You haven’t abandoned the area in which both your 

historical place of lodging and your claimed main 

home are located; you have a member or members of 

your family living at your main home; or you often use 

that home for lodging.

If you satisfy all three factors, your tax home is the 

home where you regularly live. If you satisfy only two factors, you may have a tax home depending on all the facts 

and circumstances. If you satisfy only one factor, you are 

an itinerant; your tax home is wherever you work and you 

can’t deduct travel expenses.

Example 1. You are single and live in Boston in an 

apartment you rent. You have worked for your employer in 

Boston for a number of years. Your employer enrolls you in 

a 12-month executive training program. You don’t expect 

to return to work in Boston after you complete your training.

During your training, you don’t do any work in Boston. 

Instead, you receive classroom and on-the-job training 

throughout the United States. You keep your apartment in 

Boston and return to it frequently. You use your apartment 

4 Chapter 1 Travel Publication 463 (2023)
to conduct your personal business. You also keep up your 

community contacts in Boston. When you complete your 

training, you are transferred to Los Angeles.

You don’t satisfy factor (1) because you didn’t work in 

Boston. You satisfy factor (2) because you had duplicate 

living expenses. You also satisfy factor (3) because you 

didn’t abandon your apartment in Boston as your main 

home, you kept your community contacts, and you frequently returned to live in your apartment. Therefore, you 

have a tax home in Boston.

Example 2. You are an outside salesperson with a 

sales territory covering several states. Your employer's 

main office is in Newark, but you don’t conduct any business there. Your work assignments are temporary, and 

you have no way of knowing where your future assignments will be located. You have a room in your married sister's house in Dayton. You stay there for one or two 

weekends a year, but you do no work in the area. You 

don’t pay your sister for the use of the room.

You don’t satisfy any of the three factors listed earlier. 

You are an itinerant and have no tax home.

Tax Home Different From Family 

Home

If you (and your family) don’t live at your tax home (defined 

earlier), you can’t deduct the cost of traveling between 

your tax home and your family home. You also can’t deduct the cost of meals and lodging while at your tax home. 

See Example 1, later.

If you are working temporarily in the same city where 

you and your family live, you may be considered as traveling away from home. See Example 2, later.

Example 1. You are a truck driver and you and your 

family live in Tucson. You are employed by a trucking firm 

that has its terminal in Phoenix. At the end of your long 

runs, you return to your home terminal in Phoenix and 

spend one night there before returning home. You can’t 

deduct any expenses you have for meals and lodging in 

Phoenix or the cost of traveling from Phoenix to Tucson. 

This is because Phoenix is your tax home.

Example 2. Your family home is in Pittsburgh, where 

you work 12 weeks a year. The rest of the year you work 

for the same employer in Baltimore. In Baltimore, you eat 

in restaurants and sleep in a rooming house. Your salary is 

the same whether you are in Pittsburgh or Baltimore.

Because you spend most of your working time and earn 

most of your salary in Baltimore, that city is your tax home. 

You can’t deduct any expenses you have for meals and 

lodging there. However, when you return to work in Pittsburgh, you are away from your tax home even though you 

stay at your family home. You can deduct the cost of your 

round trip between Baltimore and Pittsburgh. You can also 

deduct your part of your family's living expenses for 

non-entertainment-related meals and lodging while you 

are living and working in Pittsburgh.

Temporary

Assignment or Job

You may regularly work at your tax home and also work at 

another location. It may not be practical to return to your 

tax home from this other location at the end of each workday.

Temporary assignment vs. indefinite assignment. If 

your assignment or job away from your main place of work 

is temporary, your tax home doesn’t change. You are considered to be away from home for the whole period you 

are away from your main place of work. You can deduct 

your travel expenses if they otherwise qualify for deduction. Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in 

fact last) for 1 year or less.

However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax 

home and you can’t deduct your travel expenses while 

there. An assignment or job in a single location is considered indefinite if it is realistically expected to last for more 

than 1 year, whether or not it actually lasts for more than 1 

year.

If your assignment is indefinite, you must include in your 

income any amounts you receive from your employer for 

living expenses, even if they are called “travel allowances” 

and you account to your employer for them. You may be 

able to deduct the cost of relocating to your new tax home 

as a moving expense. See Pub. 3 for more information.

For tax years beginning after December 2017 and 

before January 2026, the deduction of certain 

moving expenses is suspended for nonmilitary 

taxpayers. In order to deduct certain moving expenses, 

you must be an active member of the military and moving 

due to a permanent change of duty station.

Exception for federal crime investigations or prosecutions. If you are a federal employee participating in a 

federal crime investigation or prosecution, you aren’t subject to the 1-year rule. This means you may be able to deduct travel expenses even if you are away from your tax 

home for more than 1 year provided you meet the other requirements for deductibility.

For you to qualify, the Attorney General (or their designee) must certify that you are traveling:

• For the federal government;

• In a temporary duty status; and

• To investigate, prosecute, or provide support services 

for the investigation or prosecution of a federal crime.

Determining temporary or indefinite. You must determine whether your assignment is temporary or indefinite 

when you start work. If you expect an assignment or job to 

last for 1 year or less, it is temporary unless there are facts 

and circumstances that indicate otherwise. An assignment 

or job that is initially temporary may become indefinite due 

CAUTION

!

Publication 463 (2023) Chapter 1 Travel 5
to changed circumstances. A series of assignments to the 

same location, all for short periods but that together cover 

a long period, may be considered an indefinite assignment.

The following examples illustrate whether an assignment or job is temporary or indefinite.

Example 1. You are a construction worker. You live 

and regularly work in Los Angeles. You are a member of a 

trade union in Los Angeles that helps you get work in the 

Los Angeles area. Your tax home is Los Angeles. Because of a shortage of work, you took a job on a construction project in Fresno. Your job was scheduled to end in 8 

months. The job actually lasted 10 months.

You realistically expected the job in Fresno to last 8 

months. The job actually did last less than 1 year. The job 

is temporary and your tax home is still in Los Angeles.

Example 2. The facts are the same as in Example 1, 

except that you realistically expected the work in Fresno to 

last 18 months. The job was actually completed in 10 

months.

Your job in Fresno is indefinite because you realistically 

expected the work to last longer than 1 year, even though 

it actually lasted less than 1 year. You can’t deduct any 

travel expenses you had in Fresno because Fresno became your tax home.

Example 3. The facts are the same as in Example 1, 

except that you realistically expected the work in Fresno to 

last 9 months. After 8 months, however, you were asked to 

remain for 7 more months (for a total actual stay of 15 

months).

Initially, you realistically expected the job in Fresno to 

last for only 9 months. However, due to changed circumstances occurring after 8 months, it was no longer realistic 

for you to expect that the job in Fresno would last for 1 

year or less. You can deduct only your travel expenses for 

the first 8 months. You can’t deduct any travel expenses 

you had after that time because Fresno became your tax 

home when the job became indefinite.

Going home on days off. If you go back to your tax 

home from a temporary assignment on your days off, you 

aren’t considered away from home while you are in your 

hometown. You can’t deduct the cost of your meals and 

lodging there. However, you can deduct your travel expenses, including meals and lodging, while traveling between 

your temporary place of work and your tax home. You can 

claim these expenses up to the amount it would have cost 

you to stay at your temporary place of work.

If you keep your hotel room during your visit home, you 

can deduct the cost of your hotel room. In addition, you 

can deduct your expenses of returning home up to the 

amount you would have spent for meals had you stayed at 

your temporary place of work.

Probationary work period. If you take a job that requires you to move, with the understanding that you will 

keep the job if your work is satisfactory during a probationary period, the job is indefinite. You can’t deduct any of 

your expenses for meals and lodging during the probationary period.

What Travel Expenses Are 

Deductible?

Once you have determined that you are traveling away 

from your tax home, you can determine what travel expenses are deductible.

You can deduct ordinary and necessary expenses you 

have when you travel away from home on business. The 

type of expense you can deduct depends on the facts and 

your circumstances.

Table 1-1 summarizes travel expenses you may be able 

to deduct. You may have other deductible travel expenses 

that aren’t covered there, depending on the facts and your 

circumstances.

When you travel away from home on business, 

you must keep records of all the expenses you 

have and any advances you receive from your 

employer. You can use a log, diary, notebook, or any other 

written record to keep track of your expenses. The types 

of expenses you need to record, along with supporting 

documentation, are described in Table 5-1 (see chapter 5).

Separating costs. If you have one expense that includes 

the costs of non-entertainment-related meals, entertainment, and other services (such as lodging or transportation), you must allocate that expense between the cost of 

non-entertainment-related meals, and entertainment and 

the cost of other services. You must have a reasonable 

basis for making this allocation. For example, you must allocate your expenses if a hotel includes one or more 

meals in its room charge.

Travel expenses for another individual. If a spouse, 

dependent, or other individual goes with you (or your employee) on a business trip or to a business convention, 

you generally can’t deduct their travel expenses.

Employee. You can deduct the travel expenses of 

someone who goes with you if that person:

1. Is your employee,

2. Has a bona fide business purpose for the travel, and

3. Would otherwise be allowed to deduct the travel expenses.

Business associate. If a business associate travels 

with you and meets the conditions in (2) and (3) above, 

you can deduct the travel expenses you have for that person. A business associate is someone with whom you 

could reasonably expect to actively conduct business. A 

business associate can be a current or prospective (likely 

to become) customer, client, supplier, employee, agent, 

partner, or professional advisor.

RECORDS

6 Chapter 1 Travel Publication 463 (2023)
Table 1-1. Travel Expenses You Can Deduct

This chart summarizes expenses you can deduct when you travel away from home for business purposes

IF you have expenses for... THEN you can deduct the cost of...

transportation travel by airplane, train, bus, or car between your home and your business destination. If you were provided 

with a free ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero. If 

you travel by ship, see Luxury Water Travel and Cruise Ships under Conventions, later, for additional rules and 

limits.

taxi, commuter bus, and 

airport limousine

fares for these and other types of transportation that take you between:

• The airport or station and your hotel; and

• The hotel and the work location of your customers or clients, your business meeting place, or your 

temporary work location.

baggage and shipping sending baggage and sample or display material between your regular and temporary work locations.

car operating and maintaining your car when traveling away from home on business. You can deduct actual 

expenses or the standard mileage rate, as well as business-related tolls and parking. If you rent a car while 

away from home on business, you can deduct only the business-use portion of the expenses.

lodging and meals your lodging and non-entertainment-related meals if your business trip is overnight or long enough that you 

need to stop for sleep or rest to properly perform your duties. Meals include amounts spent for food, 

beverages, taxes, and related tips. See Meals, later, for additional rules and limits.

cleaning dry cleaning and laundry.

telephone business calls while on your business trip. This includes business communication by fax machine or other 

communication devices.

tips tips you pay for any expenses in this chart.

other other similar ordinary and necessary expenses related to your business travel. These expenses might include 

transportation to or from a business meal, public stenographer's fees, computer rental fees, and operating 

and maintaining a house trailer.

Bona fide business purpose. A bona fide business 

purpose exists if you can prove a real business purpose 

for the individual's presence. Incidental services, such as 

typing notes or assisting in entertaining customers, aren’t 

enough to make the expenses deductible.

Example. You drive to Chicago on business and take 

your spouse with you. Your spouse isn’t your employee. 

Your spouse occasionally types notes, performs similar 

services, and accompanies you to luncheons and dinners. 

The performance of these services doesn’t establish that 

your spouse’s presence on the trip is necessary to the 

conduct of your business. Your spouse’s expenses aren’t 

deductible.

You pay $199 a day for a double room. A single room 

costs $149 a day. You can deduct the total cost of driving 

your car to and from Chicago, but only $149 a day for your 

hotel room. If both you and your spouse use public transportation, you can only deduct your fare.

Meals

You can deduct a portion of the cost of meals if it is necessary for you to stop for substantial sleep or rest to properly 

perform your duties while traveling away from home on 

business. Meal and entertainment expenses are discussed in chapter 2.

Lavish or extravagant. You can't deduct expenses for 

meals that are lavish or extravagant. An expense isn't considered lavish or extravagant if it is reasonable based on 

the facts and circumstances. Meal expenses won't be disallowed merely because they are more than a fixed dollar 

amount or because the meals take place at deluxe restaurants, hotels, or resorts.

50% limit on meals. You can figure your meal expenses 

using either of the following methods.

• Actual cost.

• The standard meal allowance.

Both of these methods are explained below. But, regardless of the method you use, you can generally deduct only 

50% of the unreimbursed cost of your meals.

If you are reimbursed for the cost of your meals, how 

you apply the 50% limit depends on whether your employer's reimbursement plan was accountable or nonaccountable. If you aren’t reimbursed, the 50% limit applies even if 

the unreimbursed meal expense is for business travel. 

Chapter 2 discusses the 50% Limit in more detail, and 

chapter 6 discusses accountable and nonaccountable 

plans.

Actual Cost

You can use the actual cost of your meals to figure the 

amount of your expense before reimbursement and application of the 50% deduction limit. If you use this method, 

you must keep records of your actual cost.

Standard Meal Allowance

Generally, you can use the “standard meal allowance” 

method as an alternative to the actual cost method. It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of 

Publication 463 (2023) Chapter 1 Travel 7
your actual costs. The set amount varies depending on 

where and when you travel. In this publication, “standard 

meal allowance” refers to the federal rate for M&IE, discussed later under Amount of standard meal allowance. If 

you use the standard meal allowance, you must still keep 

records to prove the time, place, and business purpose of 

your travel. See the recordkeeping rules for travel in chapter 5.

Incidental expenses. The term “incidental expenses” 

means fees and tips given to porters, baggage carriers, 

hotel staff, and staff on ships.

Incidental expenses don’t include expenses for laundry, 

cleaning and pressing of clothing, lodging taxes, costs of 

telegrams or telephone calls, transportation between places of lodging or business and places where meals are 

taken, or the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings.

Incidental-expenses-only method. You can use an optional method (instead of actual cost) for deducting incidental expenses only. The amount of the deduction is $5 a 

day. You can use this method only if you didn’t pay or incur 

any meal expenses. You can’t use this method on any day 

that you use the standard meal allowance. This method is 

subject to the proration rules for partial days. See Travel 

for days you depart and return, later, in this chapter.

Note. The incidental-expenses-only method isn’t subject to the 50% limit discussed below.

Federal employees should refer to the Federal 

Travel Regulations (FTR) at eCFR.gov for 

changes affecting claims for reimbursement.

50% limit may apply. If you use the standard meal allowance method for non-entertainment-related meal expenses and you aren’t reimbursed or you are reimbursed under a nonaccountable plan, you can generally deduct only 

50% of the standard meal allowance. If you are reimbursed under an accountable plan and you are deducting 

amounts that are more than your reimbursements, you 

can deduct only 50% of the excess amount. The 50% 

Limit is discussed in more detail in chapter 2, and accountable and nonaccountable plans are discussed in 

chapter 6.

There is no optional standard lodging amount 

similar to the standard meal allowance. Your allowable lodging expense deduction is your actual 

cost.

Who can use the standard meal allowance. You can 

use the standard meal allowance whether you are an employee or self-employed, and whether or not you are reimbursed for your traveling expenses.

Use of the standard meal allowance for other travel. 

You can use the standard meal allowance to figure your 

meal expenses when you travel in connection with investment and other income-producing property. You can also 

use it to figure your meal expenses when you travel for 

qualifying educational purposes. You can’t use the standCAUTION

!

CAUTION

!

ard meal allowance to figure the cost of your meals when 

you travel for medical or charitable purposes.

Amount of standard meal allowance. The standard 

meal allowance is the federal M&IE rate. For travel in 

2023, the rate for most small localities in the United States 

is $59 per day.

Most major cities and many other localities in the United States are designated as high-cost areas, qualifying 

for higher standard meal allowances.

You can find this information (organized by state) 

at GSA.gov/travel/plan-book/per-diem-rates. Enter a zip code or select a city and state for the per 

diem rates for the current fiscal year. Per diem rates for 

prior fiscal years are available by using the drop-down 

menu.

If you travel to more than one location in one day, use 

the rate in effect for the area where you stop for sleep or 

rest. If you work in the transportation industry, however, 

see Special rate for transportation workers, later.

Federal government's fiscal year. Per diem rates are 

listed by the federal government's fiscal year, which runs 

from October 1 to September 30. You can choose to use 

the rates from the 2022 fiscal year per diem tables or the 

rates from the 2023 fiscal year tables, but you must consistently use the same tables for all travel you are reporting on your income tax return for the year. See Transition 

Rules, later.

Standard meal allowance for areas outside the 

continental United States. The standard meal allowance rates above don’t apply to travel in Alaska, Hawaii, or 

any other location outside the continental United States. 

The Department of Defense establishes per diem rates for 

Alaska, Hawaii, Puerto Rico, American Samoa, Guam, 

Midway, the Northern Mariana Islands, the U.S. Virgin Islands, Wake Island, and other non-foreign areas outside 

the continental United States. The Department of State 

establishes per diem rates for all other foreign areas.

You can access per diem rates for non-foreign 

areas outside the continental United States at 

Travel.dod.mil/Travel-Transportation-Rates/PerDiem/Per-Diem-Rate-Lookup/. You can access all other 

foreign per diem rates at aoprals.state.gov/web920/

per_diem.asp.

Special rate for transportation workers. You can 

use a special standard meal allowance if you work in the 

transportation industry. You are in the transportation industry if your work:

• Directly involves moving people or goods by airplane, 

barge, bus, ship, train, or truck; and

• Regularly requires you to travel away from home and, 

during any single trip, usually involves travel to areas 

eligible for different standard meal allowance rates.

If this applies, you can claim a standard meal allowance of 

$69 a day ($74 for travel outside the continental United 

States) for travel in 2023.

8 Chapter 1 Travel Publication 463 (2023)
Using the special rate for transportation workers eliminates the need for you to determine the standard meal allowance for every area where you stop for sleep or rest. If 

you choose to use the special rate for any trip, you must 

use the special rate (and not use the regular standard 

meal allowance rates) for all trips you take that year.

Travel for days you depart and return. For both the 

day you depart for and the day you return from a business 

trip, you must prorate the standard meal allowance (figure 

a reduced amount for each day). You can do so by one of 

two methods.

• Method 1: You can claim 3/4 of the standard meal allowance.

• Method 2: You can prorate using any method that you 

consistently apply and that is in accordance with reasonable business practice.

Example. You are employed in New Orleans as a convention planner. In March, your employer sent you on a 

3-day trip to Washington, DC, to attend a planning seminar. You left your home in New Orleans at 10 a.m. on 

Wednesday and arrived in Washington, DC, at 5:30 p.m. 

After spending 2 nights there, you flew back to New Orleans on Friday and arrived back home at 8 p.m. Your employer gave you a flat amount to cover your expenses and 

included it with your wages.

Under Method 1, you can claim 21/2 days of the standard meal allowance for Washington, DC: 3/4 of the daily 

rate for Wednesday and Friday (the days you departed 

and returned), and the full daily rate for Thursday.

Under Method 2, you could also use any method that 

you apply consistently and that is in accordance with reasonable business practice. For example, you could claim 3 

days of the standard meal allowance even though a federal employee would have to use Method 1 and be limited 

to only 21/2 days.

Travel in the United States

The following discussion applies to travel in the United 

States. For this purpose, the United States includes the 50 

states and the District of Columbia. The treatment of your 

travel expenses depends on how much of your trip was 

business related and on how much of your trip occurred 

within the United States. See Part of Trip Outside the United States, later.

Trip Primarily for Business

You can deduct all of your travel expenses if your trip was 

entirely business related. If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or 

had other personal activities, you can deduct only your 

business-related travel expenses. These expenses include the travel costs of getting to and from your business 

destination and any business-related expenses at your 

business destination.

Example. You work in Atlanta and take a business trip 

to New Orleans in May. Your business travel totals 900 

miles round trip. On your way home, you stop in Mobile to 

visit your parents. You spend $2,165 for the 9 days you are 

away from home for travel, non-entertainment-related 

meals, lodging, and other travel expenses. If you hadn’t 

stopped in Mobile, you would have been gone only 6 

days, and your total cost would have been $1,633.50. You 

can deduct $1,633.50 for your trip, including the cost of 

round-trip transportation to and from New Orleans. The 

deduction for your non-entertainment-related meals is 

subject to the 50% limit on meals mentioned earlier.

Trip Primarily for

Personal Reasons

If your trip was primarily for personal reasons, such as a 

vacation, the entire cost of the trip is a nondeductible personal expense. However, you can deduct any expenses 

you have while at your destination that are directly related 

to your business.

A trip to a resort or on a cruise ship may be a vacation 

even if the promoter advertises that it is primarily for business. The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, won’t change what is 

really a vacation into a business trip.

Part of Trip Outside

the United States

If part of your trip is outside the United States, use the 

rules described later in this chapter under Travel Outside 

the United States for that part of the trip. For the part of 

your trip that is inside the United States, use the rules for 

travel in the United States. Travel outside the United 

States doesn’t include travel from one point in the United 

States to another point in the United States. The following 

discussion can help you determine whether your trip was 

entirely within the United States.

Public transportation. If you travel by public transportation, any place in the United States where that vehicle 

makes a scheduled stop is a point in the United States. 

Once the vehicle leaves the last scheduled stop in the 

United States on its way to a point outside the United 

States, you apply the rules under Travel Outside the United States, later.

Example. You fly from New York to Puerto Rico with a 

scheduled stop in Miami. Puerto Rico isn’t considered part 

of the United States for purposes of travel. You return to 

New York nonstop. The flight from New York to Miami is in 

the United States, so only the flight from Miami to Puerto 

Rico is outside the United States. Because there are no 

scheduled stops between Puerto Rico and New York, all 

of the return trip is outside the United States.

Private car. Travel by private car in the United States is 

travel between points in the United States, even though 

Publication 463 (2023) Chapter 1 Travel 9
you are on your way to a destination outside the United 

States.

Example. You travel by car from Denver to Mexico City 

and return. Your travel from Denver to the border and from 

the border back to Denver is travel in the United States, 

and the rules in this section apply. The rules below under 

Travel Outside the United States apply to your trip from the 

border to Mexico City and back to the border.

Travel Outside

the United States

If any part of your business travel is outside the United 

States, some of your deductions for the cost of getting to 

and from your destination may be limited. For this purpose, the United States includes the 50 states and the 

District of Columbia.

How much of your travel expenses you can deduct depends in part upon how much of your trip outside the United States was business related.

Travel Entirely for Business or

Considered Entirely for Business

You can deduct all your travel expenses of getting to and 

from your business destination if your trip is entirely for 

business or considered entirely for business.

Travel entirely for business. If you travel outside the 

United States and you spend the entire time on business 

activities, you can deduct all of your travel expenses.

Travel considered entirely for business. Even if you 

didn’t spend your entire time on business activities, your 

trip is considered entirely for business if you meet at least 

one of the following four exceptions.

Exception 1—No substantial control. Your trip is 

considered entirely for business if you didn’t have substantial control over arranging the trip. The fact that you 

control the timing of your trip doesn’t, by itself, mean that 

you have substantial control over arranging your trip.

You don’t have substantial control over your trip if you:

• Are an employee who was reimbursed or paid a travel 

expense allowance, and

• Aren’t related to your employer, or

• Aren’t a managing executive.

“Related to your employer” is defined later in chapter 6 

under Per Diem and Car Allowances.

A “managing executive” is an employee who has the 

authority and responsibility, without being subject to the 

veto of another, to decide on the need for the business 

travel.

A self-employed person generally has substantial control over arranging business trips.

Exception 2—Outside United States no more than 

a week. Your trip is considered entirely for business if you 

were outside the United States for a week or less, 

combining business and nonbusiness activities. One 

week means 7 consecutive days. In counting the days, 

don’t count the day you leave the United States, but do 

count the day you return to the United States.

Example. You traveled to Brussels primarily for business. You left Denver on Tuesday and flew to New York. 

On Wednesday, you flew from New York to Brussels, arriving the next morning. On Thursday and Friday, you had 

business discussions, and from Saturday until Tuesday, 

you were sightseeing. You flew back to New York, arriving 

Wednesday afternoon. On Thursday, you flew back to 

Denver.

Although you were away from your home in Denver for 

more than a week, you weren’t outside the United States 

for more than a week. This is because the day you depart 

doesn’t count as a day outside the United States.

You can deduct your cost of the round-trip flight between Denver and Brussels. You can also deduct the cost 

of your stay in Brussels for Thursday and Friday while you 

conducted business. However, you can’t deduct the cost 

of your stay in Brussels from Saturday through Tuesday 

because those days were spent on nonbusiness activities.

Exception 3—Less than 25% of time on personal 

activities. Your trip is considered entirely for business if:

• You were outside the United States for more than a 

week, and

• You spent less than 25% of the total time you were 

outside the United States on nonbusiness activities.

For this purpose, count both the day your trip began and 

the day it ended.

Example. You flew from Seattle to Tokyo, where you 

spent 14 days on business and 5 days on personal matters. You then flew back to Seattle. You spent 1 day flying 

in each direction.

Because only 5/21 (less than 25%) of your total time 

abroad was for nonbusiness activities, you can deduct as 

travel expenses what it would have cost you to make the 

trip if you hadn’t engaged in any nonbusiness activity. The 

amount you can deduct is the cost of the round-trip plane 

fare and 16 days of non-entertainment-related meals (subject to the 50% Limit), lodging, and other related expenses.

Exception 4—Vacation not a major consideration. 

Your trip is considered entirely for business if you can establish that a personal vacation wasn’t a major consideration, even if you have substantial control over arranging 

the trip.

Travel Primarily for Business

If you travel outside the United States primarily for business but spend some of your time on other activities, you 

generally can’t deduct all of your travel expenses. You can 

only deduct the business portion of your cost of getting to 

and from your destination. You must allocate the costs between your business and other activities to determine your 

deductible amount. See Travel allocation rules, later.

10 Chapter 1 Travel Publication 463 (2023)
You don’t have to allocate your travel expenses if 

you meet one of the four exceptions listed earlier 

under Travel considered entirely for business. In 

those cases, you can deduct the total cost of getting to 

and from your destination.

Travel allocation rules. If your trip outside the United 

States was primarily for business, you must allocate your 

travel time on a day-to-day basis between business days 

and nonbusiness days. The days you depart from and return to the United States are both counted as days outside 

the United States.

To figure the deductible amount of your round-trip travel 

expenses, use the following fraction. The numerator (top 

number) is the total number of business days outside the 

United States. The denominator (bottom number) is the 

total number of business and nonbusiness days of travel.

Counting business days. Your business days include 

transportation days, days your presence was required, 

days you spent on business, and certain weekends and 

holidays.

Transportation day. Count as a business day any day 

you spend traveling to or from a business destination. 

However, if because of a nonbusiness activity you don’t 

travel by a direct route, your business days are the days it 

would take you to travel a reasonably direct route to your 

business destination. Extra days for side trips or nonbusiness activities can’t be counted as business days.

Presence required. Count as a business day any day 

your presence is required at a particular place for a specific business purpose. Count it as a business day even if 

you spend most of the day on nonbusiness activities.

Day spent on business. If your principal activity during working hours is the pursuit of your trade or business, 

count the day as a business day. Also, count as a business day any day you are prevented from working because of circumstances beyond your control.

Certain weekends and holidays. Count weekends, 

holidays, and other necessary standby days as business 

days if they fall between business days. But if they follow 

your business meetings or activity and you remain at your 

business destination for nonbusiness or personal reasons, 

don’t count them as business days.

Example 1. Your tax home is New York City. You travel 

to Quebec, where you have a business meeting on Friday. 

You have another meeting on the following Monday. Because your presence was required on both Friday and 

Monday, they are business days. Because the weekend is 

between business days, Saturday and Sunday are counted as business days. This is true even though you use the 

weekend for sightseeing, visiting friends, or other nonbusiness activity.

Example 2. If, in Example 1, you had no business in 

Quebec after Friday, but stayed until Monday before starting home, Saturday and Sunday would be nonbusiness 

days.

TIP

Nonbusiness activity on the way to or from your 

business destination. If you stopped for a vacation or 

other nonbusiness activity either on the way from the United States to your business destination, or on the way 

back to the United States from your business destination, 

you must allocate part of your travel expenses to the nonbusiness activity.

The part you must allocate is the amount it would have 

cost you to travel between the point where travel outside 

the United States begins and your nonbusiness destination and a return to the point where travel outside the United States ends.

You determine the nonbusiness portion of that expense 

by multiplying it by a fraction. The numerator (top number) 

of the fraction is the number of nonbusiness days during 

your travel outside the United States, and the denominator 

(bottom number) is the total number of days you spend 

outside the United States.

Example. You live in New York. On May 4, you flew to 

Paris to attend a business conference that began on May 

5. The conference ended at noon on May 14. That evening, you flew to Dublin where you visited with friends until 

the afternoon of May 21, when you flew directly home to 

New York. The primary purpose for the trip was to attend 

the conference.

If you hadn’t stopped in Dublin, you would have arrived 

home the evening of May 14. You don’t meet any of the 

exceptions that would allow you to consider your travel entirely for business. May 4 through May 14 (11 days) are 

business days and May 15 through May 21 (7 days) are 

nonbusiness days.

You can deduct the cost of your non-entertainment-related meals (subject to the 50% Limit), lodging, and other 

business-related travel expenses while in Paris.

You can’t deduct your expenses while in Dublin. You 

also can’t deduct 7/18 of what it would have cost you to 

travel round trip between New York and Dublin.

You paid $750 to fly from New York to Paris, $400 to fly 

from Paris to Dublin, and $700 to fly from Dublin back to 

New York. Round-trip airfare from New York to Dublin 

would have been $1,250.

You figure the deductible part of your air travel expenses by subtracting 7/18 of the round-trip airfare and other 

expenses you would have had in traveling directly between New York and Dublin ($1,250 × 7/18 = $486) from 

your total expenses in traveling from New York to Paris to 

Dublin and back to New York ($750 + $400 + $700 = 

$1,850).

Your deductible air travel expense is $1,364 ($1,850 − 

$486).

Nonbusiness activity at, near, or beyond business 

destination. If you had a vacation or other nonbusiness 

activity at, near, or beyond your business destination, you 

must allocate part of your travel expenses to the nonbusiness activity.

The part you must allocate is the amount it would have 

cost you to travel between the point where travel outside 

the United States begins and your business destination 

and a return to the point where travel outside the United 

States ends.

Publication 463 (2023) Chapter 1 Travel 11
You determine the nonbusiness portion of that expense 

by multiplying it by a fraction. The numerator (top number) 

of the fraction is the number of nonbusiness days during 

your travel outside the United States, and the denominator 

(bottom number) is the total number of days you spend 

outside the United States.

None of your travel expenses for nonbusiness activities 

at, near, or beyond your business destination are deductible.

Example. Assume that the dates are the same as in 

the previous example but that instead of going to Dublin 

for your vacation, you fly to Venice, Italy, for a vacation.

You can’t deduct any part of the cost of your trip from 

Paris to Venice and return to Paris. In addition, you can’t 

deduct 7/18 of the airfare and other expenses from New 

York to Paris and back to New York.

You can deduct 11/18 of the round-trip plane fare and 

other travel expenses from New York to Paris, plus your 

non-entertainment-related meals (subject to the 50% 

Limit), lodging, and any other business expenses you had 

in Paris. (Assume these expenses total $4,939.) If the 

round-trip plane fare and other travel-related expenses 

(such as food during the trip) are $1,750, you can deduct 

travel costs of $1,069 (11/18 × $1,750), plus the full $4,939 

for the expenses you had in Paris.

Other methods. You can use another method of counting business days if you establish that it more clearly reflects the time spent on other than business activities outside the United States.

Travel Primarily for Personal Reasons

If you travel outside the United States primarily for vacation or for investment purposes, the entire cost of the trip is 

a nondeductible personal expense. However, if you spend 

some time attending brief professional seminars or a continuing education program, you can deduct your registration fees and other expenses you have that are directly related to your business.

Example. The university from which you graduated 

has a continuing education program for members of its 

alumni association. This program consists of trips to various foreign countries where academic exercises and conferences are set up to acquaint individuals in most occupations with selected facilities in several regions of the 

world. However, none of the conferences are directed toward specific occupations or professions. It is up to each 

participant to seek out specialists and organizational settings appropriate to their occupational interests.

Three-hour sessions are held each day over a 5-day 

period at each of the selected overseas facilities where 

participants can meet with individual practitioners. These 

sessions are composed of a variety of activities including 

workshops, mini-lectures, roleplaying, skill development, 

and exercises. Professional conference directors schedule and conduct the sessions. Participants can choose 

those sessions they wish to attend.

You can participate in this program because you are a 

member of the alumni association. You and your family 

take one of the trips. You spend about 2 hours at each of 

the planned sessions. The rest of the time you go touring 

and sightseeing with your family. The trip lasts less than 1 

week.

Your travel expenses for the trip aren’t deductible since 

the trip was primarily a vacation. However, registration 

fees and any other incidental expenses you have for the 

five planned sessions you attended that are directly related and beneficial to your business are deductible business expenses. These expenses should be specifically 

stated in your records to ensure proper allocation of your 

deductible business expenses.

Luxury Water Travel

If you travel by ocean liner, cruise ship, or other form of 

luxury water transportation for business purposes, there is 

a daily limit on the amount you can deduct. The limit is 

twice the highest federal per diem rate allowable at the 

time of your travel. (Generally, the federal per diem is the 

amount paid to federal government employees for daily 

living expenses when they travel away from home within 

the United States for business purposes.)

Daily limit on luxury water travel. The highest federal 

per diem rate allowed and the daily limit for luxury water 

travel in 2023 are shown in the following table.

2023 Dates

Highest Federal 

Per Diem

Daily Limit on Luxury 

Water Travel

January 1 – March 31 $564 $1,128

April 1 – April 30 498 996

May 1– May 31 398 796

June 1 – September 30 538 1,076

October 1 – October 31 401 802

November 1 – November 30 394 788

December 1 – December 

31 

564 1,128

Example. You are a travel agent and traveled by ocean 

liner from New York to London, England, on business in 

May. Your expense for the 6-day cruise was $6,200. Your 

deduction for the cruise can’t exceed $4,776 (6 days × 

$796 daily limit).

Meals and entertainment. If your expenses for luxury 

water travel include separately stated amounts for meals 

or entertainment, those amounts are subject to the 50% 

limit on non-entertainment-related meals and entertainment before you apply the daily limit. For a discussion of 

the 50% Limit, see chapter 2.

Example. In the previous example, your luxury water 

travel had a total cost of $6,200. Of that amount, $3,700 

was separately stated as non-entertainment-related meals 

and $1,000 was separately stated as entertainment. Considering that you are self-employed, you aren’t reimbursed 

for any of your travel expenses. You figure your deductible 

travel expenses as follows.

12 Chapter 1 Travel Publication 463 (2023)
Entertainment ...................... $1,000

 0% limit ......................... x 0.00

Allowable entertainment ................ $0.00

Non-entertainment-related meals .......... $3,700

50% limit ........................ × 0.50

Allowable non-entertainment meals & 

entertainment ...................... $1,850

Other travel expenses ................ + 1,500

Allowable cost before the daily limit ............... $3,350

Daily limit for May 2023 ................ $ 796

Times number of days ................ × 6

Maximum luxury water travel ......

deduction .............................. $4,776

Amount of allowable deduction ................ $3,350

Your deduction for your cruise is limited to $3,350, even 

though the limit on luxury water travel is higher.

Not separately stated. If your meal or entertainment 

charges aren’t separately stated or aren’t clearly identifiable, you don’t have to allocate any portion of the total 

charge to meals or entertainment.

Exceptions

The daily limit on luxury water travel (discussed earlier) 

doesn’t apply to expenses you have to attend a convention, seminar, or meeting on board a cruise ship. See 

Cruise Ships, later, under Conventions.

Conventions

You can deduct your travel expenses when you attend a 

convention if you can show that your attendance benefits 

your trade or business. You can’t deduct the travel expenses for your family.

If the convention is for investment, political, social, or 

other purposes unrelated to your trade or business, you 

can’t deduct the expenses.

Your appointment or election as a delegate 

doesn’t, in itself, determine whether you can deduct travel expenses. You can deduct your travel 

expenses only if your attendance is connected to your 

own trade or business.

Convention agenda. The convention agenda or program 

generally shows the purpose of the convention. You can 

show your attendance at the convention benefits your 

trade or business by comparing the agenda with the official duties and responsibilities of your position. The 

agenda doesn’t have to deal specifically with your official 

duties and responsibilities; it will be enough if the agenda 

is so related to your position that it shows your attendance 

was for business purposes.

CAUTION

!

Conventions Held Outside

the North American Area

You can’t deduct expenses for attending a convention, 

seminar, or similar meeting held outside the North American area unless:

• The meeting is directly related to the active conduct of 

your trade or business, and

• It is as reasonable to hold the meeting outside the 

North American area as within the North American 

area. See Reasonableness test, later.

If the meeting meets these requirements, you must also 

satisfy the rules for deducting expenses for business trips 

in general, discussed earlier under Travel Outside the United States.

North American area. The North American area includes the following locations.

American Samoa Jarvis Island

Antigua and Barbuda Johnston Island

Aruba Kingman Reef

Bahamas Marshall Islands

Baker Island Mexico

Barbados Micronesia

Bermuda Midway Islands

Canada Northern Mariana

Costa Rica Islands

Curaçao Palau

Dominica Palmyra Atoll

Dominican Republic Panama

Grenada Puerto Rico

Guam Saint Lucia

Guyana Trinidad and Tobago

Honduras USA

Howland Island U.S. Virgin Islands

Jamaica Wake Island

The North American area also includes U.S. islands, cays, 

and reefs that are territories of the United States and not 

part of the 50 states or the District of Columbia. See Revenue Ruling 2016-16, available at IRS.gov/irb/

2016-26_IRB#RR-2016-16, for more information.

Reasonableness test. The following factors are taken 

into account to determine if it was as reasonable to hold 

the meeting outside the North American area as within the 

North American area.

• The purpose of the meeting and the activities taking 

place at the meeting.

• The purposes and activities of the sponsoring organizations or groups.

• The homes of the active members of the sponsoring 

organizations and the places at which other meetings 

of the sponsoring organizations or groups have been 

or will be held.

• Other relevant factors you may present.

Cruise Ships

You can deduct up to $2,000 per year of your expenses of 

attending conventions, seminars, or similar meetings held 

Publication 463 (2023) Chapter 1 Travel 13
on cruise ships. All ships that sail are considered cruise 

ships.

You can deduct these expenses only if all of the following requirements are met.

1. The convention, seminar, or meeting is directly related 

to the active conduct of your trade or business.

2. The cruise ship is a vessel registered in the United 

States.

3. All of the cruise ship's ports of call are in the United 

States or in territories of the United States.

4. You attach to your return a written statement signed 

by you that includes information about:

a. The total days of the trip (not including the days of 

transportation to and from the cruise ship port),

b. The number of hours each day that you devoted to 

scheduled business activities, and

c. A program of the scheduled business activities of 

the meeting.

5. You attach to your return a written statement signed 

by an officer of the organization or group sponsoring 

the meeting that includes:

a. A schedule of the business activities of each day 

of the meeting, and

b. The number of hours you attended the scheduled 

business activities.

2.

Meals and Entertainment

You can no longer take a deduction for any expense related to activities generally considered entertainment, 

amusement, or recreation. You can continue to deduct 

50% of the cost of business meals if you (or your employee) are present and the food or beverages aren't considered lavish or extravagant.

If food or beverages are provided during or at an 

entertainment event, and the food and beverages 

were purchased separately from the entertainment or the cost of the food and beverages was stated 

separately from the cost of the entertainment on one or 

more bills, invoices, or receipts, you may be able to deduct 

the separately stated costs as a meal expense. For more 

information, see Regulations section 1.274-11(d)(2), Example 2.

TIP

Entertainment

Entertainment—Defined

Entertainment includes any activity generally considered 

to provide entertainment, amusement, or recreation. Examples include entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting 

events; on yachts; or on hunting, fishing, vacation, and 

similar trips. Entertainment may also include meeting personal, living, or family needs of individuals, such as providing meals, a hotel suite, or a car to customers or their 

families.

Deduction may depend on your type of business. 

Your kind of business may determine if a particular activity 

is considered entertainment. For example, if you are a 

dress designer and have a fashion show to introduce your 

new designs to store buyers, the show generally isn’t considered entertainment. This is because fashion shows are 

typical in your business. But, if you are an appliance distributor and hold a fashion show for the spouses of your 

retailers, the show is generally considered entertainment.

Separating costs. If you have one expense that includes the costs of entertainment and other services 

(such as lodging or transportation), you must allocate that 

expense between the cost of entertainment and the cost 

of other services. You must have a reasonable basis for 

making this allocation. For example, you must allocate 

your expenses if a hotel includes entertainment in its 

lounge on the same bill with your room charge.

Exceptions to the Rules

In general, entertainment expenses are nondeductible. 

However, there are a few exceptions to the general rule, 

including:

• Entertainment treated as compensation on your originally filed tax returns (and treated as wages to your 

employees);

• Recreational expenses for employees such as a holiday party or a summer picnic;

• Expenses related to attending business meetings or 

conventions of certain exempt organizations such as 

business leagues, chambers of commerce, professional associations, etc.; and

• Entertainment sold to customers. For example, if you 

run a nightclub, your expenses for the entertainment 

you furnish to your customers, such as a floor show, 

aren’t subject to the nondeductible rules.

Examples of Nondeductible Entertainment

Entertainment events. Generally, you can't deduct any 

expense for an entertainment event. This includes expenses for entertaining guests at nightclubs; at social, athletic, 

14 Chapter 2 Meals and Entertainment Publication 463 (2023)
and sporting clubs; at theaters; at sporting events; on 

yachts; or on hunting, fishing, vacation, and similar trips.

Entertainment facilities. Generally, you can’t deduct 

any expense for the use of an entertainment facility. This 

includes expenses for depreciation and operating costs 

such as rent, utilities, maintenance, and protection.

An entertainment facility is any property you own, rent, 

or use for entertainment. Examples include a yacht, hunting lodge, fishing camp, swimming pool, tennis court, 

bowling alley, car, airplane, apartment, hotel suite, or 

home in a vacation resort.

Club dues and membership fees. You can’t deduct 

dues (including initiation fees) for membership in any club 

organized for business, pleasure, recreation, or other social purposes.

This rule applies to any membership organization if one 

of its principal purposes is either:

• To conduct entertainment activities for members or 

their guests; or

• To provide members or their guests with access to entertainment facilities, discussed later.

The purposes and activities of a club, not its name, will 

determine whether or not you can deduct the dues. You 

can’t deduct dues paid to:

• Country clubs,

• Golf and athletic clubs,

• Airline clubs,

• Hotel clubs, and

• Clubs operated to provide meals under circumstances 

generally considered to be conducive to business discussions.

Gift or entertainment. Any item that might be considered either a gift or entertainment will generally be considered entertainment. However, if you give a customer packaged food or beverages that you intend the customer to 

use at a later date, treat it as a gift.

Meals

As discussed above, entertainment expenses are generally nondeductible. However, you may continue to deduct 

50% of the cost of business meals if you (or an employee) 

is present and the food or beverages are not considered 

lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant, or 

similar business contact.

Food and beverages that are provided during entertainment events are not considered entertainment if purchased separately from the entertainment, or if the cost of 

the food and beverages is stated separately from the cost 

of the entertainment on one or more bills, invoices, or receipts. However, the entertainment disallowance rule may 

not be circumvented through inflating the amount charged 

for food and beverages.

Other rules for meals and entertainment expenses. 

Any allowed expense must be ordinary and necessary. An 

ordinary expense is one that is common and accepted in 

your trade or business. A necessary expense is one that is 

helpful and appropriate for your business. An expense 

doesn't have to be required to be considered necessary. 

Expenses must not be lavish or extravagant. An expense 

isn't considered lavish or extravagant if it is reasonable 

based on the facts and circumstances.

Examples. For each example, assume that the food and 

beverage expenses are ordinary and necessary expenses 

under section 162(a) paid or incurred during the tax year 

in carrying on a trade or business and are not lavish or extravagant under the circumstances. Also assume that the 

taxpayer and the business contact are not engaged in a 

trade or business that has any relation to the entertainment activity.

Example 1. Taxpayer A invites B, a business contact, 

to a baseball game. A purchases tickets for A and B to attend the game. While at the game, A buys hot dogs and 

drinks for A and B. The baseball game is entertainment as 

defined in Regulations section 1.274-11(b)(1)(i) and, thus, 

the cost of the game tickets is an entertainment expense 

and is not deductible by A. The cost of the hot dogs and 

drinks, which are purchased separately from the game 

tickets, is not an entertainment expense and is not subject 

to the section 274(a)(1) disallowance. Therefore, A may 

deduct 50% of the expenses associated with the hot dogs 

and drinks purchased at the game.

Example 2. Taxpayer C invites D, a business contact, 

to a basketball game. C purchases tickets for C and D to 

attend the game in a suite, where they have access to 

food and beverages. The cost of the basketball game tickets, as stated on the invoice, includes the food and beverages. The basketball game is entertainment as defined in 

Regulations section 1.274-11(b)(1)(i) and, thus, the cost 

of the game tickets is an entertainment expense and is not 

deductible by C. The cost of the food and beverages, 

which are not purchased separately from the game tickets, is not stated separately on the invoice. Thus, the cost 

of the food and beverages is also an entertainment expense that is subject to the section 274(a)(1) disallowance. Therefore, C may not deduct any of the expenses 

associated with the basketball game.

Example 3. Assume the same facts as in Example 2, 

except that the invoice for the basketball game tickets separately states the cost of the food and beverages. As in 

Example 2, the basketball game is entertainment as defined in Regulations section 1.274-2(b)(1)(i) and, thus, the 

cost of the game tickets, other than the cost of the food 

and beverages, is an entertainment expense and is not 

deductible by C. However, the cost of the food and beverages, which is stated separately on the invoice for the 

game tickets, is not an entertainment expense and is not 

subject to the section 274(a)(1) disallowance. Therefore, 

C may deduct 50% of the expenses associated with the 

food and beverages provided at the game.

Publication 463 (2023) Chapter 2 Meals and Entertainment 15
50% Limit

In general, you can deduct only 50% of your business-related meal expenses, unless an exception applies. (If you 

are subject to the Department of Transportation's “hours of 

service” limits, you can deduct 80% of your business-related meal expenses. See Individuals subject to “hours of 

service” limits, later.)

The 50% limit applies to employees or their employers, 

and to self-employed persons (including independent contractors) or their clients, depending on whether the expenses are reimbursed.

Examples of meals might include:

• Meals while traveling away from home (whether eating 

alone or with others) on business, or

• Meal at a business convention or business league 

meeting.

Costs to include or exclude. Taxes and tips relating to a 

business meal are included as a cost of the meal and are 

subject to the 50% limit. However, the cost of transportation to and from the meal is not treated as part of the cost 

and would not be subject to the limit.

Application of 50% limit. The 50% limit on meal expenses applies if the expense is otherwise deductible and 

isn’t covered by one of the exceptions discussed later. Figure A can help you determine if the 50% limit applies to 

you.

The 50% limit also applies to certain meal expenses 

that aren’t business related. It applies to meal expenses 

you have for the production of income, including rental or 

royalty income. It also applies to the cost of meals included in deductible educational expenses.

When to apply the 50% limit. The 50% limit will apply 

after determining the amount that would otherwise qualify 

for a deduction. You first have to determine the amount of 

meal expenses that would be deductible under the other 

rules discussed in this publication.

Figure A. Does the 50% Limit Apply to Your Expenses?

There are exceptions to these rules. See Exceptions to the 50% Limit for Meals, later.

All employees and self-employed persons can use this chart.

Were your meal and entertainment expenses reimbursed?

(Count only reimbursements your employer didn’t

include in box 1 of your Form W-2. If self-employed,

count only reimbursements from clients or customers that

aren’t included on Form 1099-MISC, Miscellaneous

Income.)

If an employee, did you adequately account

to your employer under an accountable plan?

If self-employed, did you provide the payer

with adequate records? (See chapter 6.)

Did your expenses exceed the reimbursement?

For the amount reimbursed... For the excess amount...

Yes

No

No

Yes

No Yes

Start Here

Your meal and entertainment 

expenses are NOT subject to 

the limitations. However, since 

the reimbursement wasn’t 

treated as wages or as other 

taxable income, you can’t 

deduct the expenses.

Your meal expenses ARE 

subject to the 50% limit. 

Your entertainment 

expenses are nondeductible. 16 Chapter 2 Meals and Entertainment Publication 463 (2023)
Taking turns paying for meals. If a group of business 

acquaintances takes turns picking up each others' meal 

checks primarily for personal reasons, without regard to 

whether any business purposes are served, no member of 

the group can deduct any part of the expense.

Example 1. You spend $200 (including tax and tip) for 

a business meal. If $110 of that amount isn’t allowable because it is lavish and extravagant, the remaining $90 is 

subject to the 50% limit. Your deduction can’t be more 

than $45 (50% (0.50) × $90).

Example 2. You purchase two tickets to a concert for 

$200 for you and your client. Your deduction is zero because no deduction is allowed for entertainment expenses.

Exception to the 50% Limit for Meals

Your meal expense isn’t subject to the 50% limit if the expense meets one of the following exceptions.

1—Expenses treated as compensation. In general, 

expenses for goods, services, and facilities, to the extent 

the expenses are treated by the taxpayer, with respect to 

entertainment, amusement, or recreation, as compensation to an employee and as wages to the employee for tax 

purposes.

2—Employee's reimbursed expenses. If you are an 

employee, you aren’t subject to the 50% limit on expenses 

for which your employer reimburses you under an accountable plan. Accountable plans are discussed in chapter 6.

3—Self-employed reimbursed expenses. If you are 

self-employed, your deductible meal expenses aren’t subject to the 50% limit if all of the following requirements are 

met.

• You have these expenses as an independent contractor.

• Your customer or client reimburses you or gives you 

an allowance for these expenses in connection with 

services you perform.

• You provide adequate records of these expenses to 

your customer or client. (See chapter 5.)

In this case, your client or customer is subject to the 

50% limit on the expenses.

Example. You are a self-employed attorney who adequately accounts for meal expenses to a client who reimburses you for these expenses. You aren’t subject to the 

limitation on meal expenses. If the client can deduct the 

expenses, the client is subject to the 50% limit.

If you (as an independent contractor) have expenses 

for meals related to providing services for a client but don’t 

adequately account for and seek reimbursement from the 

client for those expenses, you are subject to the 50% limit 

on non-entertainment-related meals and the entertainment-related meal expenses are nondeductible to you.

4—Recreational expenses for employees. You 

aren't subject to the 50% limit for expenses for recreational, social, or similar activities (including facilities) such 

as a holiday party or a summer picnic.

5—Advertising expenses. You aren’t subject to the 

50% limit if you provide meals to the general public as a 

means of advertising or promoting goodwill in the community. For example, neither the expense of sponsoring a 

television or radio show nor the expense of distributing 

free food and beverages to the general public is subject to 

the 50% limit.

6—Sale of meals. You aren’t subject to the 50% limit if 

you actually sell meals to the public. For example, if you 

run a restaurant, your expense for the food you furnish to 

your customers isn’t subject to the 50% limit.

Individuals subject to “hours of service” limits. You 

can deduct a higher percentage of your meal expenses 

while traveling away from your tax home if the meals take 

place during or incident to any period subject to the Department of Transportation's “hours of service” limits. The 

percentage is 80%.

Individuals subject to the Department of Transportation's “hours of service” limits include the following persons.

• Certain air transportation workers (such as pilots, 

crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration 

regulations.

• Interstate truck operators and bus drivers who are under Department of Transportation regulations.

• Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations.

• Certain merchant mariners who are under Coast 

Guard regulations.

The temporary 100-percent deduction for expenses that were paid or incurred after December 31, 

2020, and before January 1, 2023, for food or 

beverages provided by a restaurant has expired. Generally, the 50% deduction continues to apply. See 50% Limit, 

earlier.

3.

Gifts

If you give gifts in the course of your trade or business, 

you may be able to deduct all or part of the cost. This 

chapter explains the limits and rules for deducting the 

costs of gifts.

CAUTION

!

Publication 463 (2023) Chapter 3 Gifts 17
$25 limit. You can deduct no more than $25 for business 

gifts you give directly or indirectly to each person during 

your tax year. A gift to a company that is intended for the 

eventual personal use or benefit of a particular person or a 

limited class of people will be considered an indirect gift to 

that particular person or to the individuals within that class 

of people who receive the gift.

If you give a gift to a member of a customer's family, the 

gift is generally considered to be an indirect gift to the customer. This rule doesn’t apply if you have a bona fide, independent business connection with that family member 

and the gift isn’t intended for the customer's eventual use.

If you and your spouse both give gifts, both of you are 

treated as one taxpayer. It doesn’t matter whether you 

have separate businesses, are separately employed, or 

whether each of you has an independent connection with 

the recipient. If a partnership gives gifts, the partnership 

and the partners are treated as one taxpayer.

Example. You sell products to a local company. You 

and your spouse gave the local company three gourmet 

gift baskets to thank them for their business. You and your 

spouse paid $80 for each gift basket, or $240 total. Three 

of the local company's executives took the gift baskets 

home for their families' use. You and your spouse have no 

independent business relationship with any of the executives' other family members. You and your spouse can deduct a total of $75 ($25 limit × 3) for the gift baskets.

Incidental costs. Incidental costs, such as engraving on 

jewelry, or packaging, insuring, and mailing, are generally 

not included in determining the cost of a gift for purposes 

of the $25 limit.

A cost is incidental only if it doesn’t add substantial 

value to the gift. For example, the cost of gift wrapping is 

an incidental cost. However, the purchase of an ornamental basket for packaging fruit isn’t an incidental cost if the 

value of the basket is substantial compared to the value of 

the fruit.

Exceptions. The following items aren’t considered gifts 

for purposes of the $25 limit.

1. An item that costs $4 or less and:

a. Has your name clearly and permanently imprinted 

on the gift, and

b. Is one of a number of identical items you widely 

distribute. Examples include pens, desk sets, and 

plastic bags and cases.

2. Signs, display racks, or other promotional material to 

be used on the business premises of the recipient.

Gift or entertainment. Any item that might be considered either a gift or entertainment will generally be considered entertainment. However, if you give a customer packaged food or beverages you intend the customer to use at 

a later date, treat it as a gift.

If you are entitled to a reimbursement from your 

employer but you don’t claim it, you can’t claim a 

deduction for the expenses to which that unclaimed reimbursement applies. This type of deduction is 

considered a miscellaneous deduction that is no longer allowable due to the suspension of miscellaneous itemized 

deductions subject to the 2% floor under section 67(a).

4.

Transportation

This chapter discusses expenses you can deduct for business transportation when you aren’t traveling away from 

home, as defined in chapter 1. These expenses include 

the cost of transportation by air, rail, bus, taxi, etc., and the 

cost of driving and maintaining your car.

Transportation expenses include the ordinary and necessary costs of all of the following.

• Getting from one workplace to another in the course of 

your business or profession when you are traveling 

within the city or general area that is your tax home. 

Tax home is defined in chapter 1.

• Visiting clients or customers.

• Going to a business meeting away from your regular 

workplace.

• Getting from your home to a temporary workplace 

when you have one or more regular places of work. 

These temporary workplaces can be either within the 

area of your tax home or outside that area.

Transportation expenses don’t include expenses you have 

while traveling away from home overnight. Those expenses are travel expenses discussed in chapter 1. However, 

if you use your car while traveling away from home overnight, use the rules in this chapter to figure your car expense deduction. See Car Expenses, later.

Daily transportation expenses you incur while traveling 

from home to one or more regular places of business are 

generally nondeductible commuting expenses. However, 

there may be exceptions to this general rule. You can deduct daily transportation expenses incurred going between your residence and a temporary work station outside the metropolitan area where you live. Also, daily 

transportation expenses can be deducted if (1) you have 

one or more regular work locations away from your residence; or (2) your residence is your principal place of 

business and you incur expenses going between the residence and another work location in the same trade or 

business, regardless of whether the work is temporary or 

permanent and regardless of the distance.

CAUTION

!

18 Chapter 4 Transportation Publication 463 (2023)
If you are entitled to a reimbursement from your 

employer but you don’t claim it, you can’t claim a 

deduction for the expenses to which that unclaimed reimbursement applies. This type of deduction is 

considered a miscellaneous deduction that is no longer allowable due to the suspension of miscellaneous itemized 

deductions subject to the 2% floor under section 67(a).

Illustration of transportation expenses. Figure B above 

illustrates the rules that apply for deducting transportation 

expenses when you have a regular or main job away from 

your home. You may want to refer to it when deciding 

whether you can deduct your transportation expenses.

Temporary work location. If you have one or more regular work locations away from your home and you commute 

CAUTION

!

to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip 

transportation between your home and the temporary location, regardless of distance.

If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the 

employment is temporary unless there are facts and circumstances that would indicate otherwise.

If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic 

expectation that the employment will last for 1 year or less, 

the employment isn’t temporary, regardless of whether it 

actually lasts for more than 1 year.

If employment at a work location initially is realistically 

expected to last for 1 year or less, but at some later date 

the employment is realistically expected to last more than 

Figure B. When Are Transportation Expenses Deductible?

Most employees and self-employed persons can use this chart. (Don’t use this chart if your home is your principal 

place of business. See Office in the home, later.)

Temporary

work location

Home Regular or

main job

Always

deductible

Always

deductible

Second job

Never deductible

Never deductible

Deductible if you have a

regular or main job

at another location

Always deductible

Home: The place where you reside. Transportation expenses between your home and

your main or regular place of work are personal commuting expenses.

Regular or main job: Your principal place of business. If you have more than one job,

you must determine which one is your regular or main job. Consider the time you

spend at each, the activity you have at each, and the income you earn at each.

Temporary work location: A place where your work assignment is realistically

expected to last (and does in fact last) one year or less. Unless you have a regular

place of business, you can only deduct your transportation expenses to a temporary

work location outside your metropolitan area.

Second job: If you regularly work at two or more places in one day, whether or not

for the same employer, you can deduct your transportation expenses of getting from

one workplace to another. If you don’t go directly from your rst job to your second

job, you can only deduct the transportation expenses of going directly from your rst

job to your second job. You can’t deduct your transportation expenses between

your home and a second job on a day off from your main job.

Publication 463 (2023) Chapter 4 Transportation 19
1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate 

otherwise) until your expectation changes. It won’t be treated as temporary after the date you determine it will last 

more than 1 year.

If the temporary work location is beyond the general 

area of your regular place of work and you stay overnight, 

you are traveling away from home. You may have deductible travel expenses, as discussed in chapter 1.

No regular place of work. If you have no regular place 

of work but ordinarily work in the metropolitan area where 

you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area.

Generally, a metropolitan area includes the area within 

the city limits and the suburbs that are considered part of 

that metropolitan area.

You can’t deduct daily transportation costs between 

your home and temporary work sites within your metropolitan area. These are nondeductible commuting expenses.

Two places of work. If you work at two places in 1 day, 

whether or not for the same employer, you can deduct the 

expense of getting from one workplace to the other. However, if for some personal reason you don’t go directly 

from one location to the other, you can’t deduct more than 

the amount it would have cost you to go directly from the 

first location to the second.

Transportation expenses you have in going between 

home and a part-time job on a day off from your main job 

are commuting expenses. You can’t deduct them.

Armed Forces reservists. A meeting of an Armed 

Forces reserve unit is a second place of business if the 

meeting is held on a day on which you work at your regular 

job. You can deduct the expense of getting from one workplace to the other as just discussed under Two places of 

work.

You usually can’t deduct the expense if the reserve 

meeting is held on a day on which you don’t work at your 

regular job. In this case, your transportation is generally a 

nondeductible commuting expense. However, you can deduct your transportation expenses if the location of the 

meeting is temporary and you have one or more regular 

places of work.

If you ordinarily work in a particular metropolitan area 

but not at any specific location and the reserve meeting is 

held at a temporary location outside that metropolitan 

area, you can deduct your transportation expenses.

If you travel away from home overnight to attend a 

guard or reserve meeting, you can deduct your travel expenses. These expenses are discussed in chapter 1.

If you travel more than 100 miles away from home in 

connection with your performance of services as a member of the reserves, 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.

Commuting expenses. You can’t deduct the costs of 

taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. 

These costs are personal commuting expenses. You can’t 

deduct commuting expenses no matter how far your home 

is from your regular place of work. You can’t deduct commuting expenses even if you work during the commuting 

trip.

Example. You sometimes use your cell phone to make 

business calls while commuting to and from work. Sometimes business associates ride with you to and from work, 

and you have a business discussion in the car. These activities don’t change the trip from personal to business. 

You can’t deduct your commuting expenses.

Parking fees. Fees you pay to park your car at your 

place of business are nondeductible commuting expenses. You can, however, deduct business-related parking 

fees when visiting a customer or client.

Advertising display on car. Putting display material 

that advertises your business on your car doesn’t change 

the use of your car from personal use to business use. If 

you use this car for commuting or other personal uses, 

you still can’t deduct your expenses for those uses.

Car pools. You can’t deduct the cost of using your car 

in a nonprofit car pool. Don’t include payments you receive from the passengers in your income. These payments are considered reimbursements of your expenses. 

However, if you operate a car pool for a profit, you must include payments from passengers in your income. You can 

then deduct your car expenses (using the rules in this 

publication).

Hauling tools or instruments. Hauling tools or instruments in your car while commuting to and from work 

doesn’t make your car expenses deductible. However, you 

can deduct any additional costs you have for hauling tools 

or instruments (such as for renting a trailer you tow with 

your car).

Union members' trips from a union hall. If you get 

your work assignments at a union hall and then go to your 

place of work, the costs of getting from the union hall to 

your place of work are nondeductible commuting expenses. Although you need the union to get your work assignments, you are employed where you work, not where the 

union hall is located.

Office in the home. If you have an office in your home 

that qualifies as a principal place of business, you can deduct your daily transportation costs between your home 

and another work location in the same trade or business. 

(See Pub. 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business.)

Examples of deductible transportation. The following 

examples show when you can deduct transportation expenses based on the location of your work and your 

home.

20 Chapter 4 Transportation Publication 463 (2023)
Example 1. You regularly work in an office in the city 

where you live. Your employer sends you to a 1-week 

training session at a different office in the same city. You 

travel directly from your home to the training location and 

return each day. You can deduct the cost of your daily 

round-trip transportation between your home and the 

training location.

Example 2. Your principal place of business is in your 

home. You can deduct the cost of round-trip transportation 

between your qualifying home office and your client's or 

customer's place of business.

Example 3. You have no regular office, and you don’t 

have an office in your home. In this case, the location of 

your first business contact inside the metropolitan area is 

considered your office. Transportation expenses between 

your home and this first contact are nondeductible commuting expenses. Transportation expenses between your 

last business contact and your home are also nondeductible commuting expenses. While you can’t deduct the 

costs of these trips, you can deduct the costs of going 

from one client or customer to another.

Car Expenses

If you use your car for business purposes, you may be 

able to deduct car expenses. You can generally use one of 

the two following methods to figure your deductible expenses.

• Standard mileage rate.

• Actual car expenses.

If you qualify to use both methods, you may want 

to figure your deduction both ways to see which 

gives you a larger deduction.

The cost of using your car as an employee, whether 

measured using actual expenses or the standard mileage 

rate, will no longer be allowed to be claimed as an unreimbursed employee travel expense as a miscellaneous itemized deduction due to the suspension of miscellaneous 

itemized deductions that are subject to the 2% floor under 

section 67(a). The suspension applies to tax years beginning after December 2017 and before January 2026. Deductions for expenses that are deductible in determining 

adjusted gross income are not suspended. For example, 

Armed Forces reservists, qualified performing artists, and 

fee-basis state or local government officials are allowed to 

deduct unreimbursed employee travel expenses as an adjustment to total income on Schedule 1 (Form 1040), 

line 12.

If you use actual expenses to figure your deduction for 

a car you lease, there are rules that affect the amount of 

your lease payments you can deduct. See Leasing a Car, 

later.

In this publication, “car” includes a van, pickup, or panel 

truck. For the definition of “car” for depreciation purposes, 

see Car defined under Actual Car Expenses, later.

TIP

Standard Mileage Rate

For 2023, the standard mileage rate for the cost of operating your car for business use is 65.5 cents ($0.655) per 

mile.

If you use the standard mileage rate for a year, 

you can’t deduct your actual car expenses for that 

year. You can’t deduct depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, or vehicle registration fees. 

See Choosing the standard mileage rate and Standard 

mileage rate not allowed, later.

You can generally use the standard mileage rate 

whether or not you are reimbursed and whether or not any 

reimbursement is more or less than the amount figured 

using the standard mileage rate. See chapter 6 for more 

information on reimbursements.

Choosing the standard mileage rate. If you want to 

use the standard mileage rate for a car you own, you must 

choose to use it in the first year the car is available for use 

in your business. Then, in later years, you can choose to 

use either the standard mileage rate or actual expenses.

If you want to use the standard mileage rate for a car 

you lease, you must use it for the entire lease period. For 

leases that began on or before December 31, 1997, the 

standard mileage rate must be used for the entire portion 

of the lease period (including renewals) that is after 1997.

You must make the choice to use the standard mileage 

rate by the due date (including extensions) of your return. 

You can’t revoke the choice. However, in later years, you 

can switch from the standard mileage rate to the actual expenses method. If you change to the actual expenses 

method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the 

car and use straight line depreciation for the car’s remaining estimated useful life, subject to depreciation limits (discussed later).

For more information about depreciation included in the 

standard mileage rate, see Exception under Methods of 

depreciation, later.

Standard mileage rate not allowed. You can’t use the 

standard mileage rate if you:

• Use five or more cars at the same time (such as in 

fleet operations);

• Claimed a depreciation deduction for the car using 

any method other than straight line for the car’s estimated useful life;

• Used the Modified Accelerated Cost Recovery System (MACRS) (as discussed later under Depreciation 

Deduction);

• Claimed a section 179 deduction (discussed later) on 

the car;

• Claimed the special depreciation allowance on the 

car; or

• Claimed actual car expenses after 1997 for a car you 

leased.

CAUTION

!

Publication 463 (2023) Chapter 4 Transportation 21
Note. You can elect to use the standard mileage rate if 

you used a car for hire (such as a taxi) unless the standard 

mileage rate is otherwise not allowed, as discussed 

above.

Five or more cars. If you own or lease five or more 

cars that are used for business at the same time, you can’t 

use the standard mileage rate for the business use of any 

car. However, you may be able to deduct your actual expenses for operating each of the cars in your business. 

See Actual Car Expenses, later, for information on how to 

figure your deduction.

You aren’t using five or more cars for business at the 

same time if you alternate using (use at different times) 

the cars for business.

The following examples illustrate the rules for when you 

can and can’t use the standard mileage rate for five or 

more cars.

Example 1. A salesperson owns three cars and two 

vans that they alternate using for calling on their customers. The salesperson can use the standard mileage rate 

for the business mileage of the three cars and the two 

vans because they don’t use them at the same time.

Example 2. You and your employees use your four 

pickup trucks in your landscaping business. During the 

year, you traded in two of your old trucks for two newer 

ones. You can use the standard mileage rate for the business mileage of all six of the trucks you owned during the 

year.

Example 3. You own a repair shop and an insurance 

business. You and your employees use your two pickup 

trucks and van for the repair shop. You alternate using 

your two cars for the insurance business. No one else 

uses the cars for business purposes. You can use the 

standard mileage rate for the business use of the pickup 

trucks, the van, and the cars because you never have 

more than four vehicles used for business at the same 

time.

Example 4. You own a car and four vans that are used 

in your housecleaning business. Your employees use the 

vans, and you use the car to travel to various customers. 

You can’t use the standard mileage rate for the car or the 

vans. This is because all five vehicles are used in your 

business at the same time. You must use actual expenses 

for all vehicles.

Interest. If you are an employee, you can’t deduct any interest paid on a car loan. This applies even if you use the 

car 100% for business as an employee.

However, if you are self-employed and use your car in 

your business, you can deduct that part of the interest expense that represents your business use of the car. For 

example, if you use your car 60% for business, you can 

deduct 60% of the interest on Schedule C (Form 1040). 

You can’t deduct the part of the interest expense that represents your personal use of the car.

If you use a home equity loan to purchase your 

car, you may be able to deduct the interest. See 

Pub. 936, Home Mortgage Interest Deduction, for 

more information.

Personal property taxes. If you itemize your deductions 

on Schedule A (Form 1040), you can deduct on line 5c 

state and local personal property taxes on motor vehicles. 

You can take this deduction even if you use the standard 

mileage rate or if you don’t use the car for business.

If you are self-employed and use your car in your business, you can deduct the business part of state and local 

personal property taxes on motor vehicles on Schedule C 

(Form 1040), or Schedule F (Form 1040). If you itemize 

your deductions, you can include the remainder of your 

state and local personal property taxes on the car on 

Schedule A (Form 1040).

Parking fees and tolls. In addition to using the standard 

mileage rate, you can deduct any business-related parking fees and tolls. (Parking fees you pay to park your car at 

your place of work are nondeductible commuting expenses.)

Sale, trade-in, or other disposition. If you sell, trade in, 

or otherwise dispose of your car, you may have a gain or 

loss on the transaction or an adjustment to the basis of 

your new car. See Disposition of a Car, later.

Actual Car Expenses

If you don’t use the standard mileage rate, you may be 

able to deduct your actual car expenses.

Actual car expenses include:

Depreciation

Licenses

Lease 

payments

Registration 

fees

Gas Insurance Repairs

Oil Garage rent Tires

Tolls Parking fees

If you have fully depreciated a car that you still use in 

your business, you can continue to claim your other actual 

car expenses. Continue to keep records, as explained 

later in chapter 5.

Business and personal use. If you use your car for both 

business and personal purposes, you must divide your expenses between business and personal use. You can divide your expense based on the miles driven for each purpose.

Example. You are a contractor and drive your car 

20,000 miles during the year: 12,000 miles for business 

use and 8,000 miles for personal use. You can claim only 

60% (12,000 ÷ 20,000) of the cost of operating your car as 

a business expense.

Employer-provided vehicle. If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses. You can’t 

use the standard mileage rate. See Vehicle Provided by 

Your Employer in chapter 6.

TIP

22 Chapter 4 Transportation Publication 463 (2023)
Interest on car loans. If you are an employee, you can’t 

deduct any interest paid on a car loan. This interest is 

treated as personal interest and isn’t deductible. If you are 

self-employed and use your car in that business, see Interest, earlier, under Standard Mileage Rate.

Taxes paid on your car. If you are an employee, you can 

deduct personal property taxes paid on your car if you 

itemize deductions. Enter the amount paid on Schedule A 

(Form 1040), line 5c.

Sales taxes. Generally, sales taxes on your car are 

part of your car's basis and are recovered through depreciation, discussed later.

Fines and collateral. You can’t deduct fines you pay or 

collateral you forfeit for traffic violations.

Casualty and theft losses. If your car is damaged, destroyed, or stolen, you may be able to deduct part of the 

loss not covered by insurance. See Pub. 547, Casualties, 

Disasters, and Thefts, for information on deducting a loss 

on your car.

Depreciation and section 179 deductions. Generally, 

the cost of a car, plus sales tax and improvements, is a 

capital expense. Because the benefits last longer than 1 

year, you generally can’t deduct a capital expense. However, you can recover this cost through the section 179 deduction (the deduction allowed by section 179 of the Internal Revenue Code), special depreciation allowance, and 

depreciation deductions. Depreciation allows you to recover the cost over more than 1 year by deducting part of 

it each year. The section 179 deduction, special depreciation allowance, and depreciation deductions are discussed later.

Generally, there are limits on these deductions. Special 

rules apply if you use your car 50% or less in your work or 

business.

You can claim a section 179 deduction and use a depreciation method other than straight line only if you don’t 

use the standard mileage rate to figure your business-related car expenses in the year you first place a car in service.

If, in the year you first place a car in service, you claim 

either a section 179 deduction or use a depreciation 

method other than straight line for its estimated useful life, 

you can’t use the standard mileage rate on that car in any 

future year.

Car defined. For depreciation purposes, a car is any 

four-wheeled vehicle (including a truck or van) made primarily for use on public streets, roads, and highways. Its 

unloaded gross vehicle weight (for trucks and vans, gross 

vehicle weight) must not be more than 6,000 pounds. A 

car includes any part, component, or other item physically 

attached to it or usually included in the purchase price.

A car doesn’t include:

• An ambulance, hearse, or combination ambulance-hearse used directly in a business;

• A vehicle used directly in the business of transporting 

persons or property for pay or hire; or

• A truck or van that is a qualified nonpersonal use vehicle.

Qualified nonpersonal use vehicles. These are vehicles that by their nature aren’t likely to be used more 

than a minimal amount for personal purposes. They include trucks and vans that have been specially modified 

so that they aren’t likely to be used more than a minimal 

amount for personal purposes, such as by installation of 

permanent shelving and painting the vehicle to display advertising or the company's name. Delivery trucks with 

seating only for the driver, or only for the driver plus a folding jump seat, are qualified nonpersonal use vehicles.

More information. See Depreciation Deduction, later, 

for more information on how to depreciate your vehicle.

Section 179 Deduction

You can elect to recover all or part of the cost of a car that 

is qualifying section 179 property, up to a limit, by deducting it in the year you place the property in service. This is 

the section 179 deduction. If you elect the section 179 deduction, you must reduce your depreciable basis in the car 

by the amount of the section 179 deduction.

There is a limit on the total section 179 deduction, 

special depreciation allowance, and depreciation 

deduction for cars, trucks, and vans that may reduce or eliminate any benefit from claiming the section 

179 deduction. See Depreciation Limits, later.

You can claim the section 179 deduction only in the 

year you place the car in service. For this purpose, a car is 

placed in service when it is ready and available for a specifically assigned use in a trade or business. Even if you 

aren’t using the property, it is in service when it is ready 

and available for its specifically assigned use.

A car first used for personal purposes can’t qualify for 

the deduction in a later year when its use changes to business.

Example. In 2022, you bought a new car and used it 

for personal purposes. In 2023, you began to use it for 

business. Changing its use to business use doesn’t qualify the cost of your car for a section 179 deduction in 2023. 

However, you can claim a depreciation deduction for the 

business use of the car starting in 2023. See Depreciation 

Deduction, later.

More than 50% business use requirement. You must 

use the property more than 50% for business to claim any 

section 179 deduction. If you used the property more than 

50% for business, multiply the cost of the property by the 

percentage of business use. The result is the cost of the 

property that can qualify for the section 179 deduction.

Example. You purchased a new car in April 2023 for 

$24,500 and used it 60% for business. Based on your 

business usage, the total cost of your car that qualifies for 

the section 179 deduction is $14,700 ($24,500 cost × 

60% (0.60) business use). But see Limit on total section 

TIP

Publication 463 (2023) Chapter 4 Transportation 23
179, special depreciation allowance, and depreciation deduction, discussed later.

Limits. There are limits on:

• The amount of the section 179 deduction;

• The section 179 deduction for sport utility and certain 

other vehicles; and

• The total amount of the section 179 deduction, special 

depreciation allowance, and depreciation deduction 

(discussed later) you can claim for a qualified property.

Limit on the amount of the section 179 deduction. 

For tax years beginning in 2023, the total amount you can 

elect to deduct under section 179 can’t be more than 

$1,160,000.

If the cost of your section 179 property placed in service in tax years beginning in 2023 is over $2,890,000, you 

must reduce the $1,160,000 dollar limit (but not below 

zero) by the amount of cost over $2,890,000. If the cost of 

your section 179 property placed in service during tax 

years beginning in 2023 is $4,050,000 or more, you can’t 

take a section 179 deduction.

The total amount you can deduct under section 179 

each year after you apply the limits listed above cannot be 

more than the taxable income from the active conduct of 

any trade or business during the year.

If you are married and file a joint return, you and your 

spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service.

If you and your spouse file separate returns, you are 

treated as one taxpayer for the dollar limit. You must allocate the dollar limit (after any reduction) between you.

For more information on the above section 179 deduction limits, see Pub. 946, How To Depreciate Property.

Limit for sport utility and certain other vehicles. 

You cannot elect to deduct more than $28,900 of the cost 

of any heavy sport utility vehicle (SUV) and certain other 

vehicles placed in service during the tax years beginning 

in 2023. This rule applies to any four-wheeled vehicle primarily designed or used to carry passengers over public 

streets, roads, or highways that isn’t subject to any of the 

passenger automobile limits explained under Depreciation 

Limits, later, and that is rated at more than 6,000 pounds 

gross vehicle weight and not more than 14,000 pounds 

gross vehicle weight. However, the $28,900 limit doesn’t 

apply to any vehicle:

• Designed to have a seating capacity of more than nine 

persons behind the driver's seat;

• Equipped with a cargo area of at least 6 feet in interior 

length that is an open area or is designed for use as 

an open area but is enclosed by a cap and isn’t readily 

accessible directly from the passenger compartment; 

or

• That has an integral enclosure, fully enclosing the 

driver compartment and load carrying device, doesn’t 

have seating rearward of the driver's seat, and has no 

body section protruding more than 30 inches ahead of 

the leading edge of the windshield.

Limit on total section 179 deduction, special depreciation allowance, and depreciation deduction. 

The first-year limit on the depreciation deduction, special 

depreciation allowance, and section 179 deduction for vehicles acquired before September 28, 2017, and placed in 

service during 2023, is $12,200. The first-year limit on depreciation, special depreciation allowance, and section 

179 deduction for vehicles acquired after September 27, 

2017, and placed in service during 2023 increases to 

$20,200. If you elect not to claim a special depreciation allowance for a vehicle placed in service in 2023, the 

amount increases to $12,200. The limit is reduced if your 

business use of the vehicle is less than 100%. See Depreciation Limits, later, for more information.

Example. In the earlier example under More than 50% 

business use requirement, you had a car with a cost (for 

purposes of the section 179 deduction) of $14,700. However, based on your business usage of the car, the total of 

your section 179 deduction, special depreciation allowance, and depreciation deductions is limited to $12,120 

($20,200 limit x 60% (0.60) business use) because the car 

was acquired after September 27, 2017, and placed in 

service during 2023.

Cost of car. For purposes of the section 179 deduction, 

the cost of the car doesn’t include any amount figured by 

reference to any other property held by you at any time. 

For example, if you buy a car as a replacement for a car 

that was stolen or that was destroyed in a casualty loss, 

and you use section 1033 to determine the basis in your 

replacement vehicle, your cost for purposes of the section 

179 deduction doesn’t include your adjusted basis in the 

relinquished car. In that case, your cost includes only the 

cash you paid.

Basis of car for depreciation. The amount of the 

section 179 deduction reduces your basis in your car. If 

you choose the section 179 deduction, you must subtract 

the amount of the deduction from the cost of your car. The 

resulting amount is the basis in your car you use to figure 

your depreciation deduction.

When to elect. If you want to take the section 179 deduction, you must make the election in the tax year you place 

the car in service for business or work.

How to elect. Employees use Form 2106, Employee 

Business Expenses, to make the election and report the 

section 179 deduction. All others use Form 4562, Depreciation and Amortization, to make an election.

Form 2106 is only used by Armed Forces reservists, qualified performing artists, fee-basis state or 

local government officials, and employees with 

impairment-related work expenses. Due to the suspension 

of miscellaneous itemized deductions subject to the 2% 

floor under section 67(a), employees who do not fit into 

one of the listed categories may not use Form 2106.

CAUTION

!

24 Chapter 4 Transportation Publication 463 (2023)
File the appropriate form with either of the following.

• Your original tax return filed for the year the property 

was placed in service (whether or not you file it 

timely).

• An amended return filed within the time prescribed by 

law. An election made on an amended return must 

specify the item of section 179 property to which the 

election applies and the part of the cost of each such 

item to be taken into account. The amended return 

must also include any resulting adjustments to taxable 

income.

You must keep records that show the specific 

identification of each piece of qualifying section 

179 property. These records must show how you 

acquired the property, the person you acquired it from, 

and when you placed it in service.

Revoking an election. An election (or any specification made in the election) to take a section 179 deduction 

for 2023 can only be revoked with the Commissioner's approval.

Recapture of section 179 deduction. To be eligible to 

claim the section 179 deduction, you must use your car 

more than 50% for business or work in the year you acquired it. If your business use of the car is 50% or less in a 

later tax year during the recovery period, you have to recapture (include in income) in that later year any excess 

depreciation. Any section 179 deduction claimed on the 

car is included in figuring the excess depreciation. For information on this calculation, see Excess depreciation, 

later in this chapter under Car Used 50% or Less for Business. For more information on recapture of a section 179 

deduction, see Pub. 946.

Dispositions. If you dispose of a car on which you had 

claimed the section 179 deduction, the amount of that deduction is treated as a depreciation deduction for recapture purposes. You treat any gain on the disposition of the 

property as ordinary income up to the amount of the section 179 deduction and any allowable depreciation (unless 

you establish the amount actually allowed). For information on the disposition of a car, see Disposition of a Car, 

later. For more information on recapture of a section 179 

deduction, see Pub. 946.

Special Depreciation Allowance

You may be able to claim the special depreciation allowance for your car, truck, or van if it is qualified property and 

was placed in service in 2023. The allowance for 2023 is 

an additional depreciation deduction for 100% of the car's 

depreciable basis (after any section 179 deduction, but 

before figuring your regular depreciation deduction under 

MACRS) if the vehicle was acquired after September 27, 

2017, and placed in service during 2023. Further, while it 

applies to a new vehicle, it also applies to a used vehicle 

only if the vehicle meets the used property requirements. 

For more information on the used property requirements, 

see section 168(k)(2)(E)(ii). To qualify for the allowance, 

CAUTION

!

more than 50% of the use of the car must be in a qualified 

business use (as defined under Depreciation Deduction, 

later).

Combined depreciation. The first-year limit on the depreciation deduction, special depreciation allowance, and 

section 179 deduction for vehicles acquired before September 28, 2017, and placed in service during 2023, is 

$12,200. Your combined section 179 depreciation, special 

depreciation allowance, and regular MACRS depreciation 

deduction is limited to the maximum allowable depreciation deduction for vehicles acquired after September 27, 

2017, and placed in service during 2023 is $20,200. If you 

elect not to claim a special depreciation allowance for a 

vehicle placed in service in 2023, the amount is $12,200. 

See Depreciation Limits, later in this chapter.

Qualified car. To be qualified property, the car (including 

the truck or van) must meet all of the following tests.

• You acquired the car after September 27, 2017, but 

only if no written binding contract to acquire the car 

existed before September 28, 2017.

• You acquired the car new or used.

• You placed the car in service in your trade or business 

before January 1, 2027.

• You used the car more than 50% in a qualified business use during the tax year.

Election not to claim the special depreciation allowance. You can elect not to claim the special depreciation 

allowance for your car, truck, or van that is qualified property. If you make this election, it applies to all 5-year property placed in service during the year.

To make this election, attach a statement to your timely 

filed return (including extensions) indicating the class of 

property (5-year for cars) for which you are making the 

election and that you are electing not to claim the special 

depreciation allowance for qualified property in that class 

of property.

Unless you elect not to claim the special depreciation allowance, you must reduce the car's adjusted basis by the amount of the allowance, even if 

the allowance wasn’t claimed.

Depreciation Deduction

If you use actual car expenses to figure your deduction for 

a car you own and use in your business, you can claim a 

depreciation deduction. This means you can deduct a certain amount each year as a recovery of your cost or other 

basis in your car.

You generally need to know the following things about 

the car you intend to depreciate.

• Your basis in the car.

• The date you place the car in service.

• The method of depreciation and recovery period you 

will use.

CAUTION

!

Publication 463 (2023) Chapter 4 Transportation 25
Basis. Your basis in a car for figuring depreciation is generally its cost. This includes any amount you borrow or pay 

in cash, other property, or services.

Generally, you figure depreciation on your car, truck, or 

van using your unadjusted basis (see Unadjusted basis, 

later). However, in some situations, you will use your adjusted basis (your basis reduced by depreciation allowed 

or allowable in earlier years). For one of these situations, 

see Exception under Methods of depreciation, later.

If you change the use of a car from personal to business, your basis for depreciation is the lesser of the fair 

market value or your adjusted basis in the car on the date 

of conversion. Additional rules concerning basis are discussed later in this chapter under Unadjusted basis.

Placed in service. You generally place a car in service 

when it is available for use in your work or business, in an 

income-producing activity, or in a personal activity. Depreciation begins when the car is placed in service for use in 

your work or business or for the production of income.

For purposes of figuring depreciation, if you first start 

using the car only for personal use and later convert it to 

business use, you place the car in service on the date of 

conversion.

Car placed in service and disposed of in the same 

year. If you place a car in service and dispose of it in the 

same tax year, you can’t claim any depreciation deduction 

for that car.

Methods of depreciation. Generally, you figure depreciation on cars using the Modified Accelerated Cost Recovery (MACRS) discussed later in this chapter.

Exception. If you used the standard mileage rate in 

the first year of business use and change to the actual expenses method in a later year, you can’t depreciate your 

car under the MACRS rules. You must use straight line depreciation over the estimated remaining useful life of the 

car. The amount you depreciate can’t be more than the 

depreciation limit that applies for that year. See Depreciation Limits, later.

To figure depreciation under the straight line method, 

you must reduce your basis in the car (but not below zero) 

by a set rate per mile for all miles for which you used the 

standard mileage rate. The rate per mile varies depending 

on the year(s) you used the standard mileage rate. For the 

rate(s) to use, see Depreciation adjustment when you 

used the standard mileage rate under Disposition of a 

Car, later.

This reduction of basis is in addition to those basis adjustments described later under Unadjusted basis. You 

must use your adjusted basis in your car to figure your depreciation deduction. For additional information on the 

straight line method of depreciation, see Pub. 946.

More-than-50%-use test. Generally, you must use your 

car more than 50% for qualified business use (defined 

next) during the year to use MACRS. You must meet this 

more-than-50%-use test each year of the recovery period 

(6 years under MACRS) for your car.

If your business use is 50% or less, you must use the 

straight line method to depreciate your car. This is explained later under Car Used 50% or Less for Business.

Qualified business use. A qualified business use is any 

use in your trade or business. It doesn’t include use for the 

production of income (investment use), or use provided 

under lease to, or as compensation to, a 5% owner or related person. However, you do combine your business and 

investment use to figure your depreciation deduction for 

the tax year.

Use of your car by another person. Don’t treat any 

use of your car by another person as use in your trade or 

business unless that use meets one of the following conditions.

• It is directly connected with your business.

• It is properly reported by you as income to the other 

person (and, if you have to, you withhold tax on the income).

• It results in a payment of fair market rent. This includes 

any payment to you for the use of your car.

Business use changes. If you used your car more than 

50% in qualified business use in the year you placed it in 

service, but 50% or less in a later year (including the year 

of disposition), you have to change to the straight line 

method of depreciation. See Qualified business use 50% 

or less in a later year under Car Used 50% or Less for 

Business, later.

Property doesn’t cease to be used more than 

50% in qualified business use by reason of a 

transfer at death.

Use for more than one purpose. If you use your car for 

more than one purpose during the tax year, you must allocate the use to the various purposes. You do this on the 

basis of mileage. Figure the percentage of qualified business use by dividing the number of miles you drive your 

car for business purposes during the year by the total 

number of miles you drive the car during the year for any 

purpose.

Change from personal to business use. If you change 

the use of a car from 100% personal use to business use 

during the tax year, you may not have mileage records for 

the time before the change to business use. In this case, 

you figure the percentage of business use for the year as 

follows.

1. Determine the percentage of business use for the period following the change. Do this by dividing business 

miles by total miles driven during that period.

2. Multiply the percentage in (1) by a fraction. The numerator (top number) is the number of months the car 

is used for business, and the denominator (bottom 

number) is 12.

Example. You use a car only for personal purposes 

during the first 6 months of the year. During the last 6 

months of the year, you drive the car a total of 15,000 

TIP

26 Chapter 4 Transportation Publication 463 (2023)
miles of which 12,000 miles are for business. This gives 

you a business use percentage of 80% (12,000 ÷ 15,000) 

for that period. Your business use for the year is 40% 

(80% (0.80) × 6/12).

Limits. The amount you can claim for section 179, special depreciation allowance, and depreciation deductions 

may be limited. The maximum amount you can claim depends on the year in which you placed your car in service. 

You have to reduce the maximum amount if you did not 

use the car exclusively for business. See Depreciation 

Limits, later.

Unadjusted basis. You use your unadjusted basis (often 

referred to as your basis or your basis for depreciation) to 

figure your depreciation using the MACRS depreciation 

chart, explained later under Modified Accelerated Cost 

Recovery System (MACRS). Your unadjusted basis for figuring depreciation is your original basis increased or decreased by certain amounts.

To figure your unadjusted basis, begin with your car's 

original basis, which is generally its cost. Cost includes 

sales taxes (see Sales taxes, earlier), destination charges, 

and dealer preparation. Increase your basis by any substantial improvements you make to your car, such as adding air conditioning or a new engine. Decrease your basis 

by any section 179 deduction, special depreciation allowance, gas guzzler tax, and vehicle credits claimed. See 

Pub. 551, Basis of Assets, for further details.

If your business use later falls to 50% or less, you 

may have to recapture (include in your income) 

any excess depreciation. See Car Used 50% or 

Less for Business, later, for more information.

If you acquired the car by gift or inheritance, see Pub. 

551, Basis of Assets, for information on your basis in the 

car.

Improvements. A major improvement to a car is treated as a new item of 5-year recovery property. It is treated 

as placed in service in the year the improvement is made. 

It doesn’t matter how old the car is when the improvement 

is added. Follow the same steps for depreciating the improvement as you would for depreciating the original cost 

of the car. However, you must treat the improvement and 

the car as a whole when applying the limits on the depreciation deductions. Your car's depreciation deduction for 

the year (plus any section 179 deduction, special depreciation allowance, and depreciation on any improvements) 

can’t be more than the depreciation limit that applies for 

that year. See Depreciation Limits, later.

Car trade-in. If you traded one car (the “old car”) for another car (the “new car”) in 2023, you must treat the transaction as a disposition of the old car and the purchase of 

the new car. You must treat the old car as disposed of at 

the time of the trade-in. The depreciable basis of the new 

car is the adjusted basis of the old car (figured as if 100% 

of the car’s use had been for business purposes) plus any 

additional amount you paid for the new car. You then figure your depreciation deduction for the new car beginning 

with the date you placed it in service. You must also comCAUTION

!

plete Form 2106, Part II, Section D. This method is explained later, beginning at Effect of trade-in on basis.

Form 2106 is only used by Armed Forces reservists, qualified performing artists, fee-basis state or 

local government officials, and employees with 

impairment-related work expenses. Due to the suspension 

of miscellaneous itemized deductions subject to the 2% 

floor under section 67(a), employees who do not fit into 

one of the listed categories may not use Form 2106.

Effect of trade-in on basis. The discussion that follows applies to trade-ins of cars in 2023, where the election was made to treat the transaction as a disposition of 

the old car and the purchase of the new car. For information on how to figure depreciation for cars involved in a 

like-kind exchange (trade-in) in 2023, for which the election wasn’t made, see Pub. 946 and Regulations section 

1.168(i)-6(d)(3).

Note. Like-kind exchanges completed after December 

31, 2017, are generally limited to exchanges of real property not held primarily for sale. Regulations section 

1.168(i)-6 doesn't reflect this change in law.

Traded car used only for business. If you trade in a 

car you used only in your business for another car that will 

be used only in your business, your original basis in the 

new car is your adjusted basis in the old car, plus any additional amount you pay for the new car.

Example. You trade in a car that has an adjusted basis 

of $5,000 for a new car. In addition, you pay cash of 

$20,000 for the new car. Your original basis of the new car 

is $25,000 (your $5,000 adjusted basis in the old car plus 

the $20,000 cash paid). Your unadjusted basis is $25,000 

unless you claim the section 179 deduction, special depreciation allowance, or have other increases or decreases to your original basis, discussed under Unadjusted 

basis, earlier.

Traded car used partly in business. If you trade in a 

car you used partly in your business for a new car you will 

use in your business, you must make a “trade-in” adjustment for the personal use of the old car. This adjustment 

has the effect of reducing your basis in your old car, but 

not below zero, for purposes of figuring your depreciation 

deduction for the new car. (This adjustment isn’t used, 

however, when you determine the gain or loss on the later 

disposition of the new car. See Pub. 544, Sales and Other 

Dispositions of Assets, for information on how to report the 

disposition of your car.)

To figure the unadjusted basis of your new car for depreciation, first add to your adjusted basis in the old car 

any additional amount you pay for the new car. Then subtract from that total the excess, if any, of:

1. The total of the amounts that would have been allowable as depreciation during the tax years before the 

trade if 100% of the use of the car had been business 

and investment use, over

2. The total of the amounts actually allowed as depreciation during those years.

CAUTION

!

Publication 463 (2023) Chapter 4 Transportation 27
For information about figuring depreciation, see Modified 

Accelerated Cost Recovery System (MACRS) next.

Modified Accelerated Cost Recovery System 

(MACRS). MACRS is the name given to the tax rules for 

getting back (recovering) through depreciation deductions 

the cost of property used in a trade or business or to produce income.

The maximum amount you can deduct is limited, depending on the year you placed your car in service. See 

Depreciation Limits, later.

Recovery period. Under MACRS, cars are classified 

as 5-year property. You actually depreciate the cost of a 

car, truck, or van over a period of 6 calendar years. This is 

because your car is generally treated as placed in service 

in the middle of the year, and you claim depreciation for 

one-half of both the first year and the sixth year.

For more information on the qualifications for this 

shorter recovery period and the percentages to use in figuring the depreciation deduction, see chapter 4 of Pub. 

946.

Depreciation methods. You can use one of the following methods to depreciate your car.

• The 200% declining balance method (200% DB) over 

a 5-year recovery period that switches to the straight 

line method when that method provides an equal or 

greater deduction.

• The 150% declining balance method (150% DB) over 

a 5-year recovery period that switches to the straight 

line method when that method provides an equal or 

greater deduction.

• The straight line method (SL) over a 5-year recovery 

period.

If you use Table 4-1 (discussed later) to determine 

your depreciation rate for 2023, you don’t need to 

determine in what year using the straight line 

method provides an equal or greater deduction. This is 

because the chart has the switch to the straight line 

method built into its rates.

Before choosing a method, you may wish to consider 

the following facts.

• Using the straight line method provides equal yearly 

deductions throughout the recovery period.

• Using the declining balance methods provides greater 

deductions during the earlier recovery years with the 

deductions generally getting smaller each year.

MACRS depreciation chart. A 2023 MACRS Depreciation Chart and instructions are included in this chapter as 

Table 4-1. Using this table will make it easy for you to figure the 2023 depreciation deduction for your car. A similar 

chart appears in the Instructions for Form 2106.

You may have to use the tables in Pub. 946 instead of using this MACRS Depreciation Chart.

TIP

CAUTION

!

You must use the Depreciation Tables in Pub. 946 

rather than the 2023 MACRS Depreciation Chart in this 

publication if any one of the following three conditions applies to you.

1. You file your return on a fiscal year basis.

2. You file your return for a short tax year (less than 12 

months).

3. During the year, all of the following conditions apply.

a. You placed some property in service from January 

through September.

b. You placed some property in service from October 

through December.

c. Your basis in the property you placed in service 

from October through December (excluding nonresidential real property, residential rental property, 

and property placed in service and disposed of in 

the same year) was more than 40% of your total 

bases in all property you placed in service during 

the year.

Depreciation in future years. If you use the percentages from the chart, you generally must continue to use 

them for the entire recovery period of your car. However, 

you can’t continue to use the chart if your basis in your car 

is adjusted because of a casualty. In that case, for the year 

of the adjustment and the remaining recovery period, figure the depreciation without the chart using your adjusted 

basis in the car at the end of the year of the adjustment 

and over the remaining recovery period. See Figuring the 

Deduction Without Using the Tables in chapter 4 of Pub. 

946.

In future years, don’t use the chart in this edition 

of the publication. Instead, use the chart in the 

publication or the form instructions for those future 

years.

Disposition of car during recovery period. If you 

dispose of the car before the last year of the recovery period, you are generally allowed a half-year of depreciation 

in the year of disposition. This rule applies unless the 

mid-quarter convention applies to the vehicle being disposed of. See Depreciation deduction for the year of disposition under Disposition of a Car, later, for information 

on how to figure the depreciation allowed in the year of 

disposition.

How to use the 2023 chart. To figure your depreciation deduction for 2023, find the percentage in the column 

of Table 4-1 based on the date that you first placed the car 

in service and the depreciation method that you are using. 

Multiply the unadjusted basis of your car (defined earlier) 

by that percentage to determine the amount of your depreciation deduction. If you prefer to figure your depreciation 

deduction without the help of the chart, see Pub. 946.

Your deduction can’t be more than the maximum 

depreciation limit for cars. See Depreciation Limits, later.

TIP

CAUTION

!

28 Chapter 4 Transportation Publication 463 (2023)
Example. You bought a used truck in February 2022 to 

use exclusively in your landscape business. You paid 

$9,200 for the truck with no trade-in. You didn’t claim any 

section 179 deduction, the truck didn’t qualify for the special depreciation allowance, and you chose to use the 

200% DB method to get the largest depreciation deduction in the early years.

You used the MACRS Depreciation Chart in 2022 to 

find your percentage. The unadjusted basis of the truck 

equals its cost because you used it exclusively for business. You multiplied the unadjusted basis of the truck, 

$9,200, by the percentage that applied, 20%, to figure 

your 2022 depreciation deduction of $1,840.

In 2023, you used the truck for personal purposes when 

you repaired your parent’s cabin. Your records show that 

the business use of the truck was 90% in 2023. You used 

Table 4-1 to find your percentage. Reading down the first 

column for the date placed in service and across to the 

200% DB column, you locate your percentage, 32%. You 

multiply the unadjusted basis of the truck, $8,280 ($9,200 

cost × 90% (0.90) business use), by 32% (0.32) to figure 

your 2023 depreciation deduction of $2,650.

Depreciation Limits

There are limits on the amount you can deduct for depreciation of your car, truck, or van. The section 179 deduction and special depreciation allowance are treated as depreciation for purposes of the limits. The maximum 

amount you can deduct each year depends on the date 

you acquired the passenger automobile and the year you 

place the passenger automobile in service. These limits 

are shown in the following tables for 2023.

Maximum

Depreciation Deduction

for Passenger Automobiles (Including 

Trucks and

Vans) Acquired Before September 28, 2017, 

and

Placed in Service During 2018–2023

Date 4th &

Placed in 1st 2nd 3rd Later

Service Year Year Year Years

2023 $12,200 $19,500 $11,700 $6,960

2022 11,200 18,000 10,800 6,460

2021 10,200 16,400 9,800 5,860

2020 10,100 16,100 9,700 5,760

2019 14,9001 16,100 9,700 5,760

2018 16,4002 16,000 9,600 5,760

1

 $10,100 if the passenger automobile isn’t qualified property or if you elect not to claim 

the special depreciation allowance.

2

 $10,000 if the passenger automobile isn’t qualified property or if you elect not to claim 

the special depreciation allowance.

Maximum

Depreciation Deduction

for Passenger Automobiles (Including 

Trucks and

Vans) Acquired After September 27, 2017, 

and

Placed in Service During 2018 or Later

Date 4th &

Placed in 1st 2nd 3rd Later

Service Year Year Year Years

2023 $20,2001 $19,500 $11,700 $6,960

2022 19,2002 18,000 10,800 6,460

2021 18,2003 16,400 9,800 5,860

2019–2020 18,1004 16,100 9,700 5,760

2018 18,0005 16,000 9,600 5,760

1

 $12,200 if the passenger automobile isn’t qualified property or if you elect not to claim 

the special depreciation allowance.

2

 $11,200 if the passenger automobile isn’t qualified property or if you elect not to claim 

the special depreciation allowance.

3

 $10,200 if the passenger automobile isn’t qualified property or if you elect not to claim 

the special depreciation allowance.

4

 $10,100 if the passenger automobile isn’t qualified property or if you elect not to claim 

the special depreciation allowance.

5

 $10,000 if the passenger automobile isn’t qualified property or if you elect not to claim 

the special depreciation allowance.

The maximum amount you can deduct each year depends on the year you place the car in service. These limits are shown in the following tables for prior years.

Maximum

Depreciation Deduction

for Cars Placed in Service

Prior to 2018

Date 4th &

Placed 1st 2nd 3rd Later

in Service Year Year Year Years

2012–2017 $11,1601 $5,100 $3,050 $1,875

2010–2011 11,0602 4,900 2,950 1,775

2008–2009 10,9603 4,800 2,850 1,775

2007 3,060 4,900 2,850 1,775

2006 2,960 4,800 2,850 1,775

2005 2,960 4,700 2,850 1,675

2004 10,6103 4,800 2,850 1,675

5/06/2003–

12/31/2003

10,7104 4,900 2,950 1,775

1/01/2003–

5/05/2003

7,6605 4,900 2,950 1,775

1

 $3,160 if the car isn’t qualified property or if you elect not to claim the special 

depreciation allowance.

2

 $3,060 if the car isn’t qualified property or if you elect not to claim the special 

depreciation allowance.

3

 $2,960 if the car isn’t qualified property or if you elect not to claim the special 

depreciation allowance.

4

 $7,660 if you acquired the car before 5/06/2003. $3,060 if the car isn’t qualified 

property or if you elect not to claim any special depreciation allowance.

5

 $3,060 if you acquired the car before 9/11/2001, the car isn’t qualified property, or 

you elect not to claim the special depreciation allowance.

Publication 463 (2023) Chapter 4 Transportation 29
Trucks and vans. For tax years prior to 2018, the 

maximum depreciation deductions for trucks and vans are 

generally higher than those for cars. A truck or van is a 

passenger automobile that is classified by the manufacturer as a truck or van and rated at 6,000 pounds gross 

vehicle weight or less.

Maximum

Depreciation Deduction

for Trucks and Vans

Placed in Service

Prior to 2018

Maximum Depreciation Deduction for Trucks and 

Vans Placed in Service Prior to 2018

Date 4th &

Placed 1st 2nd 3rd Later

in Service Year Year Year Years

2017 $11,5601 $5,700 $3,450 $2,075

2016 11,5601 5,700 3,350 2,075

2015 11,4601 5,600 3,350 1,975

2014 11,4601 5,500 3,350 1,975

2013 11,3601 5,400 3,250 1,975

2012 11,3601 5,300 3,150 1,875

2011 11,2601 5,200 3,150 1,875

2010 11,1601 5,100 3,050 1,875

2009 11,0601 4,900 2,950 1,775

2008 11,1601 5,100 3,050 1,875

2007 3,260 5,200 3,050 1,875

2005–2006 3,260 5,200 3,150 1,875

2004 10,9101 5,300 3,150 1,875

2003 11,0101, 2 5,400 3,250 1,975

1

 If the special depreciation allowance doesn’t apply or you make the election not to 

claim the special depreciation allowance, the first-year limit is $3,560 for 2017 

and 2016, $3,460 for 2015 and 2014, $3,360 for 2013 and 2012, $3,260 for 

2011, $3,160 for 2010, $3,060 for 2009, $3,160 for 2008, $3,260 for 2004, and 

$3,360 for 2003.

2

 If the truck or van was acquired before 5/06/2003, the truck or van is qualified 

property, and you claim the special depreciation allowance for the truck or van, 

the maximum deduction is $7,960.

Car used less than full year. The depreciation limits 

aren’t reduced if you use a car for less than a full year. 

This means that you don’t reduce the limit when you either 

place a car in service or dispose of a car during the year. 

However, the depreciation limits are reduced if you don’t 

use the car exclusively for business and investment purposes. See Reduction for personal use next.

Reduction for personal use. The depreciation limits are 

reduced based on your percentage of personal use. If you 

use a car less than 100% in your business or work, you 

must determine the depreciation deduction limit by multiplying the limit amount by the percentage of business and 

investment use during the tax year.

Section 179 deduction. The section 179 deduction is 

treated as a depreciation deduction. If you acquired a passenger automobile (including trucks and vans) after September 27, 2017, and placed it in service in 2023, use it 

only for business, and choose the section 179 deduction, 

the special depreciation allowance and depreciation deduction for that vehicle for 2023 is limited to $20,200.

Example. On September 4, 2023, you bought and 

placed in service a used car for $15,000. You used it 80% 

for your business, and you choose to take a section 179 

deduction for the car. The car isn’t qualified property for 

purposes of the special depreciation allowance.

Before applying the limit, you figure your maximum section 179 deduction to be $12,000. This is the cost of your 

qualifying property (up to the maximum $1,160,000 

amount) multiplied by your business use ($15,000 × 80% 

(0.80)).

You then figure that your section 179 deduction for 

2023 is limited to $9,760 (80% of $12,200). You then figure your unadjusted basis of $2,440 (($15,000 × 80% 

(0.80)) − $9,760) for determining your depreciation deduction. You have reached your maximum depreciation deduction for 2023. For 2024, you will use your unadjusted 

basis of $2,440 to figure your depreciation deduction.

Deductions in years after the recovery period. If the 

depreciation deductions for your car are reduced under 

the passenger automobile limits (discussed earlier), you 

will have unrecovered basis in your car at the end of the 

recovery period. If you continue to use your car for business, you can deduct that unrecovered basis (subject to 

depreciation limits) after the recovery period ends.

Unrecovered basis. This is your cost or other basis in 

the car reduced by any clean-fuel vehicle deduction (for 

vehicles placed in service before January 1, 2006), alternative motor vehicle credit, electric vehicle credit, gas guzzler tax, and depreciation (including any special depreciation allowance, discussed earlier, unless you elect not to 

claim it) and section 179 deductions that would have been 

allowable if you had used the car 100% for business and 

investment use.

The recovery period. For 5-year property, your recovery period is 6 calendar years. A part year's depreciation 

is allowed in the first calendar year, a full year's depreciation is allowed in each of the next 4 calendar years, and a 

part year's depreciation is allowed in the 6th calendar 

year.

Under MACRS, your recovery period is the same 

whether you use declining balance or straight line depreciation. You determine your unrecovered basis in the 7th 

year after you placed the car in service.

How to treat unrecovered basis. If you continue to 

use your car for business after the recovery period, you 

can claim a depreciation deduction in each succeeding 

tax year until you recover your basis in the car. The maximum amount you can deduct each year is determined by 

the date you placed the car in service and your business-use percentage. For example, no deduction is allowed for a year you use your car 100% for personal purposes.

Example. In April 2017, you bought and placed in 

service a car you used exclusively in your business. The 

car cost $31,500. You didn’t claim a section 179 deduction 

30 Chapter 4 Transportation Publication 463 (2023)
or the special depreciation allowance for the car. You continued to use the car 100% in your business throughout 

the recovery period (2017 through 2022). For those years, 

you used the MACRS Depreciation Chart (200% DB 

method), the Maximum Depreciation Deduction for Cars 

Placed in Service Prior to 2018 table and Maximum Depreciation Deduction for Passenger Automobiles (Including Trucks and Vans) Acquired Before September 28, 

2017, and Placed in Service During 2018–2023 table, earlier, for the applicable tax year to figure your depreciation 

deductions during the recovery period. Your depreciation 

deductions were subject to the depreciation limits, so you 

will have unrecovered basis at the end of the recovery period as shown in the following table.

MACRS Deprec.

Year % Amount Limit Allowed

2017 20.00 $6,300 $3,160 $3,160

2018 32.00 10,080 5,100 5,100

2019 19.20 6,048 3,050 3,050

2020 11.52 3,629 1,875 1,875

2021 11.52 3,629 1,875 1,875

2022 5.76 1,814 1,875 1,814

Total $31,500 $16,874

For the correct limit, see the Maximum Depreciation 

Deduction for Cars Placed in Service Prior to 2018 table 

and the Maximum Depreciation Deduction for Passenger 

Automobiles (Including Trucks and Vans) Acquired Before 

September 28, 2017, and Placed in Service During 2018–

2023 table under Depreciation Limits, earlier, for the maximum amount of depreciation allowed each year.

At the end of 2022, you had an unrecovered basis in 

the car of $14,626 ($31,500 – $16,874). If you continued 

to use the car 100% for business in 2023 and later years, 

you can claim a depreciation deduction equal to the lesser 

of $1,875 or your remaining unrecovered basis.

If your business use of the car was less than 100% during any year, your depreciation deduction would be less 

than the maximum amount allowable for that year. However, in determining your unrecovered basis in the car, you 

would still reduce your original basis by the maximum 

amount allowable as if the business use had been 100%. 

For example, if you had used your car 60% for business 

instead of 100%, your allowable depreciation deductions 

would have been $10,124 ($16,874 × 60% (0.60)), but you 

still would have to reduce your basis by $16,874 to determine your unrecovered basis.

Car Used 50% or Less

for Business

If you use your car 50% or less for qualified business use 

(defined earlier under Depreciation Deduction) either in 

the year the car is placed in service or in a later year, special rules apply. The rules that apply in these two situations are explained in the following paragraphs. (For this 

purpose, “car” was defined earlier under Actual Car Expenses and includes certain trucks and vans.)

Qualified business use 50% or less in year placed in 

service. If you use your car 50% or less for qualified business use, the following rules apply.

• You can’t take the section 179 deduction.

• You can’t take the special depreciation allowance.

• You must figure depreciation using the straight line 

method over a 5-year recovery period. You must continue to use the straight line method even if your percentage of business use increases to more than 50% 

in a later year.

Instead of making the computation yourself, you can 

use column (c) of Table 4-1 to find the percentage to use.

Example. In May 2023, you bought and placed in 

service a car for $17,500. You used it 40% for your consulting business. Because you didn’t use the car more 

than 50% for business, you can’t take any section 179 deduction or special depreciation allowance, and you must 

use the straight line method over a 5-year recovery period 

to recover the cost of your car.

You deduct $700 in 2023. This is the lesser of:

1. $700 (($17,500 cost × 40% (0.40) business use) × 

10% (0.10) recovery percentage (from column (c) of 

Table 4-1)), or

2. $4,880 ($12,200 maximum limit × 40% (0.40) business use).

Qualified business use 50% or less in a later year. If 

you use your car more than 50% in qualified business use 

in the tax year it is placed in service but the business use 

drops to 50% or less in a later year, you can no longer use 

an accelerated depreciation method for that car.

For the year the business use drops to 50% or less and 

all later years in the recovery period, you must use the 

straight line depreciation method over a 5-year recovery 

period. In addition, for the year your business use drops to 

50% or less, you must recapture (include in your gross income) any excess depreciation (discussed later). You also 

increase the adjusted basis of your car by the same 

amount.

Example. In June 2020, you purchased a car for exclusive use in your business. You met the 

more-than-50%-use test for the first 3 years of the recovery period (2020 through 2022) but failed to meet it in the 

fourth year (2023). You determine your depreciation for 

2023 using 20% (from column (c) of Table 4-1). You will 

also have to determine and include in your gross income 

any excess depreciation, discussed next.

Excess depreciation. You must include any excess 

depreciation in your gross income and add it to your car's 

adjusted basis for the first tax year in which you don’t use 

the car more than 50% in qualified business use. Use 

Form 4797, Sales of Business Property, to figure and report the excess depreciation in your gross income.

Excess depreciation is:

1. The amount of the depreciation deductions allowable 

for the car (including any section 179 deduction 

Publication 463 (2023) Chapter 4 Transportation 31
claimed and any special depreciation allowance 

claimed) for tax years in which you used the car more 

than 50% in qualified business use, minus

2. The amount of the depreciation deductions that would 

have been allowable for those years if you hadn’t used 

the car more than 50% in qualified business use for 

the year you placed it in service. This means the 

amount of depreciation figured using the straight line 

method.

Example. In September 2019, you bought a car for 

$20,500 and placed it in service. You didn’t claim the section 179 deduction or the special depreciation allowance. 

You used the car exclusively in qualified business use for 

2019, 2020, 2021, and 2022. For those years, you used 

the appropriate MACRS Depreciation Chart to figure depreciation deductions totaling $13,185 ($3,160 for 2019, 

$5,100 for 2020, $3,050 for 2021, and $1,875 for 2022) 

under the 200% DB method.

During 2023, you used the car 30% for business and 

70% for personal purposes. Since you didn’t meet the 

more-than-50%-use test, you must switch from the 200% 

DB depreciation method to the straight line depreciation 

method for 2023, and include in gross income for 2023 

your excess depreciation determined as follows.

Table 4-1. 2023 MACRS Depreciation Chart

(Use To Figure Depreciation for 2023)

If you claim actual expenses for your car, use the chart below to find the 

depreciation method and percentage to use for your 2023 return for cars 

placed in service in 2023.

First, using the left column, find the date you first placed the car in service in 

2023. Then select the depreciation method and percentage from column 

(a), (b), or (c) following the rules explained in this chapter.

For cars placed in service before 2023, you must use the same 

method you used on last year's return unless a decline in your 

business use requires you to change to the straight line method. Refer 

back to the MACRS Depreciation Chart for the year you placed the car 

in service. (See Car Used 50% or Less for Business, earlier.)

Multiply the unadjusted basis of your car by your business-use 

percentage. Multiply the result by the percentage you found in the 

chart to find the amount of your depreciation deduction for 2023. (Also 

see Depreciation Limits, earlier.)

CAUTION

!

If you placed your car in service after September of any year and you placed other business property in service during the same 

year, you may have to use the Jan. 1–Sept. 30 percentage instead of the Oct. 1–Dec. 31 percentage for your car. To find out if this 

applies to you, determine: 1) the basis of all business property (including other cars) you placed in service after September of that 

year, and 2) the basis of all business property you placed in service during that entire year. If the basis of the property placed in 

service after September isn’t more than 40% of the basis of all property (certain property is excluded) placed in service for the entire 

year, use the percentage for Jan. 1–Sept. 30 for figuring depreciation for your car. See Which Convention Applies? in chapter 4 of 

Pub. 946 for more details.

Example. You buy machinery (basis of $32,000) in May 2023 and a new van (basis of $20,000) in October 2023, both used 100% in your business. 

You use the percentage for Jan. 1–Sept. 30, 2023, to figure the depreciation for your van. This is because the $20,000 basis of the property (van) 

placed in service after September isn’t more than 40% of the basis of all property placed in service during the year (40% (0.40) × ($32,000 + 20,000) 

= $20,800).

(a) (b) (c)

Date Placed in Service 200% Declining 

Balance (200% DB)1

150% Declining 

Balance (150% DB)1

Straight Line 

(SL)

Oct. 1–Dec. 31, 2023 200 DB 5.0% 150 DB 3.75% SL 2.5%

Jan. 1–Sept. 30, 2023 200 DB 20.0 150 DB 15.0 SL 10.0

Oct. 1–Dec. 31, 2022 200 DB 38.0 150 DB 28.88 SL 20.0

Jan. 1–Sept. 30, 2022 200 DB 32.0 150 DB 25.5 SL 20.0

Oct. 1–Dec. 31, 2021 200 DB 22.8 150 DB 20.21 SL 20.0

Jan. 1–Sept. 30, 2021 200 DB 19.2 150 DB 17.85 SL 20.0

Oct. 1–Dec. 31, 2020 200 DB 13.68 150 DB 16.4 SL 20.0

Jan. 1–Sept. 30, 2020 200 DB 11.52 150 DB 16.66 SL 20.0

Oct. 1–Dec. 31, 2019 200 DB 10.94 150 DB 16.41 SL 20.0

Jan. 1–Sept. 30, 2019 200 DB 11.52 150 DB 16.66 SL 20.0

Oct. 1–Dec. 31, 2018 200 DB 9.58 150 DB 14.35 SL 17.5

Jan. 1–Sept. 30, 2018 200 DB 5.76 150 DB 8.33 SL 10.0

 Prior to 20182

1

 You can use this column only if the business use of your car is more than 50%.

2

 If your car was subject to the maximum limits for depreciation and you have unrecovered basis in the car, you can continue to claim depreciation. See 

Deductions in years after the recovery period under Depreciation Limits, earlier.

32 Chapter 4 Transportation Publication 463 (2023)
Total depreciation claimed: 

(MACRS 200% DB method) ................. $13,185

Minus total depreciation allowable: 

(Straight line method) 

2019—10% of $20,500 .............. $2,050

(Limit: $3,160)

2020—20% of $20,500 .............. 4,100

(Limit: $5,100)

2021—20% of $20,500 .............. 3,050

(Limit: $3,050)

2022—20% of $20,500 .............. 1,875 –11,075

(Limit: $1,875)

Excess depreciation ................ $2,110

For the correct limit, see the Maximum Depreciation 

Deduction for Cars Placed in Service Prior to 2018 table 

and the Maximum Depreciation Deduction for Passenger 

Automobiles (Including Trucks and Vans) Acquired Before 

September 28, 2017, and Placed in Service During 

2018-2023 table under Depreciation Limits, earlier, for the 

maximum amount of depreciation allowed each year.

In 2023, using Form 4797, you figure and report the 

$2,110 excess depreciation you must include in your 

gross income. Your adjusted basis in the car is also increased by $2,110. Your 2023 depreciation is $1,230 

($20,500 (unadjusted basis) × 30% (0.30) (business-use 

percentage) × 20% (0.20) (from column (c) of Table 4-1 on 

the line for Jan. 1–Sept. 30, 2019)). However, your depreciation deduction is limited to $563 ($1,875 x 30% (0.30) 

business use).

Leasing a Car

If you lease a car, truck, or van that you use in your business, you can use the standard mileage rate or actual expenses to figure your deductible expense. This section explains how to figure actual expenses for a leased car, 

truck, or van.

Deductible payments. If you choose to use actual expenses, you can deduct the part of each lease payment 

that is for the use of the vehicle in your business. You can’t 

deduct any part of a lease payment that is for personal 

use of the vehicle, such as commuting.

You must spread any advance payments over the entire 

lease period. You can’t deduct any payments you make to 

buy a car, truck, or van even if the payments are called 

“lease payments.”

If you lease a car, truck, or van for 30 days or more, you 

may have to reduce your lease payment deduction by an 

“inclusion amount,” explained next.

Inclusion Amounts

If you lease a car, truck, or van that you use in your business for a lease term of 30 days or more, you may have to 

include an inclusion amount in your income for each tax 

year you lease the vehicle. To do this, you don’t add an 

amount to income. Instead, you reduce your deduction for 

your lease payment. (This reduction has an effect similar 

to the limit on the depreciation deduction you would have 

on the vehicle if you owned it.)

The inclusion amount is a percentage of part of the fair 

market value of the leased vehicle multiplied by the percentage of business and investment use of the vehicle for 

the tax year. It is prorated for the number of days of the 

lease term in the tax year.

The inclusion amount applies to each tax year that you 

lease the vehicle if the fair market value (defined next) 

when the lease began was more than the amounts shown 

in the following tables.

All vehicles are subject to a single inclusion amount 

threshold for passenger automobiles leased and put into 

service in 2023. You may have an inclusion amount for a 

passenger automobile if:

Passenger Automobiles

(Including Trucks and Vans)

Year Lease Began Fair Market Value

2023 $60,000

2022 56,000

2021 51,000

2018*–2020 50,000

*If the lease term began before 2018, see tables below to find out if you have an inclusion amount.

For years prior to 2018, see the inclusion tables below. 

You may have an inclusion amount for a passenger automobile if:

Cars

(Except for Trucks and Vans)

Year Lease Began Fair Market Value

2013–2017 $19,000

2010–2012 18,500

Trucks and Vans

Year Lease Began Fair Market Value

2014–2017 $19,500

2010–2013 19,000

Fair market value. Fair market value is the price at which 

the property would change hands between a willing buyer 

and seller, neither having to buy or sell, and both having 

reasonable knowledge of all the necessary facts. Sales of 

similar property around the same date may be helpful in 

figuring the fair market value of the property.

Figure the fair market value on the first day of the lease 

term. If the capitalized cost of a car is specified in the 

lease agreement, use that amount as the fair market 

value.

Figuring the inclusion amount. Inclusion amounts for 

tax years 2018–2023 are listed in Appendices A-1 through 

A-6 for passenger vehicles (including trucks and vans). If 

the fair market value of the vehicle is $100,000 or less, use 

the appropriate appendix (depending on the year you first 

placed the vehicle in service) to determine the inclusion 

amount. If the fair market value is more than $100,000, 

Publication 463 (2023) Chapter 4 Transportation 33
see the revenue procedure(s) identified in the footnote of 

that year’s appendix for the inclusion amount.

For each tax year during which you lease the car for 

business, determine your inclusion amount by following 

these three steps.

1. Locate the appendix that applies to you. To find the inclusion amount, do the following.

a. Find the line that includes the fair market value of 

the car on the first day of the lease term.

b. Go across the line to the column for the tax year in 

which the car is used under the lease to find the 

dollar amount. For the last tax year of the lease, 

use the dollar amount for the preceding year.

2. Prorate the dollar amount from (1b) for the number of 

days of the lease term included in the tax year.

3. Multiply the prorated amount from (2) by the percentage of business and investment use for the tax year. 

This is your inclusion amount.

Example. On January 17, 2023, you leased a car for 3 

years and placed it in service for use in your business. 

The car had a fair market value of $62,500 on the first day 

of the lease term. You use the car 75% for business and 

25% for personal purposes during each year of the lease. 

Assuming you continue to use the car 75% for business, 

you use Appendix A-6 to arrive at the following inclusion 

amounts for each year of the lease. For the last tax year of 

the lease, 2026, you use the amount for the preceding 

year.

Tax year

Dollar 

amount Proration Business use

Inclusion 

amount

2023 $13 348/365 75% $9

2024 29 366/366 75% 22

2025 43 365/365 75% 32

2026 43 16/365 75% 1

Note. 2024 is a leap year and includes an extra calendar day, February 29, 2024.

For each year of the lease that you deduct lease payments, you must reduce your deduction by the inclusion 

amount figured for that year.

Leased car changed from business to personal use. 

If you lease a car for business use and, in a later year, 

change it to personal use, follow the rules explained earlier under Figuring the inclusion amount. For the tax year 

in which you stop using the car for business, use the dollar 

amount for the previous tax year. Prorate the dollar 

amount for the number of days in the lease term that fall 

within the tax year.

Example. On August 16, 2022, you leased a car with a 

fair market value of $64,500 for 3 years. You used the car 

exclusively in your data processing business. On November 6, 2023, you closed your business and went to work 

for a company where you aren’t required to use a car for 

business. Using Appendix A-5, you figured your inclusion 

amount for 2022 and 2023 as shown in the following table 

and reduced your deductions for lease payments by those 

amounts.

Tax year Dollar amount Proration Business use

Inclusion 

amount

2022 $11 137/365 100% $4

2023 11 309/365 100% 9

Leased car changed from personal to business use. 

If you lease a car for personal use and, in a later year, 

change it to business use, you must determine the car's 

fair market value on the date of conversion. Then figure 

the inclusion amount using the rules explained earlier under Figuring the inclusion amount. Use the fair market 

value on the date of conversion.

Example. In March 2021, you leased a truck for 4 

years for personal use. On June 1, 2023, you started 

working as a self-employed advertising consultant and 

started using the leased truck for business purposes. Your 

records show that your business use for June 1 through 

December 31 was 60%. To figure your inclusion amount 

for 2023, you obtained an appraisal from an independent 

car leasing company that showed the fair market value of 

your 2021 truck on June 1, 2023, was $62,650. Using Appendix A-6, you figured your inclusion amount for 2023 as 

shown in the following table.

Tax year

Dollar 

amount Proration Business use

Inclusion 

amount

2023 $13 214/365 60% $5

Reporting inclusion amounts. For information on reporting inclusion amounts, employees should see Car 

rentals under Completing Forms 2106 in chapter 6. Sole 

proprietors should see the Instructions for Schedule C 

(Form 1040), and farmers should see the Instructions for 

Schedule F (Form 1040).

Disposition of a Car

If you dispose of your car, you may have a taxable gain or 

a deductible loss. The portion of any gain that is due to 

depreciation (including any section 179 deduction, 

clean-fuel vehicle deduction (for vehicles placed in service 

before January 1, 2006), and special depreciation allowance) that you claimed on the car will be treated as ordinary income. However, you may not have to recognize a 

gain or loss if you dispose of the car because of a casualty 

or theft.

This section gives some general information about dispositions of cars. For information on how to report the disposition of your car, see Pub. 544.

Note. Like-kind exchanges completed after December 

31, 2017, are generally limited to exchanges of real property not held primarily for sale.

Casualty or theft. For a casualty or theft, a gain results 

when you receive insurance or other reimbursement that 

34 Chapter 4 Transportation Publication 463 (2023)
is more than your adjusted basis in your car. If you then 

spend all of the proceeds to acquire replacement property 

(a new car or repairs to the old car) within a specified period of time, you don’t recognize any gain. Your basis in 

the replacement property is its cost minus any gain that 

isn’t recognized. See Pub. 547 for more information.

Trade-in. When you trade in an old car for a new one, the 

transaction is considered a like-kind exchange. Generally, 

no gain or loss is recognized. (For exceptions, see chapter 1 of Pub. 544.) In a trade-in situation, your basis in the 

new property is generally your adjusted basis in the old 

property plus any additional amount you pay. (See Unadjusted basis, earlier.)

Depreciation adjustment when you used the standard mileage rate. If you used the standard mileage rate 

for the business use of your car, depreciation was included in that rate. The rate of depreciation that was allowed 

in the standard mileage rate is shown in the Rate of Depreciation Allowed in Standard Mileage Rate table, later. 

You must reduce your basis in your car (but not below 

zero) by the amount of this depreciation.

If your basis is reduced to zero (but not below zero) 

through the use of the standard mileage rate, and you 

continue to use your car for business, no adjustment (reduction) to the standard mileage rate is necessary. Use 

the full standard mileage rate (65.5 cents ($0.655) per 

mile from January 1–December 31 for 2023) for business 

miles driven.

These rates don’t apply for any year in which the 

actual expenses method was used.

Rate of Depreciation Allowed in Standard Mileage 

Rate

Year(s) Depreciation Rate per Mile

2023 0.28

2021–2022 0.26

2020 0.27

2019 0.26

2017–2018 0.25

2015–2016 0.24

2014 0.22

2012–2013 0.23

2011 0.22

2010 0.23

2008–2009 0.21

2007 0.19

2005–2006 0.17

2003–2004 0.16

2001–2002 0.15

2000 0.14

Example. In 2018, you bought and placed in service a 

car for exclusive use in your business. The car cost 

$25,500. From 2018 through 2023, you used the standard 

mileage rate to figure your car expense deduction. You 

drove your car 14,100 miles in 2018, 16,300 miles in 

2019, 15,600 miles in 2020, 16,700 miles in 2021, 15,100 

miles in 2022, and 14,900 miles in 2023. The depreciation 

TIP

portion of your car expense deduction is figured as follows.

Year Miles x Rate Depreciation

2018 14,100 × $0.25 $3,525

2019 16,300 × 0.26 4,238

2020 15,600 × 0.27 4,212

2021 16,700 × 0.26 4,342

2022 15,100 × 0.26 3,926

2023 14,900 × 0.28 4,172

Total depreciation $24,415

At the end of 2023, your adjusted basis in the car is 

$1,085 ($25,500 − $24,415).

Depreciation deduction for the year of disposition. If 

you deduct actual car expenses and you dispose of your 

car before the end of the recovery period (years 2 through 

5), you are allowed a reduced depreciation deduction in 

the year of disposition.

Use the depreciation tables in Pub. 946 to figure the reduced depreciation deduction for a car disposed of in 

2023.

The depreciation amounts computed using the depreciation tables in Pub. 946 for years 2 through 5 that you own 

your car are for a full year’s depreciation. Years 1 and 6 

apply the half-year or mid-quarter convention to the computation for you. If you dispose of the vehicle in years 2 

through 5 and the half-year convention applies, then the 

full year’s depreciation amount must be divided by 2. If the 

mid-quarter convention applies, multiply the full year’s depreciation by the percentage from the following table for 

the quarter that you disposed of the car.

Quarter Percentage

First ............................. 12.5%

Second ........................... 37.5

Third ............................. 62.5

Fourth ............................ 87.5

If the car is subject to the Depreciation Limits, discussed earlier, reduce (but do not increase) the computed 

depreciation to this amount. See Sale or Other Disposition 

Before the Recovery Period Ends in chapter 4 of Pub. 946 

for more information.

5.

Recordkeeping

If you deduct travel, gift, or transportation expenses, you 

must be able to prove (substantiate) certain elements of 

expense. This chapter discusses the records you need to 

keep to prove these expenses.

Publication 463 (2023) Chapter 5 Recordkeeping 35
If you keep timely and accurate records, you will 

have support to show the IRS if your tax return is 

ever examined. You will also have proof of expenses that your employer may require if you are reimbursed 

under an accountable plan. These plans are discussed in 

chapter 6 under Reimbursements.

How To Prove Expenses

Table 5-1 is a summary of records you need to prove each 

expense discussed in this publication. You must be able to 

prove the elements listed across the top portion of the 

chart. You prove them by having the information and receipts (where needed) for the expenses listed in the first 

column.

You can’t deduct amounts that you approximate or 

estimate.

You should keep adequate records to prove your expenses or have sufficient evidence that will support your 

own statement. You must generally prepare a written record for it to be considered adequate. This is because 

written evidence is more reliable than oral evidence alone. 

However, if you prepare a record on a computer, it is considered an adequate record.

What Are Adequate Records?

You should keep the proof you need in an account book, 

diary, log, statement of expense, trip sheets, or similar record. You should also keep documentary evidence that, 

together with your record, will support each element of an 

expense.

Documentary evidence. You must generally have documentary evidence such as receipts, canceled checks, or 

bills, to support your expenses.

Exception. Documentary evidence isn’t needed if any 

of the following conditions apply.

• You have meals or lodging expenses while traveling 

away from home for which you account to your employer under an accountable plan, and you use a per 

diem allowance method that includes meals and/or 

lodging. (Accountable plans and per diem allowances 

are discussed in chapter 6.)

• Your expense, other than lodging, is less than $75.

• You have a transportation expense for which a receipt 

isn’t readily available.

Adequate evidence. Documentary evidence will ordinarily be considered adequate if it shows the amount, 

date, place, and essential character of the expense.

For example, a hotel receipt is enough to support expenses for business travel if it has all of the following information.

• The name and location of the hotel.

• The dates you stayed there.

RECORDS CAUTION

!

• Separate amounts for charges such as lodging, 

meals, and telephone calls.

A restaurant receipt is enough to prove an expense for 

a business meal if it has all of the following information.

• The name and location of the restaurant.

• The number of people served.

• The date and amount of the expense.

If a charge is made for items other than food and beverages, the receipt must show that this is the case.

Canceled check. A canceled check, together with a 

bill from the payee, ordinarily establishes the cost. However, a canceled check by itself doesn’t prove a business 

expense without other evidence to show that it was for a 

business purpose.

Duplicate information. You don‘t have to record information in your account book or other record that duplicates information shown on a receipt as long as your records and receipts complement each other in an orderly 

manner.

You don’t have to record amounts your employer pays 

directly for any ticket or other travel item. However, if you 

charge these items to your employer, through a credit card 

or otherwise, you must keep a record of the amounts you 

spend.

Timely kept records. You should record the elements of 

an expense or of a business use at or near the time of the 

expense or use and support it with sufficient documentary 

evidence. A timely kept record has more value than a 

statement prepared later when there is generally a lack of 

accurate recall.

You don’t need to write down the elements of every expense on the day of the expense. If you maintain a log on 

a weekly basis that accounts for use during the week, the 

log is considered a timely kept record.

If you give your employer, client, or customer an expense account statement, it can also be considered a 

timely kept record. This is true if you copy it from your account book, diary, log, statement of expense, trip sheets, 

or similar record.

Proving business purpose. You must generally provide 

a written statement of the business purpose of an expense. However, the degree of proof varies according to 

the circumstances in each case. If the business purpose 

of an expense is clear from the surrounding circumstances, then you don’t need to give a written explanation.

Example. If you are a sales representative who calls 

on customers on an established sales route, you don’t 

have to give a written explanation of the business purpose 

for traveling that route. You can satisfy the requirements by 

recording the length of the delivery route once, the date of 

each trip at or near the time of the trips, and the total miles 

you drove the car during the tax year. You could also establish the date of each trip with a receipt, record of delivery, or other documentary evidence.

36 Chapter 5 Recordkeeping Publication 463 (2023)
Confidential information. You don’t need to put confidential information relating to an element of a deductible 

expense (such as the place, business purpose, or business relationship) in your account book, diary, or other record. However, you do have to record the information elsewhere at or near the time of the expense and have it 

available to fully prove that element of the expense.

What if I Have Incomplete Records?

If you don’t have complete records to prove an element of 

an expense, then you must prove the element with:

• Your own written or oral statement containing specific 

information about the element, and

• Other supporting evidence that is sufficient to establish the element.

If the element is the description of a gift, or the cost, 

time, place, or date of an expense, the supporting evidence must be either direct evidence or documentary evidence. Direct evidence can be written statements or the 

oral testimony of your guests or other witnesses setting 

forth detailed information about the element. Documentary evidence can be receipts, paid bills, or similar evidence.

If the element is either the business relationship of your 

guests or the business purpose of the amount spent, the 

supporting evidence can be circumstantial rather than direct. For example, the nature of your work, such as making 

deliveries, provides circumstantial evidence of the use of 

your car for business purposes. Invoices of deliveries establish when you used the car for business.

Sampling. You can keep an adequate record for parts of 

a tax year and use that record to prove the amount of business or investment use for the entire year. You must demonstrate by other evidence that the periods for which an 

adequate record is kept are representative of the use 

throughout the tax year.

Example. You use your car to visit the offices of clients, meet with suppliers and other subcontractors, and 

pick up and deliver items to clients. There is no other business use of the car, but you and your family use the car for 

personal purposes. You keep adequate records during the 

first week of each month that show that 75% of the use of 

the car is for business. Invoices and bills show that your 

business use continues at the same rate during the later 

weeks of each month. Your weekly records are representative of the use of the car each month and are sufficient 

evidence to support the percentage of business use for 

the year.

Exceptional circumstances. You can satisfy the substantiation requirements with other evidence if, because of 

the nature of the situation in which an expense is made, 

you can’t get a receipt. This applies if all the following are 

true.

• You were unable to obtain evidence for an element of 

the expense or use that completely satisfies the requirements explained earlier under What Are Adequate Records.

• You are unable to obtain evidence for an element that 

completely satisfies the two rules listed earlier under 

What if I Have Incomplete Records.

Table 5-1. How To Prove Certain Business Expenses

IF you have 

expenses 

for . . .

THEN you must keep records that show details of the following elements . . .

Amount Time Place or 

Description

Business Purpose

Business Relationship

Travel Cost of each separate 

expense for travel, 

lodging, and meals. 

Incidental expenses 

may be totaled in 

reasonable categories 

such as taxis, fees and 

tips, etc.

Dates you left 

and returned 

for each trip 

and number 

of days spent 

on business.

Destination or area of 

your travel (name of 

city, town, or other 

designation).

Purpose: Business purpose for the expense or the 

business benefit gained or expected to be gained.

Relationship: N/A

Gifts Cost of the gift. Date of the 

gift.

Description of the gift.

Transportation Cost of each separate 

expense. For car 

expenses, the cost of 

the car and any 

improvements, the date 

you started using it for 

business, the mileage 

for each business use, 

and the total miles for 

the year.

Date of the 

expense. For 

car 

expenses, the 

date of the 

use of the car.

Your business 

destination.

Purpose: Business purpose for the expense.

Relationship: N/A

Publication 463 (2023) Chapter 5 Recordkeeping 37
• You have presented other evidence for the element 

that is the best proof possible under the circumstances.

Destroyed records. If you can’t produce a receipt because of reasons beyond your control, you can prove a 

deduction by reconstructing your records or expenses. 

Reasons beyond your control include fire, flood, and other 

casualties.

Separating and Combining Expenses

This section explains when expenses must be kept separate and when expenses can be combined.

Separating expenses. Each separate payment is generally considered a separate expense. For example, if you 

entertain a customer or client at dinner and then go to the 

theater, the dinner expense and the cost of the theater 

tickets are two separate expenses. You must record them 

separately in your records.

Combining items. You can make one daily entry in your 

record for reasonable categories of expenses. Examples 

are taxi fares, telephone calls, or other incidental travel 

costs. Nonentertainment meals should be in a separate 

category. You can include tips for meal-related services 

with the costs of the meals.

Expenses of a similar nature occurring during the 

course of a single event are considered a single expense.

Car expenses. You can account for several uses of 

your car that can be considered part of a single use, such 

as a round trip or uninterrupted business use, with a single 

record. Minimal personal use, such as a stop for lunch on 

the way between two business stops, isn’t an interruption 

of business use.

Example. You make deliveries at several different locations on a route that begins and ends at your employer's 

business premises and that includes a stop at the business premises between two deliveries. You can account 

for these using a single record of miles driven.

Gift expenses. You don’t always have to record the 

name of each recipient of a gift. A general listing will be 

enough if it is evident that you aren’t trying to avoid the 

$25 annual limit on the amount you can deduct for gifts to 

any one person. For example, if you buy a large number of 

tickets to local high school basketball games and give one 

or two tickets to each of many customers, it is usually 

enough to record a general description of the recipients.

Allocating total cost. If you can prove the total cost of 

travel or entertainment but you can’t prove how much it 

costs for each person who participated in the event, you 

may have to allocate the total cost among you and your 

guests on a pro rata basis. To do so, you must establish 

the number of persons who participated in the event.

If your return is examined. If your return is examined, 

you may have to provide additional information to the IRS. 

This information could be needed to clarify or to establish 

the accuracy or reliability of information contained in your 

records, statements, testimony, or documentary evidence 

before a deduction is allowed.

How Long To Keep

Records and Receipts

You must keep records as long as they may be needed for 

the administration of any provision of the Internal Revenue 

Code. Generally, this means you must keep records that 

support your deduction (or an item of income) for 3 years 

from the date you file the income tax return on which the 

deduction is claimed. A return filed early is considered 

filed on the due date. For a more complete explanation of 

how long to keep records, see Pub. 583, Starting a Business and Keeping Records.

You must keep records of the business use of your car 

for each year of the recovery period. See 

More-than-50%-use test in chapter 4 under Depreciation 

Deduction.

Reimbursed for expenses. Employees who give their 

records and documentation to their employers and are reimbursed for their expenses generally don’t have to keep 

copies of this information. However, you may have to 

prove your expenses if any of the following conditions apply.

• You claim deductions for expenses that are more than 

reimbursements.

• Your expenses are reimbursed under a nonaccountable plan.

• Your employer doesn’t use adequate accounting procedures to verify expense accounts.

• You are related to your employer as defined under Per 

Diem and Car Allowances in chapter 6.

Reimbursements, adequate accounting, and nonaccountable plans are discussed in chapter 6.

Examples of Records

Table 5-2 and Table 5-3 are examples of worksheets that 

can be used for tracking business expenses.

38 Chapter 5 Recordkeeping Publication 463 (2023)
THIS IS NOT AN OFFICIAL INTERNAL REVENUE FORM

Table 5-2. Daily Business Mileage and Expense Log

Name: 

Odometer Readings Expenses

Date

Destination

 (City, Town, or 

Area)

Business 

Purpose Start Stop

Miles

 this trip

 Type

(Gas, oil, tolls, 

etc.) Amount

Weekly 

Total

Total

Year-to-Date

Publication 463 (2023) Chapter 5 Recordkeeping 39
THIS IS NOT AN OFFICIAL INTERNAL REVENUE FORM

Table 5-3. Weekly Traveling Expense Record 

From: To: Name: 

Expenses Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total

1. Travel Expenses:

Airlines

Excess Baggage

Bus – Train

Cab and Limousine

Tips

Porter

2.

Non-Entertainment-Related 

Meals and Lodging:

Breakfast

Lunch

 Dinner

 Hotel and Motel 

(Detail in Schedule B)

3. Other Expenses: 

Postage

Telephone & Telegraph

Stationery & Printing

Stenographer

Sample Room

Advertising

Assistant(s)

Trade Shows

4. Car Expenses: (List all car expenses—the division between business and personal expenses may be made at the end of the year.)

(Detail mileage in Schedule A (if applicable).)

Gas, oil, lube, wash

Repairs, parts

Tires, supplies

Parking fees, tolls

5. Other (Identify)

Total

Note: Attach receipted bills for (1) ALL lodging and (2) any other expenses of $75.00 or more.

Schedule A—Car

Mileage: End

Start

Total

Business Mileage

Schedule B—Lodging

Hotel or Motel

Name

City

WEEKLY REIMBURSEMENTS:

Travel and transportation expenses.......

Other reimbursements ..............

TOTAL .......................

40 Chapter 5 Recordkeeping Publication 463 (2023)
6.

How To Report

This chapter explains where and how to report the expenses discussed in this publication. It discusses reimbursements and how to treat them under accountable and nonaccountable plans. It also explains rules for independent 

contractors and clients, fee-basis officials, certain performing artists, Armed Forces reservists, and certain disabled employees. The chapter ends with illustrations of 

how to report travel, gift, and car expenses on Forms 

2106.

Where To Report

This section provides general information on where to report the expenses discussed in this publication.

Self-employed. You must report your income and expenses on Schedule C (Form 1040) if you are a sole proprietor, or on Schedule F (Form 1040) if you are a farmer. You 

don’t use Form 2106.

If you claim car or truck expenses, you must provide 

certain information on the use of your vehicle. You provide 

this information on Schedule C (Form 1040) or Form 4562.

If you file Schedule C (Form 1040):

• Report your travel expenses, except meals, on 

line 24a;

• Report your deductible non-entertainment-related 

meals (actual cost or standard meal allowance) on 

line 24b;

• Report your gift expenses and transportation expenses, other than car expenses, on line 27a; and

• Report your car expenses on line 9. Complete Part IV 

of the form unless you have to file Form 4562 for depreciation or amortization.

If you file Schedule F (Form 1040), do the following.

• Report your car expenses on line 10. Attach Form 

4562 and provide information on the use of your car in 

Part V of Form 4562.

• Report all other business expenses discussed in this 

publication on line 32. You can only include 50% of 

your non-entertainment-related meals on that line.

See your form instructions for more information on how to 

complete your tax return.

Both self-employed and an employee. If you are both 

self-employed and an employee, you must keep separate 

records for each business activity. Report your business 

expenses for self-employment on Schedule C (Form 

1040), or Schedule F (Form 1040), as discussed earlier. 

Report your business expenses for your work as an employee on Form 2106, as discussed next.

Form 2106 is only used by Armed Forces reservists, qualified performing artists, fee-basis state or 

local government officials, and employees with 

impairment-related work expenses. Due to the suspension 

of miscellaneous itemized deductions subject to the 2% 

floor under section 67(a), employees who do not fit into 

one of the listed categories may not use Form 2106.

Employees. If you are an employee, you must generally 

complete Form 2106 to deduct your travel and transportation expenses.

• You are an employee deducting expenses attributable 

to your job.

• You weren’t reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 

aren’t considered reimbursements).

• If you claim car expenses, you use the standard mileage rate.

For more information on how to report your expenses 

on Form 2106, see Completing Form 2106, later.

Gifts. If you didn’t receive any reimbursements (or the 

reimbursements were all included in box 1 of your Form 

W-2), the only business expense you are claiming is for 

gifts, and the special rules discussed later don’t apply to 

you, don’t complete Form 2106.

Statutory employees. If you received a Form W-2 

and the “Statutory employee” box in box 13 was checked, 

report your income and expenses related to that income 

on Schedule C (Form 1040). Don’t complete Form 2106.

Statutory employees include full-time life insurance 

salespersons, certain agent or commission drivers, traveling salespersons, and certain homeworkers.

If you are entitled to a reimbursement from your 

employer but you don’t claim it, you can’t claim a 

deduction for the expenses to which that unclaimed reimbursement applies.

Reimbursement for personal expenses. If your employer reimburses you for nondeductible personal expenses, such as for vacation trips, your employer must report 

the reimbursement as wage income in box 1 of your Form 

W-2. You can’t deduct personal expenses.

Income-producing property. If you have travel or transportation expenses related to income-producing property, 

report your deductible expenses on the form appropriate 

for that activity.

For example, if you have rental real estate income and 

expenses, report your expenses on Schedule E (Form 

1040), Supplemental Income and Loss. See Pub. 527, 

Residential Rental Property, for more information on the 

rental of real estate.

CAUTION

!

CAUTION

!

Publication 463 (2023) Chapter 6 How To Report 41
Vehicle Provided by

Your Employer

If your employer provides you with a car, you may be able 

to deduct the actual expenses of operating that car for 

business purposes. The amount you can deduct depends 

on the amount that your employer included in your income 

and the business and personal miles you drove during the 

year. You can’t use the standard mileage rate.

Form 2106 is only used by Armed Forces reservists, qualified performing artists, fee-basis state or 

local government officials, and employees with 

impairment-related work expenses. Due to the suspension 

of miscellaneous itemized deductions subject to the 2% 

floor under section 67(a), employees who do not fit into 

one of the listed categories may not use Form 2106.

Value reported on Form W-2. Your employer can figure 

and report either the actual value of your personal use of 

the car or the value of the car as if you used it only for personal purposes (100% income inclusion). Your employer 

must separately state the amount if 100% of the annual 

lease value was included in your income. If you are unsure 

of the amount included on your Form W-2, ask your employer.

Full value included in your income. You may be able to 

deduct the value of the business use of an employer-provided car if your employer reported 100% of the value of 

the car in your income. On your 2023 Form W-2, the 

amount of the value will be included in box 1, Wages, tips, 

other compensation; and box 14, Other.

To claim your expenses, complete Form 2106, Part II, 

Sections A and C. Enter your actual expenses on line 23 

of Section C and include the entire value of the employer-provided car on line 25. Complete the rest of the 

form.

Less than full value included in your income. If less 

than the full annual lease value of the car was included on 

your Form W-2, this means that your Form W-2 only includes the value of your personal use of the car. Don’t enter this value on your Form 2106 because it isn’t deductible.

If you paid any actual costs (that your employer didn’t 

provide or reimburse you for) to operate the car, you can 

deduct the business portion of those costs. Examples of 

costs that you may have are gas, oil, and repairs. Complete Form 2106, Part II, Sections A and C. Enter your actual costs on line 23 of Section C and leave line 25 blank. 

Complete the rest of the form.

Reimbursements

This section explains what to do when you receive an advance or are reimbursed for any of the employee business 

expenses discussed in this publication.

If you received an advance, allowance, or reimbursement for your expenses, how you report this amount and 

CAUTION

!

your expenses depends on whether your employer reimbursed you under an accountable plan or a nonaccountable plan.

This section explains the two types of plans, how per 

diem and car allowances simplify proving the amount of 

your expenses, and the tax treatment of your reimbursements and expenses. It also covers rules for independent 

contractors.

No reimbursement. You aren’t reimbursed or given an 

allowance for your expenses if you are paid a salary or 

commission with the understanding that you will pay your 

own expenses. In this situation, you have no reimbursement or allowance arrangement, and you don’t have to 

read this section on reimbursements. Instead, see Completing Form 2106, later, for information on completing 

your tax return.

Form 2106 is only used by Armed Forces reservists, qualified performing artists, fee-basis state or 

local government officials, and employees with 

impairment-related work expenses. Due to the suspension 

of miscellaneous itemized deductions subject to the 2% 

floor under section 67(a), employees who do not fit into 

one of the listed categories may not use Form 2106.

Reimbursement, allowance, or advance. A reimbursement or other expense allowance arrangement is a system 

or plan that an employer uses to pay, substantiate, and recover the expenses, advances, reimbursements, and 

amounts charged to the employer for employee business 

expenses. Arrangements include per diem and car allowances.

A per diem allowance is a fixed amount of daily reimbursement your employer gives you for your lodging and 

M&IE when you are away from home on business. (The 

term “incidental expenses” is defined in chapter 1 under 

Standard Meal Allowance.) A car allowance is an amount 

your employer gives you for the business use of your car.

Your employer should tell you what method of reimbursement is used and what records you must provide.

Employers. If you are an employer and you reimburse 

employee business expenses, how you treat this reimbursement on your employee's Form W-2 depends in part 

on whether you have an accountable plan. Reimbursements treated as paid under an accountable plan, as explained next, aren’t reported as pay. Reimbursements 

treated as paid under nonaccountable plans, as explained 

later, are reported as pay. See Pub. 15 (Circular E), Employer's Tax Guide, for information on employee pay.

Accountable Plans

To be an accountable plan, your employer's reimbursement or allowance arrangement must include all of the following rules.

1. Your expenses must have a business connection—that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer.

CAUTION

!

42 Chapter 6 How To Report Publication 463 (2023)
2. You must adequately account to your employer for 

these expenses within a reasonable period of time.

3. You must return any excess reimbursement or allowance within a reasonable period of time.

Adequate accounting and returning excess reimbursements are discussed later.

An excess reimbursement or allowance is any amount 

you are paid that is more than the business-related expenses that you adequately accounted for to your employer.

Reasonable period of time. The definition of reasonable period of time depends on the facts and circumstances of your situation. However, regardless of the facts and 

circumstances of your situation, actions that take place 

within the times specified in the following list will be treated as taking place within a reasonable period of time.

• You receive an advance within 30 days of the time you 

have an expense.

• You adequately account for your expenses within 60 

days after they were paid or incurred.

• You return any excess reimbursement within 120 days 

after the expense was paid or incurred.

• You are given a periodic statement (at least quarterly) 

that asks you to either return or adequately account for 

outstanding advances and you comply within 120 

days of the statement.

Employee meets accountable plan rules. If you meet 

the three rules for accountable plans, your employer 

shouldn’t include any reimbursements in your income in 

box 1 of your Form W-2. If your expenses equal your reimbursements, you don’t complete Form 2106. You have no 

deduction since your expenses and reimbursements are 

equal.

If your employer included reimbursements in 

box 1 of your Form W-2 and you meet all the rules 

for accountable plans, ask your employer for a 

corrected Form W-2.

Accountable plan rules not met. Even though you are 

reimbursed under an accountable plan, some of your expenses may not meet all three rules. All reimbursements 

that fail to meet all three rules for accountable plans are 

generally treated as having been reimbursed under a nonaccountable plan (discussed later).

Failure to return excess reimbursements. If you are 

reimbursed under an accountable plan, but you fail to return, within a reasonable time, any amounts in excess of 

the substantiated amounts, the amounts paid in excess of 

the substantiated expenses are treated as paid under a 

nonaccountable plan. See Reasonable period of time, 

earlier, and Returning Excess Reimbursements, later.

Reimbursement of nondeductible expenses. You 

may be reimbursed under your employer's accountable 

plan for expenses related to that employer's business, 

some of which would be allowable as employee business 

expense deductions and some of which would not. The 

TIP

reimbursements you receive for the nondeductible expenses don’t meet rule (1) for accountable plans, and they are 

treated as paid under a nonaccountable plan.

Example. Your employer's plan reimburses you for 

travel expenses while away from home on business and 

also for meals when you work late at the office, even 

though you aren’t away from home. The part of the arrangement that reimburses you for the nondeductible 

meals when you work late at the office is treated as paid 

under a nonaccountable plan.

The employer makes the decision whether to reimburse employees under an accountable plan or 

a nonaccountable plan. If you are an employee 

who receives payments under a nonaccountable plan, you 

can’t convert these amounts to payments under an accountable plan by voluntarily accounting to your employer 

for the expenses and voluntarily returning excess reimbursements to the employer.

Adequate Accounting

One of the rules for an accountable plan is that you must 

adequately account to your employer for your expenses. 

You adequately account by giving your employer a statement of expense, an account book, a diary, or a similar record in which you entered each expense at or near the 

time you had it, along with documentary evidence (such 

as receipts) of your travel, mileage, and other employee 

business expenses. (See Table 5-1 in chapter 5 for details 

you need to enter in your record and documents you need 

to prove certain expenses.) A per diem or car allowance 

satisfies the adequate accounting requirement under certain conditions. See Per Diem and Car Allowances, later.

You must account for all amounts you received from 

your employer during the year as advances, reimbursements, or allowances. This includes amounts you charged 

to your employer by credit card or other method. You must 

give your employer the same type of records and supporting information that you would have to give to the IRS if the 

IRS questioned a deduction on your return. You must pay 

back the amount of any reimbursement or other expense 

allowance for which you don’t adequately account or that 

is more than the amount for which you accounted.

Per Diem and Car Allowances

If your employer reimburses you for your expenses using a 

per diem or a car allowance, you can generally use the allowance as proof for the amount of your expenses. A per 

diem or car allowance satisfies the adequate accounting 

requirements for the amount of your expenses only if all 

the following conditions apply.

• Your employer reasonably limits payments of your expenses to those that are ordinary and necessary in the 

conduct of the trade or business.

• The allowance is similar in form to and not more than 

the federal rate (defined later).

TIP

Publication 463 (2023) Chapter 6 How To Report 43
• You prove the time (dates), place, and business purpose of your expenses to your employer (as explained 

in Table 5-1) within a reasonable period of time.

• You aren’t related to your employer (as defined next). 

If you are related to your employer, you must be able 

to prove your expenses to the IRS even if you have already adequately accounted to your employer and returned any excess reimbursement.

If the IRS finds that an employer's travel allowance practices are not based on reasonably accurate estimates of 

travel costs (including recognition of cost differences in 

different areas for per diem amounts), you won’t be considered to have accounted to your employer. In this case, 

you must be able to prove your expenses to the IRS.

Related to employer. You are related to your employer if:

1. Your employer is your brother or sister, half brother or 

half sister, spouse, ancestor, or lineal descendant;

2. Your employer is a corporation in which you own, directly or indirectly, more than 10% in value of the outstanding stock; or

3. Certain relationships (such as grantor, fiduciary, or 

beneficiary) exist between you, a trust, and your employer.

You may be considered to indirectly own stock for purposes of (2) if you have an interest in a corporation, partnership, estate, or trust that owns the stock or if a member of 

your family or your partner owns the stock.

The federal rate. The federal rate can be figured using 

any one of the following methods.

1. For per diem amounts:

a. The regular federal per diem rate.

b. The standard meal allowance.

c. The high-low rate.

2. For car expenses:

a. The standard mileage rate.

b. A fixed and variable rate (FAVR).

For per diem amounts, use the rate in effect for 

the locality where you stop for sleep or rest.

Regular federal per diem rate. The regular federal 

per diem rate is the highest amount that the federal government will pay to its employees for lodging and M&IE (or 

M&IE only) while they are traveling away from home in a 

particular area. The rates are different for different localities. Your employer should have these rates available. You 

can also find federal per diem rates at GSA.gov/travel/

plan-book/per-diem-rates.

The standard meal allowance. The standard meal 

allowance is the federal M&IE rate. For travel in 2023, the 

rate for most small localities in the United States is $59 

per day. Most major cities and many other localities qualify 

TIP

for higher rates. You can find this information at GSA.gov/

travel/plan-book/per-diem-rates.

You receive an allowance only for M&IE when your employer does one of the following.

• Provides you with lodging (furnishes it in kind).

• Reimburses you, based on your receipts, for the actual cost of your lodging.

• Pays the hotel, motel, etc., directly for your lodging.

• Doesn’t have a reasonable belief that you had (or will 

have) lodging expenses, such as when you stay with 

friends or relatives or sleep in the cab of your truck.

• Figures the allowance on a basis similar to that used 

in figuring your compensation, such as number of 

hours worked or miles traveled.

High-low rate. This is a simplified method of figuring 

the federal per diem rate for travel within the continental 

United States. It eliminates the need to keep a current list 

of the per diem rates for each city.

Under the high-low method, the per diem amount for 

travel during January through September of 2023 is $297 

(which includes $74 for M&IE) for certain high-cost locations. All other areas have a per diem amount of $204 

(which includes $64 for M&IE). For more information, see 

Notice 2022-44, which can be found at IRS.gov/irb/

2022-41_IRB#NOT-2022-44.

Effective October 1, 2023, the per diem rate for certain 

high-cost locations increased to $309 (which includes $74 

for M&IE). The rate for all other locations increased to 

$214 (which includes $64 for M&IE). For more information, 

see Notice 2023-68, which can be found at IRS.gov/irb/

2023-41_IRB#NOT-2023-68, and Revenue Procedure 

2019-48 at IRS.gov/irb/2019-51_IRB#REVPROC-2019-48.

Employers who didn’t use the high-low method 

during the first 9 months of 2023 can’t begin to 

use it before 2024.

Prorating the standard meal allowance on partial 

days of travel. The standard meal allowance is for a full 

24-hour day of travel. If you travel for part of a day, such as 

on the days you depart and return, you must prorate the 

full-day M&IE rate. This rule also applies if your employer 

uses the regular federal per diem rate or the high-low rate.

You can use either of the following methods to figure 

the federal M&IE for that day.

1. Method 1:

a. For the day you depart, add 3/4 of the standard 

meal allowance amount for that day.

b. For the day you return, add 3/4 of the standard 

meal allowance amount for the preceding day.

2. Method 2: Prorate the standard meal allowance using 

any method you consistently apply in accordance with 

reasonable business practice. For example, an employer can treat 2 full days of per diem (that includes 

M&IE) paid for travel away from home from 9 a.m. of 

one day to 5 p.m. of the next day as being no more 

CAUTION

!

44 Chapter 6 How To Report Publication 463 (2023)
than the federal rate. This is true even though a federal employee would be limited to a reimbursement of 

M&IE for only 11/2 days of the federal M&IE rate.

The standard mileage rate. This is a set rate per mile 

that you can use to figure your deductible car expenses. 

For 2023, the standard mileage rate for the cost of operating your car for business use is 65.5 cents ($0.655) per 

mile.

Fixed and variable rate (FAVR). This is an allowance 

your employer may use to reimburse your car expenses. 

Under this method, your employer pays an allowance that 

includes a combination of payments covering fixed and 

variable costs, such as a cents-per-mile rate to cover your 

variable operating costs (such as gas, oil, etc.) plus a flat 

amount to cover your fixed costs (such as depreciation (or 

lease payments), insurance, etc.). If your employer chooses to use this method, your employer will request the 

necessary records from you.

Reporting your expenses with a per diem or car allowance. If your reimbursement is in the form of an allowance received under an accountable plan, the following 

facts affect your reporting.

• The federal rate.

• Whether the allowance or your actual expenses were 

more than the federal rate.

The following discussions explain where to report your expenses depending upon how the amount of your allowance compares to the federal rate.

Allowance less than or equal to the federal rate. If 

your allowance is less than or equal to the federal rate, the 

allowance won’t be included in box 1 of your Form W-2. 

You don’t need to report the related expenses or the allowance on your return if your expenses are equal to or less 

than the allowance.

However, if your actual expenses are more than your allowance, you can complete Form 2106. If you are using 

actual expenses, you must be able to prove to the IRS the 

total amount of your expenses and reimbursements for the 

entire year. If you are using the standard meal allowance 

or the standard mileage rate, you don’t have to prove that 

amount.

Form 2106 is only used by Armed Forces reservists, qualified performing artists, fee-basis state or 

local government officials, and employees with 

impairment-related work expenses. Due to the suspension 

of miscellaneous itemized deductions subject to the 2% 

floor under section 67(a), employees who do not fit into 

one of the listed categories may not use Form 2106.

Example 1. In April, a member of a reserve component of the Armed Forces takes a 2-day business trip to 

Denver. The federal rate for Denver is $278 ($199 lodging 

+ $79 M&IE) per day. As required by their employer's accountable plan, they account for the time (dates), place, 

and business purpose of the trip. Their employer reimburses them $278 a day ($556 total) for living expenses. 

CAUTION

!

Their living expenses in Denver aren’t more than $278 a 

day.

Their employer doesn’t include any of the reimbursement on their Form W-2 and they don’t deduct the expenses on their return.

Example 2. In June, a fee-basis local government official takes a 2-day business trip to Boston. Their employer 

uses the high-low method to reimburse employees. Because Boston is a high-cost area, they are given an advance of $297 (which includes $74 for M&IE) a day ($594 

total) for their lodging and M&IE. Their actual expenses totaled $700.

Since their $700 of expenses are more than their $594 

advance, they include the excess expenses when they 

itemize their deductions. They complete Form 2106 

(showing all of their expenses and reimbursements). They 

must also allocate their reimbursement between their 

meals and other expenses as discussed later under Completing Form 2106.

Example 3. A fee-basis state government official 

drives 10,000 miles during 2023 for business. Under their 

employer's accountable plan, they account for the time 

(dates), place, and business purpose of each trip. Their 

employer pays them a mileage allowance of 40 cents 

($0.40) a mile.

Because their $6,550 expense figured under the standard mileage rate (10,000 miles x 65.5 cents ($0.655) per 

mile) is more than their $4,000 reimbursement (10,000 

miles × 40 cents ($0.40)), they itemize their deductions to 

claim the excess expense. They complete Form 2106 

(showing all their expenses and reimbursements) and enter $2,550 ($6,550 − $4,000) as an itemized deduction.

Allowance more than the federal rate. If your allowance is more than the federal rate, your employer must include the allowance amount up to the federal rate under 

code L in box 12 of your Form W-2. This amount isn’t taxable. However, the excess allowance will be included in 

box 1 of your Form W-2. You must report this part of your 

allowance as if it were wage income.

If your actual expenses are less than or equal to the 

federal rate, you don’t complete Form 2106 or claim any of 

your expenses on your return.

However, if your actual expenses are more than the 

federal rate, you can complete Form 2106 and deduct 

those excess expenses. You must report on Form 2106 

your reimbursements up to the federal rate (as shown under code L in box 12 of your Form W-2) and all your expenses. You should be able to prove these amounts to the 

IRS.

Form 2106 is only used by Armed Forces reservists, qualified performing artists, fee-basis state or 

local government officials, and employees with 

impairment-related work expenses. Due to the suspension 

of miscellaneous itemized deductions subject to the 2% 

floor under section 67(a), employees who do not fit into 

one of the listed categories may not use Form 2106.

CAUTION

!

Publication 463 (2023) Chapter 6 How To Report 45
Example 1. Sasha, a performing artist, lives and works 

in Austin. In July, the employer sent Sasha to Albuquerque 

for 4 days on business. The employer paid the hotel directly for Sasha’s lodging and reimbursed $80 a day ($320 

total) for M&IE. Sasha’s actual meal expenses weren’t 

more than the federal rate for Albuquerque, which is $69 

per day.

The employer included the $44 that was more than the 

federal rate (($80 − $69) × 4) in box 1 of Sasha’s Form 

W-2. The employer shows $276 ($69 a day × 4) under 

code L in box 12 of Form W-2. This amount isn’t included 

in income. Sasha doesn’t have to complete Form 2106; 

however, Sasha must include the $44 in gross income as 

wages (by reporting the total amount shown in box 1 of 

their Form W-2).

Example 2. Another performing artist, Ari, also lives in 

Austin and works for the same employer as in Example 1. 

In May, the employer sent Ari to San Diego for 4 days and 

paid the hotel directly for the hotel bill. The employer reimbursed Ari $75 a day for M&IE. The federal rate for San 

Diego is $74 a day.

Ari can prove that actual non-entertainment-related 

meal expenses totaled $380. The employer's accountable 

plan won’t pay more than $75 a day for travel to San 

Diego, so Ari doesn’t give the employer the records that 

prove that the amount actually spent was $380. However, 

Ari does account for the time (dates), place, and business 

purpose of the trip. This is Ari’s only business trip this year.

Ari was reimbursed $300 ($75 × 4 days), which is $4 

more than the federal rate of $296 ($74 × 4 days). The 

employer includes the $4 as income on the employee’s 

Form W-2 in box 1. The employer also enters $296 under 

code L in box 12 of the employee’s Form W-2.

Ari completes Form 2106 to figure deductible expenses 

and enters the total of actual expenses for the year ($380) 

on Form 2106. Ari also enters the reimbursements that 

weren’t included in income ($296). Ari’s total deductible 

meals and beverages expense, before the 50% limit, is 

$96. Ari will include $48 as an itemized deduction.

Example 3. Palmer, a fee-basis state government official, drives 10,000 miles during 2023 for business. Under 

the employer's accountable plan, Palmer gets reimbursed 

70 cents ($0.70) a mile, which is more than the standard 

mileage rate. The total reimbursement is $7,000.

The employer must include the reimbursement amount 

up to the standard mileage rate, $6,550 (10,000 miles x 

65.5 cents ($0.655) per mile), under code L in box 12 of 

the employee’s Form W-2. That amount isn’t taxable. The 

employer must also include $450 ($7,000 − $6,550) in 

box 1 of the employee's Form W-2. This is the reimbursement that is more than the standard mileage rate.

If the expenses are equal to or less than the standard 

mileage rate, Palmer wouldn’t complete Form 2106. If the 

expenses are more than the standard mileage rate, 

Palmer would complete Form 2106 and report total expenses and reimbursement (shown under code L in box 12 of 

their Form W-2). Palmer would then claim the excess expenses as an itemized deduction.

Returning Excess Reimbursements

Under an accountable plan, you are required to return any 

excess reimbursement or other expense allowances for 

your business expenses to the person paying the reimbursement or allowance. Excess reimbursement means 

any amount for which you didn’t adequately account within 

a reasonable period of time. For example, if you received 

a travel advance and you didn’t spend all the money on 

business-related expenses or you don’t have proof of all 

your expenses, you have an excess reimbursement.

Adequate accounting and reasonable period of time 

were discussed earlier in this chapter.

Travel advance. You receive a travel advance if your employer provides you with an expense allowance before you 

actually have the expense, and the allowance is reasonably expected to be no more than your expense. Under an 

accountable plan, you are required to adequately account 

to your employer for this advance and to return any excess 

within a reasonable period of time.

If you don’t adequately account for or don't return any 

excess advance within a reasonable period of time, the 

amount you don’t account for or return will be treated as 

having been paid under a nonaccountable plan (discussed later).

Unproven amounts. If you don’t prove that you actually traveled on each day for which you received a per 

diem or car allowance (proving the elements described in 

Table 5-1), you must return this unproven amount of the 

travel advance within a reasonable period of time. If you 

don’t do this, the unproven amount will be considered paid 

under a nonaccountable plan (discussed later).

Per diem allowance more than federal rate. If your 

employer's accountable plan pays you an allowance that 

is higher than the federal rate, you don’t have to return the 

difference between the two rates for the period you can 

prove business-related travel expenses. However, the difference will be reported as wages on your Form W-2. This 

excess amount is considered paid under a nonaccountable plan (discussed later).

Example. Your employer sends you on a 5-day business trip to Phoenix in March 2023 and gives you a $400 

($80 × 5 days) advance to cover your M&IE. The federal 

per diem for M&IE for Phoenix is $69. Your trip lasts only 3 

days. Under your employer's accountable plan, you must 

return the $160 ($80 × 2 days) advance for the 2 days you 

didn’t travel. For the 3 days you did travel, you don’t have 

to return the $33 difference between the allowance you received and the federal rate for Phoenix (($80 − $69) × 3 

days). However, the $33 will be reported on your Form 

W-2 as wages.

Nonaccountable Plans

A nonaccountable plan is a reimbursement or expense allowance arrangement that doesn’t meet one or more of 

the three rules listed earlier under Accountable Plans.

46 Chapter 6 How To Report Publication 463 (2023)
In addition, even if your employer has an accountable 

plan, the following payments will be treated as being paid 

under a nonaccountable plan.

• Excess reimbursements you fail to return to your employer. 

• Reimbursement of nondeductible expenses related to 

your employer's business. See Reimbursement of 

nondeductible expenses, earlier, under Accountable 

Plans.

An arrangement that repays you for business expenses by 

reducing the amount reported as your wages, salary, or 

other pay will be treated as a nonaccountable plan. This is 

because you are entitled to receive the full amount of your 

pay whether or not you have any business expenses.

If you aren’t sure if the reimbursement or expense allowance arrangement is an accountable or nonaccountable plan, ask your employer.

Reporting your expenses under a nonaccountable 

plan. Your employer will combine the amount of any reimbursement or other expense allowance paid to you under 

a nonaccountable plan with your wages, salary, or other 

pay. Your employer will report the total in box 1 of your 

Form W-2.

You must complete Form 2106 and itemize your deductions to deduct your expenses for travel, transportation, or 

non-entertainment-related meals. Your meal and entertainment expenses will be subject to the 50% Limit discussed in chapter 2.

Form 2106 is only used by Armed Forces reservists, qualified performing artists, fee-basis state or 

local government officials, and employees with 

impairment-related work expenses. Due to the suspension 

of miscellaneous itemized deductions subject to the 2% 

floor under section 67(a), employees who do not fit into 

one of the listed categories may not use Form 2106.

Example 1. Your employer gives you $1,000 a month 

($12,000 total for the year) for your business expenses. 

You don’t have to provide any proof of your expenses to 

your employer, and you can keep any funds that you don’t 

spend.

You are a performing artist and are being reimbursed 

under a nonaccountable plan. Your employer will include 

the $12,000 on your Form W-2 as if it were wages. If you 

want to deduct your business expenses, you must complete Form 2106 and itemize your deductions.

Example 2. You are paid $2,000 a month by your employer. On days that you travel away from home on business, your employer designates $50 a day of your salary 

as paid to reimburse your travel expenses. Because your 

employer would pay your monthly salary whether or not 

you were traveling away from home, the arrangement is a 

nonaccountable plan. No part of the $50 a day designated 

by your employer is treated as paid under an accountable 

plan.

CAUTION

!

Rules for Independent Contractors 

and Clients

This section provides rules for independent contractors 

who incur expenses on behalf of a client or customer. The 

rules cover the reporting and substantiation of certain expenses discussed in this publication, and they affect both 

independent contractors and their clients or customers.

You are considered an independent contractor if you 

are self-employed and you perform services for a customer or client.

Accounting to Your Client

If you received a reimbursement or an allowance for travel, 

or gift expenses that you incurred on behalf of a client, you 

should provide an adequate accounting of these expenses to your client. If you don’t account to your client for 

these expenses, you must include any reimbursements or 

allowances in income. You must keep adequate records of 

these expenses whether or not you account to your client 

for these expenses.

If you don’t separately account for and seek reimbursement for meal and entertainment expenses in connection 

with providing services for a client, you are subject to the 

50% limit on those expenses. See 50% Limit in chapter 2.

Adequate accounting. As a self-employed person, you 

adequately account by reporting your actual expenses. 

You should follow the recordkeeping rules in chapter 5.

How to report. For information on how to report expenses on your tax return, see Self-employed at the beginning of this chapter.

Required Records for

Clients or Customers

If you are a client or customer, you generally don’t have to 

keep records to prove the reimbursements or allowances 

you give, in the course of your business, to an independent contractor for travel or gift expenses incurred on your 

behalf. However, you must keep records if:

• You reimburse the contractor for entertainment expenses incurred on your behalf, and

• The contractor adequately accounts to you for these 

expenses.

Contractor adequately accounts. If the contractor adequately accounts to you for non-entertainment-related 

meal expenses, you (the client or customer) must keep records documenting each element of the expense, as explained in chapter 5. Use your records as proof for a deduction on your tax return. If non-entertainment-related 

meal expenses are accounted for separately, you are subject to the 50% limit on meals. If the contractor adequately 

accounts to you for reimbursed amounts, you don’t have 

to report the amounts on an information return.

Publication 463 (2023) Chapter 6 How To Report 47
Contractor doesn’t adequately account. If the contractor doesn’t adequately account to you for allowances or 

reimbursements of non-entertainment-related meal expenses, you don’t have to keep records of these items. 

You aren’t subject to the 50% limit on meals in this case. 

You can deduct the reimbursements or allowances as payment for services if they are ordinary and necessary business expenses. However, you must file Form 1099-MISC 

to report amounts paid to the independent contractor if the 

total of the reimbursements and any other fees is $600 or 

more during the calendar year.

How To Use Per Diem

Rate Tables

This section contains information about the per diem rate 

substantiation methods available and the choice of rates 

you must make for the last 3 months of the year.

The Two Substantiation Methods

High-low method. IRS Notices list the localities that are 

treated under the high-low substantiation method as 

high-cost localities for all or part of the year. Notice 

2022-44, available at IRS.gov/irb/

2022-41_IRB#NOT-2022-44, lists the high-cost localities 

that are eligible for $297 (which includes $74 for meals 

and incidental expenses (M&IE)) per diem, effective October 1, 2022. For travel on or after October 1, 2022, all 

other localities within the continental United States 

(CONUS) are eligible for $204 (which includes $64 for 

M&IE) per diem under the high-low method.

Notice 2023-68, available at IRS.gov/irb/

2023-41_IRB#NOT-2023-68, lists the high-cost localities 

that are eligible for $309 (which includes $74 for M&IE) 

per diem, effective October 1, 2023. For travel on or after 

October 1, 2023, the per diem for all other localities increased to $214 (which includes $64 for M&IE).

Regular federal per diem rate method. Regular federal 

per diem rates are published by the General Services Administration (GSA). Both tables include the separate rate 

for M&IE for each locality. The rates listed for FY2023 at 

GSA.gov/travel/plan-book/per-diem-rates are effective October 1, 2022, and those listed for FY2024 are effective 

October 1, 2023. The standard rate for all locations within 

CONUS not specifically listed for FY2023 is $157 ($98 for 

lodging and $59 for M&IE). For FY2024, this rate increases to $166 ($107 for lodging and $59 for M&IE).

Transition Rules

The transition period covers the last 3 months of the calendar year, from the time that new rates are effective (generally, October 1) through December 31. During this period, you may generally change to the new rates or finish 

out the year with the rates you had been using.

High-low method. If you use the high-low substantiation 

method, when new rates become effective (generally, October 1), you can either continue with the rates you used 

for the first part of the year or change to the new rates. 

However, you must continue using the high-low method 

for the rest of the calendar year (through December 31). If 

you are an employer, you must use the same rates for all 

employees reimbursed under the high-low method during 

that calendar year. 

The new rates and localities for the high-low method 

are included each year in a notice that is generally published in mid to late September. You can find the notice in 

the weekly Internal Revenue Bulletin (IRB) at IRS.gov/IRB, 

or visit IRS.gov and enter “Special Per Diem Rates” in the 

search box.

Federal per diem rate method. New CONUS per diem 

rates become effective on October 1 of each year and remain in effect through September 30 of the following year. 

Employees being reimbursed under the per diem rate 

method during the first 9 months of a year (January 1–

September 30) must continue under the same method 

through the end of that calendar year (December 31). 

However, for travel by these employees from October 1 

through December 31, you can choose to continue using 

the same per diem rates or use the new rates.

The new federal CONUS per diem rates are published 

each year, generally early in September. Go to GSA.gov/

travel/plan-book/per-diem-rates.

Per diem rates for localities listed for FY2024 may 

change at any time. To be sure you have the most 

current rate, check GSA.gov/travel/plan-book/perdiem-rates.

Completing Form

2106

For tax years beginning after 2017, the Form 2106 will be 

used by Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses. Due to 

the suspension of miscellaneous itemized deductions 

subject to the 2% floor under section 67(a), employees 

who do not fit into one of the listed categories may not use 

Form 2106.

This section briefly describes how employees complete 

Forms 2106. Table 6-1 explains what the employer reports 

on Form W-2 and what the employee reports on Form 

2106. The instructions for the forms have more information 

on completing them.

If you are self-employed, don’t file Form 2106. Report your expenses on Schedule C (Form 1040) 

or Schedule F (Form 1040). See the instructions 

for the form that you must file.

CAUTION

!

CAUTION

!

48 Chapter 6 How To Report Publication 463 (2023)
Reporting Travel, Nonentertainment Meal, Gift, and Car Expenses and 

Reimbursements

Table 6-1.

IF the type of reimbursement (or 

other expense allowance)

 arrangement is under:

THEN the employer reports on Form 

W-2:

AND the employee

reports on

 Form 2106: 

An accountable plan with:

Actual expense reimbursement: Adequate accounting 

made and excess returned.

No amount. No amount.

Actual expense reimbursement: Adequate accounting and 

return of excess both required but excess not returned.

The excess amount as wages in box 1. No amount.

Per diem or mileage allowance up to the federal rate:

Adequate accounting made and excess returned.

No amount. All expenses and reimbursements only if 

excess expenses are claimed. Otherwise, 

form is not filed.

Per diem or mileage allowance up to the federal rate:

Adequate accounting and return of excess both required 

but excess not returned.

The excess amount as wages in box 1. 

The amount up to the federal rate is 

reported only under code L in box 12 of 

Form W-2—it isn’t reported in box 1.

No amount.

Per diem or mileage allowance exceeds the federal rate:

Adequate accounting up to the federal rate only and

excess not returned.

The excess amount as wages in box 1. 

The amount up to the federal rate is 

reported only under code L in box 12 of 

Form W-2—it isn’t reported in box 1.

All expenses (and reimbursements 

reported under code L in box 12 of Form 

W-2) only if expenses in excess of the 

federal rate are claimed. Otherwise, form 

isn’t filed.

A nonaccountable plan with:

Either adequate accounting or return of excess, or both, 

not required by plan.

The entire amount as wages in box 1. All expenses.

No reimbursement plan: The entire amount as wages in box 1. All expenses.

Car expenses. If you used a car to perform your job as 

an employee, you may be able to deduct certain car expenses. These are generally figured on Form 2106, Part II, 

and then claimed on Form 2106, Part I, line 1, column A.

Information on use of cars. If you claim any deduction for the business use of a car, you must answer certain 

questions and provide information about the use of the 

car. The information relates to the following items.

• Date placed in service.

• Mileage (total, business, commuting, and other personal mileage).

• Percentage of business use.

• After-work use.

• Use of other vehicles.

• Whether you have evidence to support the deduction.

• Whether or not the evidence is written.

Employees must complete Form 2106, Part II, Section A, 

to provide this information.

Standard mileage rate. If you claim a deduction 

based on the standard mileage rate instead of your actual 

expenses, you must complete Form 2106, Part II, Section B. The amount on line 22 (Section B) is carried to 

Form 2106, Part I, line 1. In addition, on Part I, line 2, you 

can deduct parking fees and tolls that apply to the business use of the car. See Standard Mileage Rate in chapter 4 for information on using this rate.

Actual expenses. If you claim a deduction based on 

actual car expenses, you must complete Form 2106, Part 

II, Section C. In addition, unless you lease your car, you 

must complete Section D to show your depreciation deduction and any section 179 deduction you claim.

If you are still using a car that is fully depreciated, continue to complete Section C. Since you have no depreciation deduction, enter zero on line 28. In this case, don’t 

complete Section D.

Car rentals. If you claim car rental expenses on Form 

2106, line 24a, you may have to reduce that expense by 

an inclusion amount, as described in chapter 4. If so, you 

can show your car expenses and any inclusion amount as 

follows.

1. Figure the inclusion amount without taking into account your business-use percentage for the tax year.

2. Report the inclusion amount from (1) on Form 2106, 

Part II, line 24b.

3. Report on line 24c the net amount of car rental expenses (total car rental expenses minus the inclusion 

amount figured in (1)).

The net amount of car rental expenses will be adjusted on 

Form 2106, Part II, line 27, to reflect the percentage of 

business use for the tax year.

Transportation expenses. Show your transportation expenses that didn’t involve overnight travel on Form 2106, 

Publication 463 (2023) Chapter 6 How To Report 49
line 2, column A. Also include on this line business expenses you have for parking fees and tolls. Don’t include expenses of operating your car or expenses of commuting 

between your home and work.

Employee business expenses other than nonentertainment meals. Show your other employee business 

expenses on Form 2106, lines 3 and 4, column A. Don’t 

include expenses for nonentertainment meals on those 

lines. Line 4 is for expenses such as gifts, educational expenses (tuition and books), office-in-the-home expenses, 

and trade and professional publications.

If line 4 expenses are the only ones you are claiming, you received no reimbursements (or the reimbursements were all included in box 1 of your 

Form W-2), and the special rules discussed later don’t apply to you, don’t complete Form 2106.

Non-entertainment-related meal expenses. Show the 

full amount of your expenses for nonentertainment business-related meals on Form 2106, line 5, column B. Include meals while away from your tax home overnight and 

other business meals. Enter 50% of the line 8, column B, 

meal expenses on line 9, column B.

“Hours of service” limits. If you are subject to the 

Department of Transportation's “hours of service” limits 

(as explained earlier under Individuals subject to “hours of 

service” limits in chapter 2), use 80% instead of 50% for 

meals while away from your tax home.

Reimbursements. Enter on Form 2106, line 7, the 

amounts your employer (or third party) reimbursed you 

that weren’t reported to you in box 1 of your Form W-2. 

This includes any amount reported under code L in box 12 

of Form W-2.

Allocating your reimbursement. If you were reimbursed under an accountable plan and want to deduct excess expenses that weren’t reimbursed, you may have to 

allocate your reimbursement. This is necessary when your 

employer pays your reimbursement in the following manner.

• Pays you a single amount that covers non-entertainment-related meals and/or entertainment, as well as 

other business expenses.

• Doesn’t clearly identify how much is for deductible 

non-entertainment-related meals.

You must allocate that single payment so that you know 

how much to enter on Form 2106, line 7, column A and 

column B.

Example. Your employer paid you an expense allowance of $12,000 this year under an accountable plan. The 

$12,000 payment consisted of $5,000 for airfare and 

$7,000 for non-entertainment-related meals, and car expenses. Your employer didn’t clearly show how much of 

the $7,000 was for the cost of deductible non-entertainment-related meals. You actually spent $14,000 during the 

year ($5,500 for airfare, $4,500 for non-entertainment-related meals, and $4,000 for car expenses).

TIP

Since the airfare allowance was clearly identified, you 

know that $5,000 of the payment goes in column A, line 7, 

of Form 2106. To allocate the remaining $7,000, you use 

the worksheet from the Instructions for Form 2106. Your 

completed worksheet follows.

Reimbursement Allocation Worksheet

(Keep for your records.)

1. Enter the total amount of reimbursements your 

employer gave you that weren’t reported to you 

in box 1 of Form W-2 ................ $7,000

2. Enter the total amount of your expenses for the 

periods covered by this reimbursement ..... 8,500

3. Enter the part of the amount on line 2 that was 

your total expense for 

non-entertainment-related meals ......... 4,500

4. Divide line 3 by line 2. Enter the result as a 

decimal (rounded to at least three places) .... 0.529 

5. Multiply line 1 by line 4. Enter the result here 

and in column B, line 7 ............... 3,703

6. Subtract line 5 from line 1. Enter the result here 

and in column A, line 7 ............... $3,297

On line 7 of Form 2106, you enter $8,297 ($5,000 airfare 

and $3,297 of the $7,000) in column A and $3,703 (of the 

$7,000) in column B.

After you complete the form. If you are a government 

official paid on a fee basis, a performing artist, an Armed 

Forces reservist, or a disabled employee with impairment-related work expenses, see Special Rules, later.

Limits on employee business expenses. Your employee business expenses may be subject to either of the 

limits described next. They are figured in the following order on the specified form.

1. Limit on meals and entertainment. Certain 

non-entertainment-related meal expenses are subject to a 

50% limit. Generally, entertainment expenses are nondeductible if paid or incurred after December 2017. If you are 

an employee, you figure this limit on line 9 of Form 2106. 

(See 50% Limit in chapter 2.)

2. Limit on total itemized deductions. Limitations on 

itemized deductions are suspended for tax years beginning after 2017 and before tax year January 2026, per 

section 68(g).

Special Rules

This section discusses special rules that apply only to 

Armed Forces reservists, government officials who are 

paid on a fee basis, performing artists, and disabled employees with impairment-related work expenses. For tax 

years beginning after 2017, they are the only taxpayers 

who can use Form 2106.

Armed Forces Reservists Traveling More 

Than 100 Miles From Home

If you are a member of a reserve component of the Armed 

Forces of the United States and you travel more than 100 

miles away from home in connection with your 

50 Chapter 6 How To Report Publication 463 (2023)
performance of services as a member of the reserves, you 

can deduct your travel expenses as an adjustment to 

gross income rather than as a miscellaneous itemized deduction. The amount of expenses you can deduct as an 

adjustment to gross income is limited to the regular federal 

per diem rate (for lodging and M&IE) and the standard 

mileage rate (for car expenses) plus any parking fees, 

ferry fees, and tolls. See Per Diem and Car Allowances, 

earlier, for more information.

Member of a reserve component. You are a member of 

a reserve component of the Armed Forces of the United 

States if you are in the Army, Navy, Marine Corps, Air 

Force, or Coast Guard Reserve; the Army National Guard 

of the United States; the Air National Guard of the United 

States; or the Reserve Corps of the Public Health Service.

How to report. If you have reserve-related travel that 

takes you more than 100 miles from home, you should first 

complete Form 2106. Then include your expenses for reserve travel over 100 miles from home, up to the federal 

rate, from Form 2106, line 10, in the total on Schedule 1 

(Form 1040), line 12.

You can’t deduct expenses of travel that doesn’t take 

you more than 100 miles from home as an adjustment to 

gross income.

Officials Paid on a Fee Basis

Certain fee-basis officials can claim their employee business expenses on Form 2106.

Fee-basis officials are persons who are employed by a 

state or local government and who are paid in whole or in 

part on a fee basis. They can deduct their business expenses in performing services in that job as an adjustment 

to gross income rather than as a miscellaneous itemized 

deduction.

If you are a fee-basis official, include your employee 

business expenses from Form 2106, line 10, in the total on 

Schedule 1 (Form 1040), line 12.

Expenses of Certain

Performing Artists

If you are a performing artist, you may qualify to deduct 

your employee business expenses as an adjustment to 

gross income. To qualify, you must meet all of the following 

requirements.

1. During the tax year, you perform services in the performing arts as an employee for at least two employers.

2. You receive at least $200 each from any two of these 

employers.

3. Your related performing-arts business expenses are 

more than 10% of your gross income from the performance of those services.

4. Your adjusted gross income isn’t more than $16,000 

before deducting these business expenses.

Special rules for married persons. If you are married, 

you must file a joint return unless you lived apart from your 

spouse at all times during the tax year. If you file a joint return, you must figure requirements (1), (2), and (3) separately for both you and your spouse. However, requirement 

(4) applies to your and your spouse's combined adjusted 

gross income.

Where to report. If you meet all of the above requirements, you should first complete Form 2106. Then you include your performing-arts-related expenses from Form 

2106, line 10, in the total on Schedule 1 (Form 1040), 

line 12.

If you don’t meet all of the above requirements, you 

don’t qualify to deduct your expenses as an adjustment to 

gross income.

Impairment-Related Work Expenses of 

Disabled Employees

If you are an employee with a physical or mental disability, 

your impairment-related work expenses aren’t subject to 

the 2%-of-adjusted-gross-income limit that applies to 

most other employee business expenses. After you complete Form 2106, enter your impairment-related work expenses from Form 2106, line 10, on Schedule A (Form 

1040), line 16, and identify the type and amount of this expense on the line next to line 16.

Impairment-related work expenses are your allowable 

expenses for attendant care at your workplace and other 

expenses in connection with your workplace that are necessary for you to be able to work.

You are disabled if you have:

• A physical or mental disability (for example, blindness 

or deafness) that functionally limits your being employed; or

• A physical or mental impairment (for example, a sight 

or hearing impairment) that substantially limits one or 

more of your major life activities, such as performing 

manual tasks, walking, speaking, breathing, learning, 

or working.

You can deduct impairment-related expenses as business expenses if they are:

• Necessary for you to do your work satisfactorily;

• For goods and services not required or used, other 

than incidentally, in your personal activities; and

• Not specifically covered under other income tax laws.

Example 1. You are blind. You must use a reader to do 

your work. You use the reader both during your regular 

working hours at your place of work and outside your regular working hours away from your place of work. The 

reader's services are only for your work. You can deduct 

your expenses for the reader as business expenses.

Example 2. You are deaf. You must use a sign language interpreter during meetings while you are at work. 

Publication 463 (2023) Chapter 6 How To Report 51
The interpreter's services are used only for your work. You 

can deduct your expenses for the interpreter as business 

expenses.

How To Get Tax Help

If you have questions about a tax issue; need help preparing your tax return; or want to download free publications, 

forms, or instructions, go to IRS.gov to find resources that 

can help you right away.

Preparing and filing your tax return. After receiving all 

your wage and earnings statements (Forms W-2, W-2G, 

1099-R, 1099-MISC, 1099-NEC, etc.); unemployment 

compensation statements (by mail or in a digital format) or 

other government payment statements (Form 1099-G); 

and interest, dividend, and retirement statements from 

banks and investment firms (Forms 1099), you have several options to choose from to prepare and file your tax return. You can prepare the tax return yourself, see if you 

qualify for free tax preparation, or hire a tax professional to 

prepare your return.

Free options for tax preparation. Your options for preparing and filing your return online or in your local community, if you qualify, include the following.

• Free File. This program lets you prepare and file your 

federal individual income tax return for free using software or Free File Fillable Forms. However, state tax 

preparation may not be available through Free File. Go 

to IRS.gov/FreeFile to see if you qualify for free online 

federal tax preparation, e-filing, and direct deposit or 

payment options.

• VITA. The Volunteer Income Tax Assistance (VITA) 

program offers free tax help to people with 

low-to-moderate incomes, persons with disabilities, 

and limited-English-speaking taxpayers who need 

help preparing their own tax returns. Go to IRS.gov/

VITA, download the free IRS2Go app, or call 

800-906-9887 for information on free tax return preparation.

• TCE. The Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly 

those who are 60 years of age and older. TCE volunteers specialize in answering questions about pensions and retirement-related issues unique to seniors. 

Go to IRS.gov/TCE or download the free IRS2Go app 

for information on free tax return preparation.

• MilTax. Members of the U.S. Armed Forces and qualified veterans may use MilTax, a free tax service offered by the Department of Defense through Military 

OneSource. For more information, go to 

MilitaryOneSource (MilitaryOneSource.mil/MilTax).

Also, the IRS offers Free Fillable Forms, which can be 

completed online and then e-filed regardless of income.

Using online tools to help prepare your return. Go to 

IRS.gov/Tools for the following.

• The Earned Income Tax Credit Assistant (IRS.gov/

EITCAssistant) determines if you’re eligible for the 

earned income credit (EIC).

• The Online EIN Application (IRS.gov/EIN) helps you 

get an employer identification number (EIN) at no 

cost.

• The Tax Withholding Estimator (IRS.gov/W4App) 

makes it easier for you to estimate the federal income 

tax you want your employer to withhold from your paycheck. This is tax withholding. See how your withholding affects your refund, take-home pay, or tax due.

• The First Time Homebuyer Credit Account Look-up 

(IRS.gov/HomeBuyer) tool provides information on 

your repayments and account balance.

• The Sales Tax Deduction Calculator (IRS.gov/

SalesTax) figures the amount you can claim if you 

itemize deductions on Schedule A (Form 1040).

Getting answers to your tax questions. On 

IRS.gov, you can get up-to-date information on 

current events and changes in tax law.

• Go to IRS.gov/Help: A variety of tools to help you get 

answers to some of the most common tax questions.

• Go to IRS.gov/ITA: The Interactive Tax Assistant, a 

tool that will ask you questions and, based on your input, provide answers on a number of tax topics.

• Go to IRS.gov/Forms: Find forms, instructions, and 

publications. You will find details on the most recent 

tax changes and interactive links to help you find answers to your questions.

• You may also be able to access tax information in your 

e-filing software.

Need someone to prepare your tax return? There are 

various types of tax return preparers, including enrolled 

agents, certified public accountants (CPAs), accountants, 

and many others who don’t have professional credentials. 

If you choose to have someone prepare your tax return, 

choose that preparer wisely. A paid tax preparer is:

• Primarily responsible for the overall substantive accuracy of your return,

• Required to sign the return, and

• Required to include their preparer tax identification 

number (PTIN).

Although the tax preparer always signs the return, 

you're ultimately responsible for providing all the 

information required for the preparer to accurately 

prepare your return and for the accuracy of every item reported on the return. Anyone paid to prepare tax returns 

for others should have a thorough understanding of tax 

matters. For more information on how to choose a tax preparer, go to Tips for Choosing a Tax Preparer on IRS.gov.

CAUTION

!

52 Publication 463 (2023)
Employers can register to use Business Services Online. The Social Security Administration (SSA) offers online service at SSA.gov/employer for fast, free, and secure 

W-2 filing options to CPAs, accountants, enrolled agents, 

and individuals who process Form W-2, Wage and Tax 

Statement, and Form W-2c, Corrected Wage and Tax 

Statement.

IRS social media. Go to IRS.gov/SocialMedia to see the 

various social media tools the IRS uses to share the latest 

information on tax changes, scam alerts, initiatives, products, and services. At the IRS, privacy and security are our 

highest priority. We use these tools to share public information with you. Don’t post your social security number 

(SSN) or other confidential information on social media 

sites. Always protect your identity when using any social 

networking site.

The following IRS YouTube channels provide short, informative videos on various tax-related topics in English, 

Spanish, and ASL.

• Youtube.com/irsvideos.

• Youtube.com/irsvideosmultilingua.

• Youtube.com/irsvideosASL.

Watching IRS videos. The IRS Video portal 

(IRSVideos.gov) contains video and audio presentations 

for individuals, small businesses, and tax professionals.

Online tax information in other languages. You can 

find information on IRS.gov/MyLanguage if English isn’t 

your native language.

Free Over-the-Phone Interpreter (OPI) Service. The 

IRS is committed to serving taxpayers with limited-English 

proficiency (LEP) by offering OPI services. The OPI Service is a federally funded program and is available at Taxpayer Assistance Centers (TACs), most IRS offices, and 

every VITA/TCE tax return site. The OPI Service is accessible in more than 350 languages.

Accessibility Helpline available for taxpayers with 

disabilities. Taxpayers who need information about accessibility services can call 833-690-0598. The Accessibility Helpline can answer questions related to current and 

future accessibility products and services available in alternative media formats (for example, braille, large print, 

audio, etc.). The Accessibility Helpline does not have access to your IRS account. For help with tax law, refunds, or 

account-related issues, go to IRS.gov/LetUsHelp.

Note. Form 9000, Alternative Media Preference, or 

Form 9000(SP) allows you to elect to receive certain types 

of written correspondence in the following formats.

• Standard Print.

• Large Print.

• Braille.

• Audio (MP3).

• Plain Text File (TXT).

• Braille Ready File (BRF).

Disasters. Go to IRS.gov/DisasterRelief to review the 

available disaster tax relief.

Getting tax forms and publications. Go to IRS.gov/

Forms to view, download, or print all the forms, instructions, and publications you may need. Or, you can go to 

IRS.gov/OrderForms to place an order.

Getting tax publications and instructions in eBook 

format. Download and view most tax publications and instructions (including the Instructions for Form 1040) on 

mobile devices as eBooks at IRS.gov/eBooks.

IRS eBooks have been tested using Apple's iBooks for 

iPad. Our eBooks haven’t been tested on other dedicated 

eBook readers, and eBook functionality may not operate 

as intended.

Access your online account (individual taxpayers 

only). Go to IRS.gov/Account to securely access information about your federal tax account.

• View the amount you owe and a breakdown by tax 

year.

• See payment plan details or apply for a new payment 

plan.

• Make a payment or view 5 years of payment history 

and any pending or scheduled payments.

• Access your tax records, including key data from your 

most recent tax return, and transcripts.

• View digital copies of select notices from the IRS.

• Approve or reject authorization requests from tax professionals.

• View your address on file or manage your communication preferences.

Get a transcript of your return. With an online account, 

you can access a variety of information to help you during 

the filing season. You can get a transcript, review your 

most recently filed tax return, and get your adjusted gross 

income. Create or access your online account at IRS.gov/

Account.

Tax Pro Account. This tool lets your tax professional 

submit an authorization request to access your individual 

taxpayer IRS online account. For more information, go to 

IRS.gov/TaxProAccount.

Using direct deposit. The safest and easiest way to receive a tax refund is to e-file and choose direct deposit, 

which securely and electronically transfers your refund directly into your financial account. Direct deposit also 

avoids the possibility that your check could be lost, stolen, 

destroyed, or returned undeliverable to the IRS. Eight in 

10 taxpayers use direct deposit to receive their refunds. If 

you don’t have a bank account, go to IRS.gov/

DirectDeposit for more information on where to find a bank 

or credit union that can open an account online.

Publication 463 (2023) 53
Reporting and resolving your tax-related identity 

theft issues. 

• Tax-related identity theft happens when someone 

steals your personal information to commit tax fraud. 

Your taxes can be affected if your SSN is used to file a 

fraudulent return or to claim a refund or credit.

• The IRS doesn’t initiate contact with taxpayers by 

email, text messages (including shortened links), telephone calls, or social media channels to request or 

verify personal or financial information. This includes 

requests for personal identification numbers (PINs), 

passwords, or similar information for credit cards, 

banks, or other financial accounts.

• Go to IRS.gov/IdentityTheft, the IRS Identity Theft 

Central webpage, for information on identity theft and 

data security protection for taxpayers, tax professionals, and businesses. If your SSN has been lost or 

stolen or you suspect you’re a victim of tax-related 

identity theft, you can learn what steps you should 

take.

• Get an Identity Protection PIN (IP PIN). IP PINs are 

six-digit numbers assigned to taxpayers to help prevent the misuse of their SSNs on fraudulent federal income tax returns. When you have an IP PIN, it prevents someone else from filing a tax return with your 

SSN. To learn more, go to IRS.gov/IPPIN.

Ways to check on the status of your refund. 

• Go to IRS.gov/Refunds.

• Download the official IRS2Go app to your mobile device to check your refund status.

• Call the automated refund hotline at 800-829-1954.

The IRS can’t issue refunds before mid-February 

for returns that claimed the EIC or the additional 

child tax credit (ACTC). This applies to the entire 

refund, not just the portion associated with these credits.

Making a tax payment. Payments of U.S. tax must be 

remitted to the IRS in U.S. dollars. Digital assets are not 

accepted. Go to IRS.gov/Payments for information on how 

to make a payment using any of the following options.

• IRS Direct Pay: Pay your individual tax bill or estimated 

tax payment directly from your checking or savings account at no cost to you.

• Debit Card, Credit Card, or Digital Wallet: Choose an 

approved payment processor to pay online or by 

phone.

• Electronic Funds Withdrawal: Schedule a payment 

when filing your federal taxes using tax return preparation software or through a tax professional.

• Electronic Federal Tax Payment System: Best option 

for businesses. Enrollment is required.

• Check or Money Order: Mail your payment to the address listed on the notice or instructions.

• Cash: You may be able to pay your taxes with cash at 

a participating retail store.

CAUTION

!

• Same-Day Wire: You may be able to do same-day 

wire from your financial institution. Contact your financial institution for availability, cost, and time frames.

Note. The IRS uses the latest encryption technology to 

ensure that the electronic payments you make online, by 

phone, or from a mobile device using the IRS2Go app are 

safe and secure. Paying electronically is quick, easy, and 

faster than mailing in a check or money order.

What if I can’t pay now? Go to IRS.gov/Payments for 

more information about your options.

• Apply for an online payment agreement (IRS.gov/

OPA) to meet your tax obligation in monthly installments if you can’t pay your taxes in full today. Once 

you complete the online process, you will receive immediate notification of whether your agreement has 

been approved.

• Use the Offer in Compromise Pre-Qualifier to see if 

you can settle your tax debt for less than the full 

amount you owe. For more information on the Offer in 

Compromise program, go to IRS.gov/OIC.

Filing an amended return. Go to IRS.gov/Form1040X 

for information and updates.

Checking the status of your amended return. Go to 

IRS.gov/WMAR to track the status of Form 1040-X amended returns.

It can take up to 3 weeks from the date you filed 

your amended return for it to show up in our system, and processing it can take up to 16 weeks.

Understanding an IRS notice or letter you’ve received. Go to IRS.gov/Notices to find additional information about responding to an IRS notice or letter.

Responding to an IRS notice or letter. You can now 

upload responses to all notices and letters using the 

Document Upload Tool. For notices that require additional 

action, taxpayers will be redirected appropriately on 

IRS.gov to take further action. To learn more about the 

tool, go to IRS.gov/Upload.

Note. You can use Schedule LEP (Form 1040), Request for Change in Language Preference, to state a preference to receive notices, letters, or other written communications from the IRS in an alternative language. You may 

not immediately receive written communications in the requested language. The IRS’s commitment to LEP taxpayers is part of a multi-year timeline that began providing 

translations in 2023. You will continue to receive communications, including notices and letters, in English until they 

are translated to your preferred language.

Contacting your local TAC. Keep in mind, many questions can be answered on IRS.gov without visiting a TAC. 

Go to IRS.gov/LetUsHelp for the topics people ask about 

most. If you still need help, TACs provide tax help when a 

tax issue can’t be handled online or by phone. All TACs 

now provide service by appointment, so you’ll know in advance that you can get the service you need without long 

CAUTION

!

54 Publication 463 (2023)
wait times. Before you visit, go to IRS.gov/TACLocator to 

find the nearest TAC and to check hours, available services, and appointment options. Or, on the IRS2Go app, 

under the Stay Connected tab, choose the Contact Us option and click on “Local Offices.”

The Taxpayer Advocate Service (TAS) 

Is Here To Help You

What Is TAS?

TAS is an independent organization within the IRS that 

helps taxpayers and protects taxpayer rights. TAS strives 

to ensure that every taxpayer is treated fairly and that you 

know and understand your rights under the Taxpayer Bill 

of Rights.

How Can You Learn About Your Taxpayer 

Rights?

The Taxpayer Bill of Rights describes 10 basic rights that 

all taxpayers have when dealing with the IRS. Go to 

TaxpayerAdvocate.IRS.gov to help you understand what 

these rights mean to you and how they apply. These are 

your rights. Know them. Use them.

What Can TAS Do For You?

TAS can help you resolve problems that you can’t resolve 

with the IRS. And their service is free. If you qualify for 

their assistance, you will be assigned to one advocate 

who will work with you throughout the process and will do 

everything possible to resolve your issue. TAS can help 

you if:

• Your problem is causing financial difficulty for you, 

your family, or your business;

• You face (or your business is facing) an immediate 

threat of adverse action; or

• You’ve tried repeatedly to contact the IRS but no one 

has responded, or the IRS hasn’t responded by the 

date promised.

How Can You Reach TAS?

TAS has offices in every state, the District of Columbia, 

and Puerto Rico. To find your advocate’s number:

• Go to TaxpayerAdvocate.IRS.gov/Contact-Us;

• Download Pub. 1546, The Taxpayer Advocate Service 

Is Your Voice at the IRS, available at IRS.gov/pub/irspdf/p1546.pdf;

• Call the IRS toll free at 800-TAX-FORM 

(800-829-3676) to order a copy of Pub. 1546;

• Check your local directory; or

• Call TAS toll free at 877-777-4778.

How Else Does TAS Help Taxpayers?

TAS works to resolve large-scale problems that affect 

many taxpayers. If you know of one of these broad issues, 

report it to TAS at IRS.gov/SAMS. Be sure to not include 

any personal taxpayer information.

Low Income Taxpayer Clinics (LITCs)

LITCs are independent from the IRS and TAS. LITCs represent individuals whose income is below a certain level 

and who need to resolve tax problems with the IRS. LITCs 

can represent taxpayers in audits, appeals, and tax collection disputes before the IRS and in court. In addition, 

LITCs can provide information about taxpayer rights and 

responsibilities in different languages for individuals who 

speak English as a second language. Services are offered 

for free or a small fee. For more information or to find an 

LITC near you, go to the LITC page at 

TaxpayerAdvocate.IRS.gov/LITC or see IRS Pub. 4134, 

Low Income Taxpayer Clinic List, at IRS.gov/pub/irs-pdf/

p4134.pdf.

Appendices

Appendices A-1 through A-6 show the lease inclusion 

amounts that you may need to report if you first leased a 

passenger automobile (including a truck and van) in 2018 

through 2023 for 30 days or more.

If any of these apply to you, use the appendix for the 

year you first leased the car. (See Leasing a Car in chapter 4.)

Publication 463 (2023) 55
Appendix A-1. Inclusion Amounts for Passenger Automobiles First Leased in 2018

Fair Market Value Tax Year of Lease1

Over Not Over 1st 2nd 3rd 4th 5th and Later

 $50,000 $51,000 $1 $3 $5 $5 $6

 51,000 52,000 4 9 13 16 19

 52,000 53,000 7 15 22 27 31

 53,000 54,000 10 21 31 37 44

 54,000 55,000 12 27 40 48 56

 55,000 56,000 15 33 49 59 68

 56,000 57,000 18 39 58 69 81

 57,000 58,000 20 45 67 80 93

 58,000 59,000 23 51 76 91 105

 59,000 60,000 26 57 85 101 117

 60,000 62,000 30 66 98 118 135

 62,000 64,000 36 78 116 139 160

 64,000 66,000 41 90 134 160 185

 66,000 68,000 46 102 152 181 210

 68,000 70,000 52 114 169 203 235

 70,000 72,000 57 126 187 225 259

 72,000 74,000 63 138 205 246 284

 74,000 76,000 68 150 223 267 309

 76,000 78,000 74 162 241 288 333

 78,000 80,000 79 174 259 310 357

 80,000 85,000 89 195 290 347 401

 85,000 90,000 102 225 335 400 463

 90,000 95,000 116 255 379 454 525

 95,000 100,0002 130 285 423 508 586

1

 For the last tax year of the lease, use the dollar amount for the preceding year.

2

 If the fair market value of the vehicle is more than $100,000, see Rev. Proc. 2018-25 (2018-18 I.R.B. 543), available at https://www.irs.gov/pub/irs-drop/rp-18-25.pdf.

Appendix A-2. Inclusion Amounts for Passenger Automobiles First Leased in 2019

Fair Market Value Tax Year of Lease1

Over Not Over 1st 2nd 3rd 4th 5th and Later

 $50,000 $51,000 $0 $1 $1 $3 $3

 51,000 52,000 4 11 15 20 23

 52,000 53,000 9 20 30 36 43

 53,000 54,000 13 30 44 53 63

 54,000 55,000 17 40 58 70 83

 55,000 56,000 22 49 72 88 102

 56,000 57,000 26 59 86 105 122

 57,000 58,000 31 68 101 122 142

 58,000 59,000 35 78 115 139 161

 59,000 60,000 39 88 129 156 181

 60,000 62,000 46 102 151 181 211

 62,000 64,000 55 121 179 216 250

 64,000 66,000 63 140 208 251 289

 66,000 68,000 72 160 236 284 329

 68,000 70,000 81 179 265 318 369

 70,000 72,000 90 198 293 353 408

 72,000 74,000 98 217 322 387 448

 74,000 76,000 107 236 351 421 487

 76,000 78,000 116 255 379 456 526

 78,000 80,000 125 275 407 489 567

 80,000 85,000 140 308 458 549 635

 85,000 90,000 162 356 529 635 734

 90,000 95,000 184 404 600 720 833

 95,000 100,0002 206 452 671 806 931

1

 For the last tax year of the lease, use the dollar amount for the preceding year.

2

 If the fair market value of the vehicle is more than $100,000, see Rev. Proc. 2019-26 (2019-24 I.R.B. 1323), available at https://www.irs.gov/pub/irs-drop/rp-19-26.pdf.

56 Publication 463 (2023)
Appendix A-3. Inclusion Amounts for Passenger Automobiles First Leased in 2020

Fair Market Value Tax Year of Lease1

Over Not Over 1st 2nd 3rd 4th 5th and Later

 $50,000 $51,000 $0 $1 $0 $2 $2

51,000 52,000 2 6 9 10 13

52,000 53,000 5 11 17 20 24

53,000 54,000 7 17 24 30 35

54,000 55,000 10 22 32 39 46

55,000 56,000 12 27 41 48 57

56,000 57,000 15 32 49 58 68

57,000 58,000 17 38 56 68 79

58,000 59,000 19 44 64 77 90

59,000 60,000 22 49 72 87 100

60,000 62,000 26 56 84 102 117

62,000 64,000 30 68 99 121 139

64,000 66,000 35 78 116 139 161

66,000 68,000 40 89 131 159 183

68,000 70,000 45 99 148 177 205

70,000 72,000 50 110 163 197 227

72,000 74,000 55 121 179 215 249

74,000 76,000 60 131 195 235 271

76,000 78,000 64 142 211 254 293

78,000 80,000 69 153 227 272 315

80,000 85,000 78 172 254 306 353

85,000 90,000 90 198 295 353 408

90,000 95,000 102 225 334 401 463

95,000 100,0002 114 252 373 449 518

1

 For the last tax year of the lease, use the dollar amount for the preceding year.

2

 If the fair market value of the vehicle is more than $100,000, see Rev. Proc. 2020-37 (2020-33 I.R.B. 381), available at https://www.irs.gov/pub/irs-drop/rp-20-37.pdf.

Appendix A-4. Inclusion Amounts for Passenger Automobiles First Leased in 2021

Fair Market Value Tax Year of Lease1

Over Not Over 1st 2nd 3rd 4th 5th and Later

 $51,000 $52,000 $0 $0 $1 $0 $1

52,000 53,000 1 1 1 2 2

53,000 54,000 1 2 2 3 4

54,000 55,000 1 3 3 5 5

55,000 56,000 2 3 5 6 6

56,000 57,000 2 4 6 7 8

57,000 58,000 2 5 7 8 10

58,000 59,000 3 5 8 10 11

59,000 60,000 3 6 9 11 13

60,000 62,000 3 7 11 13 15

62,000 64,000 4 9 13 15 18

64,000 66,000 5 10 15 18 21

66,000 68,000 5 12 17 21 24

68,000 70,000 6 13 20 23 27

70,000 72,000 7 14 22 26 30

72,000 74,000 7 16 24 29 33

74,000 76,000 8 18 26 31 36

76,000 78,000 9 19 28 34 39

78,000 80,000 9 21 30 37 42

80,000 85,000 11 23 34 41 48

85,000 90,000 12 27 40 47 55

90,000 95,000 14 30 45 55 62

95,000 100,0002 16 34 50 61 70

1

 For the last tax year of the lease, use the dollar amount for the preceding year.

2

 If the fair market value of the vehicle is more than $100,000, see Rev. Proc. 2021-31 (2021-34 I.R.B. 324), available at https://www.irs.gov/pub/irs-drop/rp-21-31.pdf.

Publication 463 (2023) 57
Appendix A-5. Inclusion Amounts for Passenger Automobiles First Leased in 2022

Fair Market Value Tax Year of Lease1

Over Not Over 1st 2nd 3rd 4th 5th and Later

 $56,000 $57,000 $1 $1 $1 $2 $2

57,000 58,000 2 4 5 7 7

58,000 59,000 3 7 9 11 13

59,000 60,000 4 9 14 16 19

60,000 62,000 6 13 20 23 28

62,000 64,000 9 19 27 34 38

64,000 66,000 11 24 36 43 50

66,000 68,000 14 30 43 53 61

68,000 70,000 16 35 52 63 72

70,000 72,000 19 40 61 72 83

72,000 74,000 21 46 68 82 95

74,000 76,000 24 51 77 91 106

76,000 78,000 26 57 85 101 117

78,000 80,000 29 62 93 111 128

80,000 85,000 33 72 107 128 148

85,000 90,000 39 86 127 152 176

90,000 95,000 45 100 147 177 204

95,000 100,0002 52 113 167 201 233

1

 For the last tax year of the lease, use the dollar amount for the preceding year.

2

 If the fair market value of the vehicle is more than $100,000, see Rev. Proc. 2022-17 (2022-13 I.R.B. 930), available at IRS.gov/pub/irs-drop/rp-22-17.pdf.

Appendix A-6. Inclusion Amounts for Passenger Automobiles First Leased in 2023

Fair Market Value Tax Year of Lease1

Over Not Over 1st 2nd 3rd 4th 5th and Later

60,000 62,000 0 0 1 3 5

62,000 64,000 13 29 43 54 63

64,000 66,000 26 57 86 104 122

66,000 68,000 39 86 128 154 181

68,000 70,000 52 114 170 206 239

70,000 72,000 65 143 212 256 297

72,000 74,000 78 171 255 306 356

74,000 76,000 91 200 296 358 414

76,000 78,000 104 228 339 408 473

78,000 80,000 117 257 381 459 531

80,000 85,000 140 306 455 548 634

85,000 90,000 172 378 560 674 780

90,000 95,000 204 449 666 801 926

95,000 100,0002 237 520 772 927 1,073

1

 For the last tax year of the lease, use the dollar amount for the preceding year.

2

 If the fair market value of the vehicle is more than $100,000, see Rev. Proc. 2023-14 (2023-6 I.R.B. 466), available at https://www.irs.gov/pub/irs-drop/rp-23-14.pdf.

58 Publication 463 (2023)
To help us develop a more useful index, please let us know if you have ideas for index entries.

Index See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

"Hours of service" limits 17

Form 2106 50

50% limit on meals 7

A

Accountable plans 42-46

Accounting to employer 42

Adequate accounting 43

Independent contractors 47

Adequate records 36

Advertising:

Car display 20

Expenses 17

Signs, display racks, or other 

promotional material to be used 

on recipient's business 

premises 18

Airline clubs 15

Allocating costs 6, 38

Allowance (See Reimbursements)

Armed forces:

Assigned overseas 4

Assistance (See Tax help)

Athletic clubs 15

B

Basis of car 26

(See also Depreciation of car)

Bona fide business purpose 7

Business travel 9

Outside U.S. 10

Business use of car 22

More-than-50%-use test. 26

Qualified business use 26

C

Canceled checks:

As evidence of business 

expenses 36

Car expenses 21-34

Actual expenses 22

Allowances for 43-46

Business and personal use 22

Combining expenses 38

Disposition of car 34

Fixed and variable rate (FAVR) 

allowance 45

Form 2106 49

Leasing a car, truck, or van 33, 34

Mileage rate (See Standard mileage 

rate)

Taxes paid on car 23

Traffic tickets 23

Car pools 20

Car rentals 34

Form 2106 49

Car, defined 23

Car, truck, or van rentals 33, 34

Casualty and theft losses:

Cars 23

Depreciation 34

Club dues 15

Commuting expenses 20

Conventions 13

Country clubs 15

Cruise ships 13

D

Daily business mileage and 

expense log (Table 5-2) 39

Depreciation of car 23

(See also Section 179 deductions)

Adjustment for using standard 

mileage rate 35

Basis 26

Sales taxes 23

Unrecovered basis 30

Casualty or theft, effect 34

Deduction 23, 35

Excess depreciation 31

Modified Accelerated Cost 

Recovery System (MACRS) 28

Trade-in, effect 27, 35

Trucks and vans 30

Depreciation of Car:

Section 179 deduction 30

Disabled employees:

Impairment-related work 

expenses 51

Documentary evidence 36

E

Employer-provided vehicles 22

Reporting requirements 42

Entertainment expenses 18

50% limit:

Determination of applicability 

(Figure A) 16

Entertainment, defined 14

Form 2106 50

Estimates of expenses 36

Exceptions to the 50% Limit 17

Excess reimbursements 

(See Reimbursements)

F

Fair market value of car 33

Farmers:

Form 1040, Schedule F 41

Federal crime investigations or 

prosecutions:

Federal employees engaged in 5

Federal rate for per diem 8, 44

Fee-basis officials 51

Fees you pay 20

Fixed and variable rate (FAVR) 

allowance 45

Form 1040, Schedule C 41

Form 1040, Schedule F 41

Form 2106 24, 41, 42, 47, 48

Form 4562 41

Form 4797 31

Form W-2:

Employer-provided vehicles 42

Reimbursement of personal 

expenses 41

Statutory employees 41

G

Gifts 15, 17

$25 limit 18

Combining for recordkeeping 

purposes 38

Reporting requirements 41

Golf clubs 15

H

Hauling tools 20

High-low method:

Introduction 48

Transition rules 48

High-low rate method 44

Home office 20

Hotel clubs 15

I

Identity theft 54

Impairment-related work 

expenses 51

Incidental expenses:

Defined 8

Gifts 18

No meals, incidentals only 8

Income-producing property 41

Incomplete records 37

Indefinite job assignment 5

Independent contractors 47

Interest on car loans 23

Itinerants 4

L

Leasing a car, truck, or van 33, 34

Luxury water travel 12

M

MACRS (Modified Accelerated Cost 

Recovery System) 28

2023 chart (Table 4-1) 32

Main place of business or work 4

Married taxpayers:

Performing artists 51

Meal expenses 7

50% limit 16

Determination of applicability 

(Figure A) 16

Publication 463 (2023) 59
Exceptions 17

Actual cost method 7

Form 2106 50

Major cities with higher 

allowances 8

Standard meal allowance 7, 8, 44

Meals and Entertainment 

expenses 14

Mileage rate (See Standard mileage 

rate)

Military (See Armed forces)

Missing children, photographs of 2

Modified Accelerated Cost 

Recovery System (MACRS) 28

2023 chart (Table 4-1) 32

N

Nonaccountable plans 46

O

Office in the home 20

Officials paid on fee basis 51

Overseas travel:

Conventions 13

Meal allowance 8

Part of trip outside U.S. 9

P

Parking fees 20, 22

Per diem allowances 43-46

Defined 42

Federal rate for 44

Per diem rates:

High-cost localities 48

High-low method 48

Regular federal method 48

Standard rate for unlisted 

localities 48

Transition rules 48

Performing artists 51

Personal property taxes 22, 23

Personal trips 9

Outside U.S. 12

Placed in service, cars 26

Probationary work period 6

Proving business purpose 36

Public transportation:

Outside of U.S. travel 9

Publications (See Tax help)

R

Recordkeeping requirements 35-38

Adequate records 36

Daily business mileage and 

expense log (Table 5-2) 39

Destroyed records 38

How to prove expenses 

(Table 5-1) 37

Incomplete records 37

Reimbursed expenses 38

Sampling to prove expenses 37

Separating and combining 

expenses 38

Three-year period of retention 38

Weekly traveling expense record 

(Table 5-3) 40

Regular federal method:

Introduction 48

Transition rules 48

Reimbursements 42-48

Accountable plans 42

Excess 46, 47

Form 2106 50

Nonaccountable plans 46

Nondeductible expenses 43

Personal expenses 41

Recordkeeping 38

Reporting (Table 6-1) 49

Unclaimed 41

Reporting requirements 41

Per diem or car allowance 45

Reimbursements 42-48

Reservists:

Transportation expenses 20

Traveling more than 100 miles from 

home 50

Returning excess 

reimbursements 46

S

Section 179 deduction:

Amended return 25

Deduction 23

Limits 24

Self-employed persons 17

Reporting requirements 41

Spouse, expenses for 6

Standard meal allowance 7, 8, 44

Standard mileage rate 2, 21, 45

Depreciation adjustment for 

using 35

Form 2106 49

Statutory employees 41

T

Tables and figures:

50% limit determination (Figure 

A) 16

Daily business mileage and 

expense log (Table 5-2) 39

Maximum depreciation deduction 

for cars placed in service prior to 

2018 table 29

Maximum depreciation deduction 

for Passenger Automobiles 

(Including Trucks and Vans) 

acquired after September 27, 

2017, and placed in service 

during 2018 or later 29

Maximum depreciation deduction 

for Passenger Automobiles 

(Including Trucks and Vans) 

acquired before September 28, 

2017, and placed in service 

during 2018–2023 29

Modified Accelerated Cost 

Recovery System (MACRS) 2023 

chart (Table 4-1) 32

Proving expenses (Table 5-1) 37

Reporting reimbursements 

(Table 6-1) 49

Transportation expenses, 

determination of deductibility 

(Figure B) 18, 19

Travel expenses, determination of 

deductibility (Table 1-1) 7

Weekly traveling expense record 

(Table 5-3) 40

Tax help 52

Tax home, determination of 4

Temporary job assignments 5

Temporary work location 19

Tickets:

Traffic violations 23

Tools:

Hauling tools 20

Trade-in of car 27, 35

Traffic tickets 23

Transients 4

Transition rules 48

Example:

High-low method 48

High-low method 48

Regular federal method 48

Transportation expenses 18

Car expenses 21-34

Deductible (Figure B) 18, 19

five or more cars 22

Form 2106 49

Transportation workers 8, 17

Travel advance 42, 46

(See also Reimbursements)

Travel expenses 3-14

Another individual accompanying 

taxpayer 6

Away from home 4, 5

Deductible 6, 14

Summary of (Table 1-1) 7

Defined 3

Going home on days off 6

In U.S. 9

Lodging 8

Luxury water travel 12

Outside U.S. 10

Travel to family home 5

Trucks and vans:

Depreciation 30

Transportation workers 17

Transportation workers' expenses 8

Two places of work 20

60 Publication 463 (2023)
U

Unclaimed reimbursements 41

Unions:

Trips from union hall to place of 

work 20

Unrecovered basis of car 30

V

Volunteers 3

W

Weekly traveling expense record 

(Table 5-3) 40

Publication 463 (2023) 61