Instructions For Form 2106 - Employee Business Expenses

For more information on the standard

rate for the entire lease period (except for the

portion of the cost (subject to a yearly limit). To

mileage rate and actual expenses, see Pub.

period, if any, before January 1, 1998).

calculate this section 179 deduction, multiply

463.

the part of the cost of the vehicle that you

You may also deduct state and local

choose to expense by the percentage on line

personal property taxes. Enter these taxes on

Section A—General Information

14. The total of your depreciation and section

Schedule A (Form 1040), line 7.

179 deduction generally cannot be more than

If you used two vehicles for business during

If you are claiming the standard mileage

the percentage on line 14 multiplied by $3,060.

the year, use a separate column in Sections A,

rate for mileage driven in more than one

C, and D for each vehicle. If you used more

However, this limit is equal to the percentage

than two vehicles, attach a statement using the

business activity, you must figure the deduction

on line 14 multiplied by $7,660 for a vehicle

for each business on a separate form or

format in Sections A, C, and D.

that qualifies for the 30% special depreciation

schedule (e.g., Form 2106 or Schedule C,

allowance, unless you elect not to claim it

Line 11. Date placed in service is generally

C-EZ, E, or F).

(explained below). Also, a higher limit applies

the date you first start using your vehicle.

to certain clean-fuel and electric vehicles (see

However, if you first start using your vehicle for

Section C— Actual Expenses

the line 36 instructions). Your section 179

personal use and later convert it to business

deduction for the year cannot be more than the

use, the vehicle is treated as placed in service

Line 23. Enter your total annual expenses for

income from your job and any other active

on the date you started using it for business.

gasoline, oil, repairs, insurance, tires, license

trade or business on your Form 1040.

plates, or similar items. Do not include state

Line 12. Enter the total number of miles you

and local personal property taxes or interest

drove each vehicle during 2001. But if you

If you are claiming a section 179

expense you paid. Deduct state and local

converted your vehicle during the year from

deduction on other property, or you

personal property taxes on Schedule A (Form

personal to business use (or vice versa), enter

placed more than $200,000 of section

1040), line 7. Employees cannot deduct car

CAUTION

the total miles for only the months you drove

179 property in service during the year, use

loan interest.

the vehicle for business.

Form 4562 to figure your section 179

Line 24a. If during 2001 you rented or leased

deduction. Enter the amount of the section 179

Line 13. Do not include commuting miles on

instead of using your own vehicle, enter the

deduction allocable to your vehicle (from Form

this line; commuting miles are not considered

cost of renting. Also, include on this line any

4562, line 12) on Form 2106, line 31.

business miles. See the line 15 instructions for

temporary rentals, such as when your car was

the definition of commuting.

being repaired, except for amounts included on

Line 14. Divide line 13 by line 12 to figure your

line 3.

Note: For section 179 purposes, the cost

business use percentage. However, if you

Line 24b. If you leased a vehicle for a term of

of the new vehicle does not include the

converted your vehicle during the year from

30 days or more after June 18, 1984, you may

adjusted basis of the vehicle you traded in.

personal to business use (or vice versa),

have to reduce your deduction for vehicle lease

multiply this percentage by the number of

payments by an amount called the inclusion

Example for a vehicle placed in service before

months you drove the vehicle for business and

September 11, 2001:

amount. You may have an inclusion amount if:

divide the result by 12.

Cost including taxes . . . . . . . . . . . . . . . . .

$15,000

And the vehicle’s fair

Line 15. Enter your average daily roundtrip

−

market value on the first

Adjusted basis of trade-in . . . . . . . . . . . . . .

2,000

commuting distance. If you went to more than

The lease term

day of the lease

Section 179 basis . . . . . . . . . . . . . . . . . . = $13,000

one work location, figure the average.

began in:

exceeded:

Limit on depreciation and section 179 deduction

$ 3,060

Generally, commuting is travel between

1999, 2000, or 2001 . . . . . . . . . . . . . . . . . .

$15,500

Smaller of:

your home and a work location. However,

1997 or 1998 . . . . . . . . . . . . . . . . . . . . . .

15,800

travel that meets any of the following

Section 179 basis, or limit on depreciation and

conditions is not commuting.

section 179 deduction . . . . . . . . . . . . . . . .

$ 3,060

•

1995 or 1996 . . . . . . . . . . . . . . . . . . . . . .

15,500

× .75

You have at least one regular work location

Percentage on line 14 . . . . . . . . . . . . . . . .

If the lease term began before 1995, see Pub. 463 to find out if

away from your home and the travel is to a

Section 179 deduction . . . . . . . . . . . . . . . . = $ 2,295

you have an inclusion amount.

temporary work location in the same trade or

business, regardless of the distance.

Special depreciation allowance. If you

Generally, a temporary work location is one

See Pub. 463 to figure the inclusion

acquired and placed in service a new vehicle

where your employment is expected to last 1

amount.

after September 10, 2001, and the percentage

year or less. See Pub. 463 for more details.

•

Line 25. If during 2001 your employer

on line 14 is more than 50%, you may be able

The travel is to a temporary work location

provided a vehicle for your business use and

to claim an additional 30% first-year

outside the metropolitan area where you live

included 100% of its annual lease value in box

depreciation allowance (subject to the overall

and normally work.

•

1 of your Form W-2, enter this amount on line

limit explained above). To qualify as a new

Your home is your principal place of

25. If less than 100% of the annual lease value

vehicle, the original use of the vehicle must

business under section 280A(c)(1)(A) (for

was included in box 1 of your Form W-2, skip

have begun with you after September 10,

purposes of deducting expenses for business

line 25.

2001. To figure the amount of the special

use of your home) and the travel is to another

allowance, complete the following worksheet.

work location in the same trade or business,

Section D— Depreciation of

regardless of whether that location is regular or

Vehicles

1. Enter the amount from line 30 . . . . 1.

temporary and regardless of distance.

2. Multiply line 1 by the percentage on

Depreciation is an amount you can deduct to

Line 16. If you do not know the total actual

Form 2106, line 14, and enter the

recover the cost or other basis of your vehicle

miles you used your vehicle for commuting

result . . . . . . . . . . . . . . . . . . . 2.

over a certain number of years. In some cases,

during the year, figure the amount to enter on

3. Enter any section 179 deduction . . 3.

you may elect to expense, under section 179,

line 16 by multiplying the number of days

4. Subtract line 3 from line 2 . . . . . . 4.

part of the cost of your vehicle in the year of

during the year that you used each vehicle for

5. Multiply line 4 by 30% (.3), and enter

purchase. For details, see Pub. 463.

the result . . . . . . . . . . . . . . . . 5.

commuting by the average daily roundtrip

6. Multiply the limit shown in the table

commuting distance in miles. However, if you

Line 30. Enter the vehicle’s actual cost

for the line 36 instructions by the

converted your vehicle during the year from

(including sales tax) or other basis (unadjusted

percentage on Form 2106, line 14,

personal to business use (or vice versa), enter

for prior years’ depreciation). If you traded in

and enter the result . . . . . . . . . . 6.

your commuting miles only for the period you

your vehicle, your basis is the adjusted basis of

7. Subtract line 3 from line 6 . . . . . . 7.

drove your vehicle for business.

the old vehicle (figured as if 100% of the

8. Enter the smaller of line 5 or line 7.

vehicle’s use had been for business purposes)

Add the result to any section 179

Section B—Standard Mileage Rate

plus any additional amount you pay for your

deduction and enter the total on

new vehicle. Reduce your basis by any diesel

You may be able to use the standard mileage

Form 2106, line 31 . . . . . . . . . . 8.

fuel or qualified electric vehicle credit or

rate instead of actual expenses to figure the

deduction for clean-fuel vehicles you claimed.

deductible costs of operating a passenger car,

Note: If you had a written contract in effect

including a van, pickup, or panel truck.

before September 11, 2001, to acquire the

If you converted the vehicle from personal

vehicle, that vehicle does not qualify for the

If you want to use the standard mileage

use to business use, your basis for

rate for a vehicle you own, you must do so in

depreciation is the smaller of the vehicle’s

special depreciation allowance.

the first year you place your vehicle in service.

adjusted basis or its fair market value on the

You may elect not to claim the special

In later years, you may deduct actual expenses

date of conversion.

depreciation allowance for vehicles acquired

instead, but you may not use a depreciation

and placed in service in 2001 by attaching a

Line 31. Section 179 deduction. If 2001 is

method other than straight line.

statement to your income tax return indicating

the first year your vehicle was placed in service

that you are not claiming the special allowance

If you lease your vehicle, you may use the

and the percentage on line 14 is more than

for any such vehicles.

standard mileage rate, but only if you use the

50%, you may elect to deduct as an expense a

-3-

Instructions For Form 2106 - Employee Business Expenses - 2001 Page 3

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