Income Tax Guide for State Legislators

Transcription

1 Income Tax Guide for State Legislators For Preparing 2017 Tax Year Returns Compliments of Society of Louisiana Certified Public Accountants Society of Louisiana CPAs 1

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3 Society of Louisiana Certified Public Accountants Truth. Strength. Fortitude BOARD OF DIRECTORS Chair Gina Rachel, CPA Chair-Elect Kandace Mauldin, CPA Treasurer Jason MacMorran, CPA, ABV, CFF, CVA Immediate Past Chair Ralph Bender, CPA, CGMA Directors Kenneth Champagne, CPA, CGMA Walker Coburn, CPA, CGMA Gary Dressler, CPA Barret Ellender, CPA Angela Gray, CPA, CGMA Mona Fordham, CPA, CGMA Jessica Kolwe, CPA Bob Little, CPA Tiffani McLain, CPA, CGMA Curtis Meaux, CPA, CGMA Jay Montalbano Jr., CPA, CVA Seth Norris, CPA Paul Riggs Jr., CPA Anthony Rutledge, CPA Mark Taylor, CPA, CGMA The Society of Louisiana Certified Public Accountants is pleased to present this Income Tax Guide for State Legislators for Preparing 2017 Tax Year Returns. It has been developed specifically for members of the Louisiana Legislature and will be helpful to you in answering some frequently raised questions concerning income tax laws as they relate to your unique position as an elected official. Rules governing taxation are continually changing and evolving because they are affected not only by legislation, but also by the decisions of courts and pronouncements by the Internal Revenue Service. Consequently, the material contained in this income tax guide may be considered current only as of the publication date. It is important to note that at the time of publication, the IRS had not yet released specific guidance on issues related to the recently passed Tax Cut and Jobs Act, effective for the 2018 tax year. While these chances do not affect your 2017 return, you should make yourself aware of how these changes will impact your 2018 tax year and plan accordingly. We will share information as it becomes available. For tax issues not addressed in this guide, for consultation on other tax or accounting questions and for assistance in the preparation of your various income tax returns we suggest that you contact your CPA. Executive Director/CEO Ronald Gitz II, CPA, CGMA Gina Rachel, CPA Chair Ronald Gitz II, CPA, CGMA Executive Director Jim Harris Legislative Liaison Woody Riser, Jr., CPA Federal Taxation Committee Chair Published February 23, For additional copies contact Linda Babin, CPA, LCPA State Government Relations Director , ext. 126 Society of Louisiana CPAs 3

4 4 Income Tax Guide for State Legislators

5 TABLE OF CONTENTS Preface: The CPA Profession Today... 6 Introduction: As a Legislator... 7 Automobile & Travel Expenses... 8 Living Expenses: Meals & Lodging...12 Living Expenses: Per Diem Allowance...14 State Legislator s Election to Treat Residence as Tax Home...15 Health Insurance: Taxation of Premiums...16 Office Expenses...16 Advertising...18 Entertainment & Business Meal Expenses...19 Telephone & Other Expenses...20 Personal Financial Disclosure...22 Campaign Expenses & Contributions Contribution Limits and Campaign Reporting Deadlines...28 Recordkeeping EZ A IRS Form 2106 and Instructions for Form IRS Form 2106-EZ and Instructions for Form 2106-EZ...46 IRS Schedule A Society of Louisiana CPAs 5

6 Preface "The CPA Profession Today" CPAs act as advisors to individuals, business, financial institutions, nonprofit organizations and government agencies on a wide range of financial matters. Today, many turn to CPAs for help with: tax preparation and planning; estate, trust and retirement planning; personal financial planning; budgeting; management advisory services; computing services; financial management and financial forecasting; and auditing, review and compilation of financial statements. CPAs also serve in management within companies of all sizes. As corporate managers, they perform many of the same services that outside CPAs do. They also bring special expertise and insight to management issues, helping to reengineer company finance functions, structure transactions for the capital markets; manage employee benefit plans and prepare and analyze financial and operational information for management decision-making. Whether chief financial officer, controller or head of human resources, CPAs are trusted members of many successful companies senior management teams. The highest professional standards and integrity in the practice of accountancy are maintained by holders of the certified public accountant certificate issued by the State of Louisiana or by other states. To qualify for certification and a Louisiana state license to practice public accounting, a CPA must: Have fulfilled stringent education requirements; Have passed the comprehensive Uniform CPA Examination covering accounting practice and theory, taxes, commercial law and auditing; Obtain 40 hours of continuing professional education annually (a minimum of 20 hours each year, with each two-year period equalling at least 80 hours), with additional minimum requirements for those CPAs who perform attest services; Abide by the Code of Professional Conduct, one of the most exacting of any profession, which stresses independence, integrity, objectivity, technical competence and adherence to professional standards and emphasizes the CPA s commitment to serving and protecting the public interest. The Society of Louisiana Certified Public Accountants (LCPA), organized in 1911, is a non-profit, professional association with more than 8,000 CPAs and future CPAs living and working in nine active chapters throughout the state, as well as US and international locations. LCPA is the state s premier organization of accountants. The following are the members of the Louisiana Legislator s Tax Guide Subcommittee of LCPA s Federal Taxation Committee: Frank Holzenthal, CPA Dennis W. Dillon, CPA Carrie W. Grinnell, CPA Scott LaCaze, CPA William A. Paddie, CPA Emil Lloyd, CPA Kevin Willis, CPA, CGMA Special thanks to Donna Budenski, Controller/House Accounting, for her assistance in the preparation of this Tax Guide. 6 Income Tax Guide for State Legislators

7 Introduction As a Legislator... As a legislator, you are considered to be an employee of the state of Louisiana for federal and state income tax purposes, and you will receive a W-2 form from the state. This W-2 will reflect your salary, session per diem, interim committee per diem, and special travel per diem. You may also receive mileage and district office reimbursements that are not included in your W-2. Certain expenses incurred by you while serving in your capacity as a legislator may be deductible for tax purposes for tax year These expenses are referred to as employee business expenses and are reportable on Form 2106 or 2106-EZ of your individual income tax return (see pp. 35 and 46 for copies of forms 2106 and 2106-EZ). Employee business expenses include automobile and other travel, entertainment and certain other expenses related to your employment as a legislator, such as dues, subscriptions and office expenses. Form 2106 expenses and other such expenses, in excess of reimbursement, are deductible only as miscellaneous itemized deductions on Schedule A, subject to a 2 percent of adjusted gross income floor and also subject to a phase-out for adjusted gross income in excess of certain thresholds (see page 49 for a copy of Schedule A). Travel expenses include automobile expenses, transportation fares, meals, lodging and other related expenses incurred while away from home. For the purpose of this deduction, your tax home is considered to be your principal place of employment or business headquarters which, of course, may be different from your place of residence. Whether the geographical area you represent is your principal place of business ( tax home ), or a minor post of duty, is determined by a review of all of the facts and circumstances relative to your particular situation. Regardless of the facts and circumstances, you may elect to treat your residence in your legislative district as your tax home. The election is made by attaching a statement to your income tax return, and your deductions are determined, in part, by reference to federal and Louisiana per diem allowances. This election is not available if you live within 50 miles of the Capitol building. The election is more fully explained on pages Throughout this Income Tax Guide you will note an emphasis on the importance of recordkeeping. The burden of proving the appropriateness and extent of deductibility is on you, the taxpayer. Therefore, it is imperative that sufficiently detailed records be kept by you. Failure to adequately support a deduction can result in its disallowance. A question-and-answer format is used to provide specific answers to questions regarding income tax laws as they relate to your unique position as a member of the Legislature. The answers generally assume that Baton Rouge is not your tax home. This Income Tax Guide represents an overview of the income tax laws as they affect you. You should consult your certified public accountant, or other tax advisor, who can assess your particular situation and determine appropriate treatment. A discussion of the Affordable Care Act is beyond the scope of this publication. Society of Louisiana CPAs 7

8 Automobile & Travel Expenses How much may I deduct for the auto mileage I incur to and from Baton Rouge? You may deduct either the standard mileage rate for all business miles, including mileage driven to and from Baton Rouge, or you may itemize your actual automobile expenses. The standard mileage rates for 2017 and 2018 are as follows: cents per mile cents per mile If you itemize your expenses, you may deduct that portion of total expenses allocable to business mileage, including mileage for traveling to and from Baton Rouge. The business use percentage is computed by dividing total business miles by total miles, business and personal, driven during the year. Allowable itemized expenses include depreciation, gas and oil, repairs and maintenance, insurance and other costs of operating and maintaining your automobile. Parking fees, tolls and property taxes may be deducted as separate additional items, but only to the extent otherwise allowable (see subsequent sections). Personal interest paid on car loans by an employee is not deductible unless it qualifies as home equity indebtedness. Since the state of Louisiana reimburses you for mileage between your home and Baton Rouge, your deductible automobile expenses must be reduced by the total amount of reimbursement received by you during the year. Expenses in excess of reimbursement may be deducted on Schedule A subject to the 2 percent of adjusted gross income floor. In some cases, the deduction for these expenses may be further limited if adjusted gross income exceeds certain threshold amounts (see page 21 for further details). What other mileage expenses may I deduct? Most members of the Legislature incur a great deal of mileage expenses while in their home districts. All travel to club meetings, speaking engagements, and meetings you attend because of your position as a legislator is considered business mileage and should be included with the mileage traveled between your home and Baton Rouge. This mileage can become substantial, particularly if your district covers a large geographical area. A memorandum of this mileage should be recorded in a diary or an appropriate mileage log. What about mileage expenses incurred while going to meetings during a political campaign for my re-election? Although I am running for re-election, I still feel it is incumbent upon me to attend these meetings to explain to my constituents the activities of the Legislature, and the disposition of legislative measures. The Internal Revenue Code specifically states that none of your campaign expenses are tax deductible (see section on campaign expenses, pp ). Because of this, it is very important for you to distinguish between those expenses directly related to a campaign for re-election, and those expenses that can be directly attributed to serving your constituency. However, your campaign account can reimburse you or pay directly for any legitimate campaign expenses. If my campaign account reimburses me for legislative or campaign expenses can I still deduct the mileage on my return? If your campaign account reimburses you at the above-referenced per mile rates, you may not deduct the mileage. If you do not give the campaign account specific mileage detail to justify the reimbursement, then you must pick up the reimbursement amount as income and deduct the per mile amount on your individual income tax return as a miscellaneous itemized deduction. 8 Income Tax Guide for State Legislators

9 If I use another mode of transportation to get to Baton Rouge, such as the bus or airplane, may I deduct these expenses in addition to my mileage expenses? You cannot claim both the mileage you would have incurred had you driven your automobile to Baton Rouge and the cost of the bus fare or airplane ticket. If you use a bus, airplane or other means of transportation to Baton Rouge, these expenses should be detailed on Form 2106, along with any reimbursement you received for the travel. The expenses incurred in excess of reimbursement will be deductible subject to the limitations discussed on page 21. If your reimbursement exceeds your expenses, the excess may be taxable income to you to the extent not offset by other non-reimbursed deductible employee business expenses. On occasion I ride with another legislator to Baton Rouge. Do I still claim a tax deduction for the mileage for that particular day, even though I did not drive my car? No. When you ride with someone else and do not directly incur any travel expense yourself, you may not claim any mileage expense for that day s travel. Of course, you may still deduct other expenses incurred, such as meals and lodging, subject to the requirements discussed in the next section, Living Expenses Meals and Lodging (see pp ). I received a traffic violation because I was rushing to get to Baton Rouge to be on time for a session or a committee meeting. Is the fine a tax deductible expense? No. A traffic fine is a penalty and is therefore not a deductible expense. I travel to Baton Rouge for each legislative session. I stay at a motel, and I am required to drive to the state Capitol each day. May I deduct this mileage as a business expense? Yes. You may deduct as a travel expense the mileage you incur going from your living quarters in Baton Rouge to either the State Capitol or any other location, as long as the purpose of the travel is directly related to your position as a member of the Louisiana Legislature. Additionally, the IRS has ruled that you may deduct daily transportation expenses incurred in going between your residence and a temporary work location outside the metropolitan area where you live and normally work. A temporary work location is defined as any location where employment at the location is realistically expected to last (and does in fact last) for one year or less. You should note that if Baton Rouge were treated as your tax home, the mileage would be treated as a non-deductible commuting expense. However, if you have one or more regular work locations away from your residence, you may deduct daily transportation expenses incurred in going between your residence and a temporary work location in the same trade or business. It appears likely that the State Capitol would be considered a regular workplace. Therefore, if Baton Rouge is your tax home, mileage from your residence to a meeting or function at a location other than the State Capitol is deductible. I have an office in my home district. May I deduct mileage expense from my home to this office? No. The mileage from your residence to one or more regular places of business within the geographical area considered your tax home is deemed a non-deductible commuting expense. However, any business mileage traveled between your residence and any other temporary place of business would give rise to a deduction, as would mileage between the office and another temporary place of business. One deductible example would be the trip between a legislator s law office and his legislative office. The IRS allows me to deduct a flat rate expense per mile or to itemize all of my automobile expenses, and then to take a portion of those expenses based on a percentage of my business miles to the total miles traveled during the year. Which method results in the greatest deduction for me? If you want to use the standard mileage rate, you must choose to use it in the first year the car is available for use. Then in later years, you can choose to use either the standard mileage rate or actual expenses. You cannot use the standard mileage rate if you claimed an accelerated depreciation deduction in an earlier year. In order to determine which gives you the greatest deduction, it is necessary to itemize your automobile expenses and then compare that amount to your tax deduction under the standard mileage allowance. Generally the greater the total business mileage, the more beneficial the mileage deduction becomes. A mileage log should be kept regardless of the method selected. Society of Louisiana CPAs 9

10 If I don t use the standard mileage rate method for computing automobile expenses, specifically what expenses am I allowed to deduct? Deductible expenses include depreciation, gasoline, oil, repairs, insurance, tires, license plates, registration fees, and similar items. The cost of the car itself, including accessories or improvements, must be capitalized and deducted via depreciation. Sales taxes incurred due to the purchase of the vehicle must be added to the cost of the car, and manufacturer rebates, if applicable, must be subtracted from the cost of the car for depreciation purposes. Specific dollar amount limits apply to annual depreciation deductions, except for SUVs, large autos, larger passenger trucks, and other vehicles weighing more than 6,000 pounds. Any truck or van that is a qualified nonpersonal use vehicle is also exempt from depreciation limits. A qualified nonpersonal use vehicle is modified in a way that makes it unlikely to be suitable for more than a deminimus amount of personal use. For vehicles subject to the depreciation limitations on passenger automobiles, the depreciation depends on the tax year in which a car is placed in service. The annual depreciation for autos placed in service in 2017 is limited to $3,160. The 2017 depreciation limit for trucks or vans (passenger autos built on a truck chassis, including minivans and sportutility vehicles [SUVs] built on a truck chassis) is $3,560. This maximum limit is reduced proportionately if business use of the auto is less than 100 percent. If the business use of the auto is 50 percent or less, you must use straight-line depreciation. Fifty percent bonus depreciation is available for vehicles purchased before September 28, 2017 and will increase the regular 1st year dollar limit by $8, percent bonus depreciation is available for assets purchased and placed in service after September 27, 2017, but the depreciation limits on autos remain the same through the end of Accurate records of business use are important to ensure the full deduction allowable under the law. You should consult with your tax advisor. Are there expenses I may deduct for the use of my automobile in addition to the standard mileage rate? Yes. Parking fees and tolls and personal property taxes may be deducted. As discussed later, personal interest related to the purchase of a car is not deductible by an employee unless it qualifies as home equity indebtedness. These deductions are available only as itemized deductions and are subject to the adjusted gross income limitations discussed on page 21. Since I am reimbursed by the state for actual mileage for personal, legislative and committee travel, would it be best to just disregard the reimbursement entirely and assume that it is completely offset by mileage expenses and therefore not report anything? If you are fully reimbursed for actual mileage driven at a rate not exceeding 53.5 cents for mileage in 2017, it is not necessary to report automobile expense in your federal income tax return. This assumes that the state has an accountable plan (requires employee substantiation and return of amounts received in excess of substantiation) and does not include the reimbursement as taxable wages in your Form W-2. If you incur travel expenses for which you are partially reimbursed, you must report all of the reimbursements and related expenses in order to deduct the unreimbursed portion of the expense. You may also have driven other miles that were not reimbursed by the state at all. L.A.R.S. 24:31:1 provides Louisiana legislative members with a mileage allowance for trips to and from the State Capitol during legislative sessions, based on the standard mileage rate under IRC 162(a). The regulations under IRC 274 provide that gross income does not include automobile reimbursements to employees which are provided under a mileage reimbursement plan and are based on mileage rates that do not exceed the rate allowed by the IRS, provided that the expenses be substantiated. For these purposes, a mileage reimbursement plan is an accountable reimbursement plan that meets the requirements of an accountable plan under IRC 62(c) (See Rev. Proc ). IRC (c) states that an accountable plan must meet the following three requirements: 1. The reimbursement under the plan must be for expenses incurred by the employee in connection with his performance of services as an employee of the employer; 2. The expenses must be substantiated; and 3. Amounts reimbursed in excess of actual expenses must be returned to the employer. 10 Income Tax Guide for State Legislators

11 For purposes of a mileage reimbursement plan, the amount of actual expenses incurred is equal to the lesser of (1) the amount paid under the plan, or (2) the standard mileage rate multiplied by the number of miles substantiated by the employee. In connection with the plan for the Louisiana legislators, the amount reimbursed for mileage should meet the business purpose test as they are in connection with travel to and from legislative sessions. To substantiate the mileage, the legislators should once again substantiate the business purpose, as well as provide the number of miles, the destination points, and the date of travel. Finally, in order to be excluded from the gross income of the legislator, reimbursements should be limited to the amount incurred as figured under the standard mileage rate. These payments are not subject to federal income or employment tax withholding. If I itemize my automobile expenses one year, may I use the standard mileage rate the following year? Yes, but within the following guidelines. The standard mileage election may be made yearly (not just in the first year) if the car was depreciated using the straight-line method in the first year it was placed in service. Must I maintain a complete log of all use of my auto in order to be able to deduct auto expense? Adequate records or sufficient evidence are required to support auto expense deductions. Written evidence recorded close in time to the actual expense will be much stronger support than oral evidence or evidence recorded much later in time (see Recordkeeping section, pp ) income tax returns will ask the following questions, which should be answered (see Forms 2106 and 2106-EZ, pp ). 1. Date vehicle was placed in service. 2. Total mileage vehicle was used for Total business miles for Average daily round-trip commuting distance (miles) for Miles vehicle was used for commuting for Other personal mileage. 7. Do you or your spouse have another vehicle available for personal use? YES NO 8. Was your vehicle available for personal use during off-duty hours? YES NO 9. Do you have evidence to support your deduction? YES NO If yes, is the evidence written? YES NO What is home equity indebtedness? How does this make personal interest on car loans deductible? Home equity indebtedness is defined as all debt other than acquisition debt (debt incurred in acquiring, constructing or substantially improving a qualified residence and secured by such residence) that is secured by a qualified residence to the extent it does not exceed the fair market value of the residence reduced by any acquisition indebtedness. A qualified residence includes the principal residence of the taxpayer and one other residence (other than rental property) used by the taxpayer as a personal residence (for example, a vacation home). Acquisition indebtedness may not exceed $1 million, and home equity indebtedness may not exceed $100,000. Interest on home equity indebtedness is deductible even if the proceeds are used for personal expenditures (for example, the purchase of an automobile). This may not be deductible for alternative minimum tax purposes. Society of Louisiana CPAs 11

12 Living Expenses Meals and Lodging What expenses may I deduct for meals and lodging while in Baton Rouge attending a legislative session or committee meeting or performing general legislative duties? During 1997, the Legislature voted to change the per diem rate from a flat amount to the reimbursement rate allowable for Baton Rouge for federal employees. This rate could change when the government (GSA) periodically reviews expenses of various locations. The federal per diem rate for Baton Rouge is based on the following schedule: Per Diem Schedule Per Diem Lodging Meals 10/1/16-9/30/17 $156 $97 $59 10/1/17-9/30/18 $164 $105 $59 May I deduct the expense of meals I have purchased for constituents and other persons who have come to Baton Rouge for a meeting involving legislative business? Yes, the cost of meals paid by you is an allowable deduction, but only if directly related or associated with the active conduct of legislative business. Business must be discussed during the meal, or the meal must occur either before or after a substantial and bona fide business discussion. An exception to this would allow a deduction for your meal when you are traveling away from home and overnight on business even if you dine alone. In general, reimbursed meals will be 100 percent deductible but unreimbursed meals are only 50 percent deductible and subject to the adjusted gross income limitations discussed on page 21. In support of the deduction you should secure a receipt for the amount paid by you with your notation showing the names of the persons present and the business discussed. Your personal meal may not be separately deductible if the per diem deduction allowance election is made by you. Also, you or your representative must be present at the meal in order to deduct the cost. Because we are in Baton Rouge for long periods of time, I find it necessary and desirable to have my spouse and children come to Baton Rouge on occasion. May I deduct the cost of their travel to Baton Rouge and their expenses for motel and meals? No, unless you can establish that your spouse s presence served a bona fide business purpose. The spouse s performance of some incidental service does not cause that spouse s expenses to qualify as deductible business expenses. This same rule applies if your spouse accompanies you on a trip for a legislative conference. After some committee meetings that last late into the evening (until 11 or 12), I go out and grab a sandwich or some refreshments. Is this a deductible business expense? Yes, to the extent that these expenses are in excess of the per diem amount reimbursed by the state and if the per diem deduction election has not been made. Again, only 50 percent of business meals are deductible subject to the adjusted gross income limitations discussed on page Income Tax Guide for State Legislators

13 While in Baton Rouge on certain special occasions, such as Independence Day, I will have a gathering for fellow legislators and other individuals connected with the Legislature. May I deduct the expense of this gathering as a business expense? Entertainment expenses must meet the same directly related or associated with criteria as business meals to be deductible. Unreimbursed entertainment expenses are only 50 percent deductible subject to the adjusted gross income limitations discussed on page 21. To establish a deduction for entertainment there must be a record of the cost, date of entertainment, place of entertainment, description of entertainment (if not apparent from the name of the place), the business purpose and the nature of the business benefit expected to be derived and the business relationship (name, occupation, title) of the persons entertained. If there are a large number of people entertained and they are readily identifiable as a class, you may record such class (e.g., senators) rather than all their names. Where the entertainment expense is incurred before or after a substantial business discussion, you must document the date and duration of the business discussion, the place, nature and business reason for the business discussion and the names of those who participated in the business discussion. Sometimes administrative assistants work long hours during the legislative session. If a fellow legislator and I take them out to dinner or if we buy them candy, etc., would this be a deductible expense? Yes, such an employee meal is a deductible expense because it is related to a business purpose. Once again, unreimbursed expenses for meals or entertainment are only 50 percent deductible subject to the adjusted gross income limitations discussed on page 21. Other deductible items, not includable in the employee s income, would be occasional supper money or taxi fare due to overtime work; traditional holiday gifts or property (not cash) with a small fair market value; tickets that are occasionally given out for entertainment events (football games, theater); coffee and doughnuts furnished to employees under special circumstances, such as illness, outstanding performance or family crises. However, under the Ethics Code, administrative assistants who are public employees are limited to accepting only food, drink, or refreshments consumed in the presence of their host. Society of Louisiana CPAs invites legislators to visit our Baton Rouge office. Linda Babin CPA, CGMA LCPA State Government Relations Director Ron Gitz II, CPA, CGMA LCPA CEO Contact Linda Babin to schedule a visit or to speak with a CPA who can help you make sense of complex tax legislation. 548 Lakeland Drive Baton Rouge lbabin@lcpa.org Society of Louisiana CPAs 13

14 Living Expenses Per Diem Allowance May I elect to deduct a per diem amount for meals and lodging while in Baton Rouge attending a legislative session, committee meeting, etc.? Yes. For a legislator whose residence in his legislative district is more than 50 miles from the State Capitol building, an election may be made to treat this residence as his tax home. If the election is made, the legislator is deemed to have expended, for living expenses at the State Capitol, an amount equal to the greater of the daily per diem allowed federal employees for travel to Baton Rouge ($156 for travel on or after January 1, 2017 through September 30, 2017; $164 for travel on or after October 1, 2017 through September 30, 2017) or an amount allowable to state employees for travel to Baton Rouge (not in excess of 110% of the federal rate). The state per diem rate for legislators now piggybacks the federal per diem reimbursement rate for each legislative day. A legislative day is defined, for purposes of the election, as any day on which the Legislature was in session including any day in which the Legislature wasn t in session for a period of four consecutive days or less. A legislative day also includes a day the Legislature wasn t in session, but the legislator s physical presence was formally recorded at a meeting of a committee of the Legislature. A committee of the Legislature is any group that includes one or more legislators and is charged with conducting the business of the Legislature. It also includes committees the Legislature authorized to conduct inquiries into matters of public concern. If a state legislator makes the IRC 162(h) election to deduct a per diem amount for lodging and meals, the amount allowable as a deduction for travel expenses away from home must be allocated in accordance with the ratio of meals and lodging under the federal per diem reimbursement rules applicable to Baton Rouge at the end of year. For this purpose, the amount allowable for meals is the federal per diem for meals and incidentals ($59) reduced by $5 per day. This meal amount is then reduced by 50% to arrive at the deductible amount under 274(n). For example, the legislator would receive a deduction of $27 per day for meals [($59 $5) x 50%]. In addition, he or she would receive a deduction of $97 ($156- $59) per day per diem for lodging before October 1, 2017 and $105 ($164 - $59) for lodging after September 30, Deductible living expenses include meals, lodging and related incidental expenses such as laundry and fees and tips for services (e.g., those given to waiters and baggage handlers). Not included are travel fares, telegrams, telephone expense or local transportation (e.g., taxicabs) for business. Amounts not treated as living expenses are deductible as travel expenses in addition to the elected per diem amount. The per diem allowance paid by the state is reported on Form W-2 as part of your salary and is not treated as travel reimbursement. A sample election to treat your residence as a tax home is illustrated on page Income Tax Guide for State Legislators

15 State Legislator s Election to Treat Residence as Tax Home If taxpayers travel away from their home in pursuit of a trade or business, travel expenses may be deductible. For tax purposes, travel expenses are ordinary and necessary expenses of traveling away from home for business. An individual s home for tax purposes is his place of business, employment, station, post of duty, even though his family residence is located in a different place. A state legislator would normally not be able to deduct expenses for travel away from home during the legislative session because the State Capitol would be considered his principal place of business. However, an individual who is a state legislator at any time during the taxable year can make an election for tax purposes to treat his place of residence within his legislative district to be considered his home for tax purposes. He will thus be considered to be away from home on any day that the legislature is in session or on any day when the legislature is not in session but the legislator s presence is formally recorded at a committee meeting. The election is available to a legislator if his residence is (1) within his legislative district and (2) is more than 50 miles away from the State Capitol building. How to make the election: The election to treat a legislator s place of residence within his legislative district to be considered his tax home for tax purposes must be made by the due date (taking into account extensions) of the tax return for the tax year at issue. The election is made by attaching a statement to the return that: (1) contains the taxpayer s name, address and TIN; (2) identifies the election; (3) indicates that the election is being made under Internal Revenue Code Section 162(h); (4) specifies the period for which the election is being made; and (5) contains any information required by the Internal Revenue Code or necessary to show that the taxpayer is entitled to make the election. Authorities: Internal Revenue Code Section 162(h) and Treasury Regulation Section T STATE LEGISLATOR S ELECTION TO TREAT RESIDENCE AS TAX HOME John C. Smith 120 Somewhere Street Nowhere Near Baton Rouge, Louisiana Social Security No.: Taxpayer, a state legislator, hereby elects to treat his residence as his tax home pursuant to Internal Revenue Code Section 162(h) for the tax year ended December 31, His place of residence is within the 123rd district, which is the legislative district that he represents. The residence is more than 50 miles from the Capitol building of the state. Society of Louisiana CPAs 15

16 Health Insurance Taxation of Health Insurance Premiums Paid by the State Are health insurance premiums paid by the state on my behalf taxable to me? LA R.S. 42:851 provides that state employees are eligible for health insurance coverage. The state s legal staff determined that elected officials may choose to participate in the State Employees Group Benefits Program or another health insurance program available to employees, under which the premiums are paid as provided by law. Because the premiums would be paid directly to the insurer (and not to the official to remit to the insurer), the premium payments would not be included in the gross income of the employee. Similarly, these amounts would not be subject to federal income or employment taxes (IRC 3121(a)(2)). Do health insurance plans offered by the State Employees Group Benefits Program meet the definition of "minimum essential coverage" under the Affordable Care Act in order to avoid paying a penalty for not having health insurance coverage? Yes, for 2017 and 2018 these plans do meet the requirements of "minimum essential coverage". Office Expenses The Legislature provides both a $500 monthly allowance and a $1,500 monthly supplemental allowance for home district office expenses and a $500 (unvouchered) monthly expense allowance. How do these amounts affect my taxable income and my deductions for expenses incurred on my personal income tax return? First, the home district office reimbursement is for rental of office space in a building located in the parish the member represents and other costs of maintaining a district office. Each legislator must file an itemized statement of expenses including supporting invoices or receipts for each month, prior to receiving reimbursement of actual expenses. It cannot be used for home office expenses in the legislator s residence or in any other property owned wholly or in part by the legislator or a member of the legislator's family. Rents, utilities, maintenance, and other office expenses incurred exceeding the reimbursed amounts are deductible on Form These expenses are subject to the adjusted gross income limitations discussed on page 21. Second, the unvouchered expense allowance of $500 per month is subject to withholding and income taxes and is included in income as Form W-2 wages. It is paid to each member for undesignated expenses incurred in connection with the holding or conduct of their office. May I deduct any cost of my home as a business expense? Deductions for office-in-home expenses are subject to strict limitations. In general, unless you can show that deductions claimed for the cost of a home office (other than those deductions allowed to everyone, such as home mortgage interest and real estate taxes) are allocable to a portion of your home that is exclusively used on a regular basis as a principal place of business, the deductions will be disallowed (i.e., if you maintain a downtown office in your home district in which you conduct your legislative activities, a deduction would not normally be allowed for an office in your home). 16 Income Tax Guide for State Legislators

17 Exclusive use means the use of a specific part of the home solely for the purpose of carrying on a trade or business or for meeting with business clients. Regular basis means the home office is used on a continuing basis as a principal place of business or for meeting with business clients (occasional or incidental use will not suffice). Home office expenses may not be used to reduce taxable income from the activity to less than zero (i.e., to create a loss). Any unused home office expenses are available for carryover to the succeeding year, subject to the taxable income limitation discussed above. The allowable deduction is computed on Form As the home office deduction is a miscellaneous itemized deduction, it will also be subject to the adjusted gross income limitations discussed on page 21. Assuming that the above-mentioned requirements are met, specifically what may I deduct as a home office expense? Deductible expenses include a pro-rata share of rent or depreciation, utilities, home mortgage interest, insurance, security system monitoring, and real estate taxes. The cost of repairs that do not benefit the room used as a home office are not deductible, but the cost of repairs to that room are deductible in full. Expenses of lawn care and landscaping are not deductible. Personal household expenses are not deductible. The allocation of expenses is determined by dividing the area exclusively used for business by the total area of the home. Depreciation is computed on the lower of the adjusted cost basis of your home or its fair market value at the time you begin using the home office. Starting with the 2013 tax year, a simplified option of computing the home office deduction has been created by the IRS. This simplified method reduces the paperwork and record keeping required by taxpayers. This optional method allows a deduction capped at $1,500 per year, based on $5 per square foot for a home office, up to 300 square feet. Current restrictions on the use of the home office deduction still apply. Your deductions for office-in-home expenses cannot exceed the gross income derived from business use for the taxable year reduced by expenses that are otherwise deductible (i.e., home mortgage interest, real estate taxes on the home, and business expenses unrelated to the home such as office supplies). Does deducting office-in-home expenses affect me when I sell the house? Office-in-home can impact how gain on the sale is reported and taxed when the house is sold. The general rule is that up to $250,000 ($500,000 for joint returns) of the gain from the sale of a principal residence may be excluded from your income except for gain recognized to the extent of any depreciation taken after May 7, No allocation of the exclusion is required between a home office and the remainder of a principal residence as long as the home office is located within the principal residence. However, the gain that is eligible for the exclusion must first be reduced by any depreciation taken after May 6, 1997 and the depreciation must be recognized as unrecaptured section 1250 gain. If I have a legislative assistant in my home district to whom I pay a token amount each month for work not related to the assistant's job duties from my private funds, am I required to go through the process of filing payroll tax returns and withholding payroll taxes? Generally, any amount paid for services that are performed by a worker is subject to the payroll tax laws if the worker is classified as an employee. In addition, workman's compensation rules may apply. Employee status exists when you have a right to control and direct the worker who performs the services. However, if the worker qualifies as an independent contractor, you would not be responsible for complying with the payroll tax or the workman's compensation laws. Society of Louisiana CPAs 17

18 Advertising Because I am a member of the Louisiana Legislature, I am often called upon to pay for ads in trade journals, programs or magazines published by various organizations in my district. May I deduct the cost of these ads when paid with personal funds? Holders of public office are generally allowed to deduct all ordinary and necessary expenses incurred in carrying on their duties in that office. If you pay for the ads personally and they are necessary to maintain relations with your constituency or to promote your name (which is necessary to you as an elected official to make people aware of who you are), such expenditures may be deducted as a business expense. They are, however, subject to the adjusted gross income limitations applicable to miscellaneous itemized deductions. During a re-election campaign period, exclude the costs of these ads from your tax deductible items (campaign expenses are not deductible). During the campaign, these expenses should be paid from campaign contributions, which are kept separate from your personal funds. As a member of the Louisiana Legislature, I am requested (and required, in effect, because of my position) to attend many dinners within my district. May I deduct the cost of these dinners? You may be able to deduct these costs if you pay for your dinner. Additionally, any incidental costs incurred to attend such dinners (travel expenses, parking fees, etc.) are also deductible. Remember, you must document not only the amount of the expenses incurred, but also the business relationship (who, why, when, where). The burden of proof for the deduction is on you, the taxpayer. For dinners that are deductible, only 50 percent of the cost may be deducted, and the deductible portion is subject to the adjusted gross income limitations discussed on page 21. Remember also that if the dinner is one where the proceeds go to a political party or candidate, it is not deductible. I buy calendars, pens and similar items with my address and phone number on them. I pass these items out to my constituency as a means of notifying the people that I am their legislator and that they may contact me should the need arise. May I deduct such items? You should be able to deduct the costs of these items because this is directly related to the business purpose of adequately and properly servicing your constituency. Any deduction is subject to the adjusted gross income limitations applicable to miscellaneous itemized deductions. However, if these items are distributed near election dates, they are considered a form of campaign expense and are not deductible. 18 Income Tax Guide for State Legislators

19 Entertainment and Business Meal Expenses I am required to meet with a constituent regarding a state problem. We meet for breakfast, lunch or dinner, and I pay for his meal. May I deduct this as a tax expense? The law provides that meal expenses (like other entertainment expenses) are not deductible unless (a) they are directly related to the active conduct of your trade or business (as a state legislator) or (b) they directly precede or follow a substantial business discussion associated with the active conduct of your trade or business. Thus, no deduction is allowed unless business is discussed during, directly before or directly after the meal (an exception: the cost of your own meal if you are traveling on business). Moreover, you or your representative must be present at the meal. Meal expenses may not be deducted to the extent the meal is lavish or extravagant. Only 50 percent of any otherwise deductible expense for business meals or entertainment is allowable as a business deduction. So, if you spend $100 for a business meal that meets the other deduction requirements, the amount that may be claimed as a business deduction is $50 (which is further subject to the adjusted gross income limitations discussed on page 21). In order to claim any deduction, a taxpayer must be able to prove that the expense was in fact incurred. A meal expense, which is deemed by the IRS as particularly susceptible to abuse, must generally be sustained as to (1) amount, (2) time and place, and (3) business purpose. Receipts must be retained for any expenditure of $75 or more. You generally cannot deduct the cost of meal expenses for your spouse or for the spouse of a constituent. However, you can deduct these costs if you can show that you had a clear business purpose for providing the meals. Because of my position in the community, I occasionally will entertain other elected officials such as city councilmen and mayors. I may also entertain congressmen. This entertainment is primarily for the purpose of maintaining communications with these officials, exploring each other s problems and determining common solutions. May I deduct this expense? As long as the expense meets the criteria outlined above, it may be deducted. However, the expense is subject to the 50 percent and adjusted gross income limitations discussed on page 21. Here again, it is necessary that you keep an itemized record to indicate the date, place, who was there and the business discussed as more fully outlined in the section titled Recordkeeping," pp The records must be produced contemporaneously. Society of Louisiana CPAs 19

20 Telephone and Other Expenses May I deduct the cost of my home telephone since I use the telephone for calling and receiving calls from constituents and for conducting other state business? The basic cost of local services for the first telephone line is considered personal and would not be a deductible expense, even if the line is used solely for business or legislative purposes. If you have a separate telephone installed exclusively for the purpose of your legislative business, then the entire cost of this telephone may be deducted as a business expense. If this second or other line is used partly for business, then the deduction is allowed to the extent of the business portion. Charges for optional services such as call waiting, call forwarding, speed or three-way calling or extra directory listings are allowable, assuming that business purpose is established. If you are a senator, to the extent your telephone expense is paid by the state, no deduction would be available. The cost of unreimbursed long distance telephone calls that relate to state business is a deductible expense. The unreimbursed cost of an answering service is also a deductible expense when it is directly related to your position as a member of the Legislature. Further, the cost of a telephone answering machine is a deductible business expense under the same conditions. Since the state reimburses you for office expenses on a vouchered basis, all of these expenses would be deductible only to the extent that they were not reimbursed by the state. Also, they are considered miscellaneous itemized deductions subject to the adjusted gross income limitations previously discussed. Can I deduct the cost of my cell phone or PDA? The portion of the monthly cost that is specifically related to your position in the Legislature can be deducted as a miscellaneous itemized deduction, similar to the other miscellaneous deductions that have already been discussed in this section. For example, if the monthly cost of operating the cell phone is $60 and you used the phone 75% of the time for business, then your deduction will be $45 ($60 x 75%). You should have documentation to support the business percentage that is used. The business percentage might change from month to month, so keeping records will be important. To help you document your deduction, request the cell phone service provider include a detailed list of all the calls that were made using the phone each month. Also, you can deduct the cost of buying the cell phone. Only the business use portion can be deducted. For example, if the cell phone cost $250 and your records indicate that you need it 80% for Legislative purposes, then your deduction would be $200 ($250 x 80%). To obtain the deduction for the cost of the cell phone, use Form 4562, which is the form used to report depreciation. You can elect to use the provisions of Section 179 and thereby deduct the entire portion in the year of purchase, or you can elect to depreciate the business portion of the phone s cost over 5 years. The amount of depreciation expense is also considered a miscellaneous type deduction. What other expenses may I deduct on my personal tax return? There are many other expenses you may incur as a result of your position as a member of the Legislature. Some of these expenses may include the following, which are tax deductible as miscellaneous itemized deductions if not reimbursed by the state: 1. Stationery and postage relating to mail concerning your business as a member of the Legislature. 2. Any other supplies, such as pens, paper clips, pencils, etc., that are necessary to maintain your office and serve your constituency. 3. Dues to organizations you normally would not belong to before becoming a member of the Legislature (to which you now belong as a matter of policy and to which your participation is instrumental to your functions as a legislator) are deductible expenses. Examples would be dues to civic organizations in your 20 Income Tax Guide for State Legislators

21 community. Dues to organizations you normally are a member of may be partially deductible to the extent you can show a direct business use and purpose. No deduction is permitted for club dues. This rule applies to many types of club dues, including social, country, sports, luncheon, etc. Dues to civic clubs and chambers of commerce are deductible. Business related meals and entertainment expenses incurred at a club are deductible up to the 50 percent standard. 4. Newspapers and magazines the cost of obtaining additional publications because of your position as a state legislator, such as special weekly papers in your district and special publications relating to politics of state or related areas of government, are deductible expenses. 5. The cost of Christmas cards sent to district leaders and leaders in the community is a form of advertising expense that is directly related to your business as a member of the Legislature. If you buy special Christmas cards that are mailed to people related to you in politics, this constitutes a tax deductible expense (cost of the cards, envelopes, postage and even family photographs, if the photographs are included in the Christmas cards). 6. Cost of newsletters sent to constituents is a tax deductible expense unless paid from campaign funds. 7. The cost of furniture and fixtures purchased by the legislator and not reimbursed by the state may be deducted over time through a depreciation allowance. 8. Business gifts are deductible, up to $25 per recipient per year. Items clearly of an advertising nature that cost $4 or less are not included in the $25 business gift limitation. Remember that all the above expenses are subject to the adjusted gross income limitations. Explain more fully the limitations on deductions for unreimbursed employee business expenses. Unreimbursed employee business expenses are subject to two separate limitations. First, miscellaneous itemized deductions (e.g., tax preparation fees, safe deposit box rentals, unreimbursed employee business expenses) are deductible to the extent that these items, in the aggregate, exceed 2 percent of adjusted gross income, and you are able to itemize. Second, the overall deduction for all itemized deductions (except for the deductions for medical expense, investment interest, casualty losses and wagering losses to the extent of wagering gains) is further reduced by 3 percent of the excess of adjusted gross income in excess of $313,800 (married joint filers), $287,500 (heads of households), $261,500 (single filers), or $156,900 (married separate filers). These 2017 threshold amounts are adjusted annually for inflation. In no event will the reduction in these allowable itemized deductions exceed 80 percent. You should note that this limitation applies to the deductions for home mortgage interest, state income taxes and charitable contributions, as well as employee business expenses. In summary, due to these two limitations, the deductions for unreimbursed employee business expenses may be cut back significantly or be zero, depending upon the level of adjusted gross income. Society of Louisiana CPAs 21

22 Personal Financial Disclosure Do I have to file an annual Financial Disclosure Report with the Louisiana Board of Ethics? Yes. The annual personal financial disclosure provisions in the ethics code that apply to legislators generally require the disclosure of certain specified information concerning income, employment, property, business associations, investments, liabilities, and transactions. Also required is disclosure of specified information, including value, regarding certain purchases or sales of immovable property, stocks, and other securities (subject to specific exceptions). Generally, except for amounts of income received from public sources and gaming interests, amounts are disclosed by category of value. How often do I have to file the report and what is the deadline for filing the report? The financial disclosure report must be filed by May 15th each year the office is held and the year following the termination of the holding of the office. However, a legislator may file his or her financial disclosure statement within 30 days after filing his or her federal tax return for the year for which the report is filed, BUT ONLY IF he or she has timely filed for an extension for filing the federal income tax return AND he or she notifies the Board of Ethics prior to the annual May 15 deadline of his or her intention to do so. Where can I find more information on financial disclosure reporting? Financial disclosure forms and instructions and other information are made available by the Board of Ethics ( There are other disclosure requirements in the ethics code regarding certain transactions with the state, certain contracts with the state, and certain transactions with the legislative branch of state government which apply to legislators and immediate family members of legislators and related entities. It is important to contact the Board of Ethics regarding the applicability of these provisions to the individual facts and circumstances involved. 22 Income Tax Guide for State Legislators

23 Campaign Expenses And Contributions Are my campaign expenses deductible for tax purposes? In 1962 Congress passed legislation that prohibits all deductions for expenditures in any political campaign by a candidate for public office. A candidate s campaign expenditures out of his own resources are not deductible as ordinary business expenses for income tax purposes. This is true even though a public office is defined as a trade or business. Additionally, these expenses may not be amortized as capital expenditures over the term of office. Campaign expenses paid from a candidate s private resources are considered non-deductible personal expenses regardless of the result of the election. Such expenses would include the cost of attending a political convention; contributions to the party that sponsored the candidacy; expenses of campaigning, travel and campaign advertising; expenses of successfully defending a contested election; filing fees; and the cost of legal fees paid in litigation over redistricting. However, once elected, an individual defending his right to elected office may deduct the expenses incurred in defending against a recall campaign. Even though political office may be viewed as a stepping stone to some other business or profession, this is not enough to change the result. Thus, political campaign expenses are not deductible by a lawyer seeking election as a legislator in the hope that the exposure will build his professional practice. Even though a candidate feels that his professional reputation was damaged during a political campaign, he cannot deduct the cost of any defamation litigation for allegations published during the campaign. May I handle my campaign finances through my personal legislative office checking account? No. The Louisiana Election Campaign Finance Disclosure Act requires that all candidates designate one or more state or national banks or state or federally chartered savings and loan associations or savings banks or state or federally charted credit unions as a campaign depository. In 1997, the Legislature passed Act No. 863 which allows campaign funds to be deposited in a money market mutual fund and designated as a campaign depository. Separate accounts should be maintained. Are campaign receipts and expenditures subject to Internal Revenue Service review? Yes. However, the Internal Revenue Service has ruled that campaign contributions and political gifts used solely for the expenses of an election campaign or similar purpose are not taxable income to the candidate. Any contributions that are used for personal purposes must be included in the candidate s taxable income. You should keep in mind that personal use of campaign funds is illegal under Louisiana law. Is it permissible to commingle political funds with personal funds? No. If funds are commingled so as to make tracing impractical, the entire fund will be presumed devoted to personal use and deemed taxable income to the candidate, and the act of commingling would also be considered a violation of Louisiana law. How are proceeds derived from fund-raising dinners or testimonial dinners accounted for? The accounting and reporting for dinner proceeds are the same as for campaign contributions. Society of Louisiana CPAs 23

24 How should currency contributions be accounted for? Currency contributions in excess of $100 are illegal. Receipts for currency contributions of $100 or less shall contain the name, address, and social security number of the contributor and be signed by the contributor, and the candidate or campaign fund shall retain a copy and provide a copy to the contributor. Are contributions of property recorded in the same manner as cash? Yes. The fair market value on the date of the contribution should be acknowledged as the amount of the contribution. Can my political campaign committee receive contributions from foreign nationals? No. Act No passed by the Legislature in 1997 prohibits contributions by any foreign government entity, foreign business entity not qualified to do business in Louisiana, or an individual not a resident of the United States and not a citizen of the United States. Are contributions to my campaign eligible for a political contributions credit or deductible as itemized deductions on the individual contributor s tax return? No. There is no longer any provision for tax credit or deduction for campaign contributions. What type of expenditures may be paid from campaign contributions? The general rule concerning the expenditure of campaign funds is that the funds must be expended for a use related to a political campaign or the holding of a public office. Examples of expenditures properly payable from campaign contributions include: 1. Generally recognized campaign expenses. 2. Contributions to the national, state or local committee of the candidate s party. 3. Reimbursements to the political candidate for out-of-pocket campaign expenses paid by him. However, all campaign expenditures should be made directly to the recipient on a check drawn on the account of the campaign. An opinion issued by the Board of Ethics for Elected Officials acting as the Supervisory Committee on Campaign Finance Disclosure provided additional guidance by permitting the following expenditures (Ethics Board Opinion No ): 1. Donations to bona fide charitable or governmental organizations such as churches, schools and civic organizations, as long as these types of expenditures are reasonable and customary. 2. The purchase or lease of telephone equipment provided the primary purpose is to facilitate the campaign or the holding of public office. 3. Payment of membership dues directly related to holding public office. Examples include the State Legislators National Conference, Common Cause, Public Affairs Research Council, etc. 4. Expenses of operating a district office. However, funds should not be used to compensate persons who would be considered public employees for the performance of duties and responsibilities of their public office or position. 5. Expenses for attendance of a legislative session or interim committee meeting, including transportation, meals and lodging, to the extent these expenses are not otherwise reimbursed through the Legislature. 6. Flowers for funerals or serious illnesses of constituents or graduation gifts to young people in the legislator s district. Expenditures for transporting electors to polling places for purposes of voting are strictly prohibited and subject to civil fines. However, a candidate may pay a bona fide bus, taxi, or transportation service, which holds a license or permit. 24 Income Tax Guide for State Legislators

25 What is the tax status of unexpended balances of political funds refunded to contributors? Campaign funds may be refunded to all contributors on a pro-rata basis. For tax purposes, unexpended balances of political funds that are repaid to contributors are not considered to be either expended or diverted and, therefore, are not taxable income to the candidate or income to the original contributor. In what other ways may unexpended balances of political funds be disposed of without being taxable to the candidate? Unexpended balances of political funds may be contributed to or for the use of another political organization subject to the contribution limits; transferred to the general fund of the U.S. Treasury or of any state or local government; or transferred to or for the use of an exempt public charity without being considered to be expended, diverted or taxable to the candidate. Alternatively, funds may be held in reasonable anticipation of being used for future campaign purposes without being considered a disposition. What reporting is required of a political committee, organization, association or fund formed for the purpose of managing expenses of a candidate? Such entity is considered an association taxable as a corporation and Form 1120-POL must be filed annually. The return is due on or before the fifteenth day of the third month after the end of the taxable year. The return must be filed with the Internal Revenue Service Center, Ogden, UT A political organization, other than a newsletter fund is not required to file Form 1120-POL if its taxable income before the specific deduction of $100 is $100 or less. (Newsletter funds cannot even claim the specific deduction of $100.) Political organizations that are not required to report certain information to the federal government or Louisiana generally must (1) file Form 8871 and send the IRS an electronic message within 24 hours of its formation, (2) report the organization s contributions and expenditures to the IRS on Form 8872 (the frequency of these reports depends upon whether they are made during a federal election year), and (3) if the political organization has gross receipts of more than $25,000, it must annually file Form 990. Prior to the passage of P.L in October 2002, most state and local political organizations were also required to comply with these requirements. The 2002 law, however, removed these reporting requirements for most state and local political organizations retroactively, specifically including candidates for state and local office in the state and local group. If the campaign files Form 1120-POL, the campaign is also required to file a Louisiana corporate income tax return. If the campaign is incorporated, the campaign may have to pay a Louisiana franchise tax with the tax return. If you operate your campaign through or in the name of a committee, you are required to register that committee annually with the Campaign Finance Office of the Louisiana Board of Ethics. You must file a Statement of Organization, which requires a $100 filing fee, as well as a Designation of Principal/Subsidiary Campaign Committee. The forms may be downloaded at: Society of Louisiana CPAs 25

26 What items would be reported and subject to tax on the 1120-POL? All receipts and expenditures not related to tax-exempt campaign activities must be reported on the 1120-POL. Generally, these types of receipts and expenditures relate to investment income such as dividends and capital gains or losses. As discussed in answers to previous questions, however, campaign receipts are not subject to tax. The Internal Revenue Code provides the campaign fund a $100 specific deduction against investment income, and the balance is taxed at the maximum federal corporate rate of 35 percent for state legislators. Estimated tax rules and alternative minimum tax do not apply to political organizations. For Louisiana income tax reporting, the state provides for no specific deduction and all investment income is subject to tax at the regular Louisiana corporate tax rates. If the campaign fund is considered to be incorporated, the Louisiana corporate franchise tax is also payable. What accounting records are required for political funds? Detailed substantiating records should be kept by the political candidate or other custodian to enable the candidate to account accurately for the receipt and disbursement of political funds. Otherwise, receipts may be taxed on his individual return, whereas campaign expenses would be non-deductible. If political funds are commingled with the personal funds of the political candidate to render tracing or identification impractical, the political funds will be presumed to have been diverted to personal use at the time so commingled and as such would also be considered an illegal act under Louisiana law. Candidates should determine that their records are kept in a manner that will assure their compliance with the Louisiana Campaign Finance Disclosure Act, as previously enacted, and as amended by Act 994 of 1988 and Acts 294, 340 and 1208 of 2001 (La. R.S. 18:1505.2). Detailed contributions and expenditures by date are required to be submitted as part of the Candidate s Report. Expenditures made by a public relations firm, advertising agency or agent for the campaign must be reported to the campaign, and the ultimate recipients of such expenditures must be submitted in the Report. What is the tax rule regarding presumption against unrestricted gifts? The Internal Revenue Service will presume, in the absence of evidence to the contrary, that contributions to a political candidate are political funds that are not intended for the unrestricted personal use of such recipient. If, in fact, the funds were intended for the unrestricted personal use of the political candidate, he must be able to substantiate this claim. Are amounts paid by a contributor for advertising in a political publication tax deductible? No. The Internal Revenue Code specifically bars any deduction for expenses of advertising in political programs or in any publication if any part of the proceeds directly or indirectly inures to the benefit of or for the use of a political party or candidate. If the political program or publication is not issued by the legislator but the ad supports the legislator, the cost of the ad should be considered an in-kind contribution to the legislator, unless it qualifies as an independent expenditure. What are the maximum amounts that may be contributed to a legislator s campaign per election? A legislator is considered to be a District Office candidate and as such can receive $2,500 from an individual, a legal entity (or parent 50+ percent subsidiary group) or a PAC. A Big PAC can contribute up to $5,000. Candidates can receive $60,000 in the aggregate from PACs for both the primary and general elections combined. Contributions from Democratic or Republican parties or committees are not limited. When calculating whether the contribution limits have been reached, outstanding loans, loan endorsements, loan guarantees and contributions must be added together. Loans, and guarantors and endorsements thereof, are subject to the contribution limits. 26 Income Tax Guide for State Legislators

27 What expenditures are permissible in cash? No expenditure in excess of $100 shall be made from a petty cash fund, and no expenditures for personal services shall be made from petty cash funds except for gratuities paid for the serving of food or drink. What are the reporting requirements for any loan made or received by a candidate? The date and amount of each loan for campaign purposes made or received by the candidate to or from any person or political committee during the reporting period, together with the full name and address of the lender, of the recipient of the proceeds of the loan, and of any person who makes any type of security agreement binding himself or his property, directly or indirectly, for the repayment of all or any part of the loan must be reported. Generally, amounts reported originally as campaign contributions can not be later changed to loans. Besides foreign nationals, is there another group that cannot give political contributions to Louisiana candidates? Persons substantially interested in the riverboat and land-based casino gaming industry are prohibited from contributing to candidates and committees supporting or opposing candidates. No one who only holds a license under the Video Draw Poker Devices Control Law is prohibited from making a political contribution. Society of Louisiana CPAs 27

28 Contribution Limits and Campaign Reporting Deadlines Contribution Limits (R.S. 18: H, K) Contributions, in-kind contributions, loans, endorsements or guarantees on loans and transfers of funds are all counted towards the contribution limits. Cash contributions are limited to $100 and receipts must be given which include the name, address, social security number, and signature of the contributor. Exception: (1) A candidate s personal funds are not subject to the limits. A candidate may not charge interest on personal loans to his campaign above the judicial interest rate (uncompounded) as of the date of the loan. (2) Loans made in the ordinary course of business, on a basis which assures repayment, as the usual and customary interest rate from a state bank, a federally chartered depository institution, a depository institution with insured accounts, a licensed lender or an insurance company do not count towards the limits. However, a loan from such an institution shall be considered a loan by each endorser or guarantor in the proportion of their liability. The contribution limits are detailed in the following chart: To a major office candidate or candidate committee per election 2 To a district office candidate or candidate committee per election 1 To any other office candidate or candidate committee per election 1 To a PAC over any four year calendar period Individual may give 2 $ 5,000 $ 2,500 $ 1,000 $ 100,000 Family Member of $ 5, 000 $ 2,500 $ 1,000 $ 100,000 Candidate may give Legal Entity may give 2 PAC may give 4 Big PAC 5 may give 4 $ 5,000 $ 2,500 $ 1,000 $ 100,000 $ 5,000 $ 2,500 $ 1,000 $ 5,000/ $ 2,500/ $ 1,000 $ 10,000 $ 5,000 $ 2,000 $ 10,000/ $ 5,000/ $ 2,000 Democratic or Republican No limits No limits No limits No limits Party or Committees may give 1 The Primary and general elections are considered as two separate elections. 2 A husband and wife may each make contributions to the same candidate up to the limit. However, separate checks should be used. If a single check is signed by one spouse, the other must provide an affidavit as to their intent to share in the contribution. 3 Includes legal entities owned wholly or partially by candidates, except Internal Revenue Code Subchapter S corporations and Limited Liability Companies wholly owned by the candidate. Parent corporations and their subsidiaries are subject to a single limit. A corporation is a parent if it owns over 50% of another corporation. 4 Candidates are also subject to an aggregate limit on the contributions they may accept from all PACs combined for both the primary and general elections. Those limits are: $80,000 major office, $60,000 district office, and $20,000 any other office. 5 A PAC with over 250 members who contributed over $50 to the PAC during the preceding calendar year and has been certified as meeting that membership requirement. 28 Income Tax Guide for State Legislators

29 Definition of Types of Offices 1. Major Office a. offices elected statewide b. Public Service Commissioner, Supreme Court Justice, Court of Appeal Judges, BESE and district court judges elected parishwide in Orleans c. any office with an election district containing a population in excess of 250,000, including offices elected parishwide in Caddo, East Baton Rouge, Jefferson and Orleans 2. District Office a. office of a member of the Louisiana Legislature b. offices elected parishwide (except in Caddo, East Baton Rouge, Jefferson and Orleans) c. offices elected in more than one parish (unless the population exceeds 250,000) d. offices elected in a district with a population in excess of 35,000, but less than 250,000, including offices elected citywide in the cities of Alexandria, Baton Rouge, Bossier City, Kenner, Lafayette, Lake Charles, Marrero, Metairie, Monroe, and Shreveport e. District Court Judgeships (except parishwide in Orleans), Family Court, Juvenile, and City Court Judgeships (unless the district has a population exceeding 250,000) 3. Any Other Office means offices not considered major or district, i.e., offices elected in a district having a population of 35,000 or less and not elected parishwide. Campaign Reporting Deadlines (R.S. 18: or ) A. Annual Reports are filed for each candidate/committee no later than February 15 of each year and are completed through the preceding December 31. The reports are used when a candidate begins participating in an election set for a future calendar year. Exception: An annual report is not due (1) if another required report was filed any time after the preceding December 10 and prior to the February 15 due date, or (2) if the candidate/committee has received no contributions, made no expenditures, and received or made no loans during the reporting period. B. 180 days prior to the primary election (180-P) filed only by major office candidates and their committees C. 90 days prior to the primary election (90-P) filed only by major office candidates and their committees D. 30 days prior to the primary election (30-P) E. 10 days prior to the primary election (10-P) F. Election Day Expenditures (EDE-P) report due 10 days after the primary election. Name and address of all election day workers must be reported as well as expenditures for election day advertisements. G. 10 days prior to the general election (10-G) last report required for candidates with no outstanding debts or loans and not participating in general election and committees not participating in general election. H. Election Day Expenditures (EDE-G) report due 10 days after the general election. Name and address of all election day workers must be reported as well as expenditure for election day advertisement. I. 40 days after the general election (40-G) filed only by candidates and committees participating in the general election last report required if there are not outstanding debts or loans Note: A specific reporting schedule is available for each election and may be downloaded at Reports are filed when received or when postmarked if delivered by United States Mail or commercial delivery service. Society of Louisiana CPAs 29

30 J. Affidavits in Lieu of Reports: Candidates for major or district offices, and committees supporting such candidates, who do not spend over $5,000 and do not receive contributions from one source, including personal funds of the candidate, totaling in excess of $200 may file an affidavit in lieu of each report required above. A separate affidavit is required for each report and once a candidate exceeds either of the threshold amounts he may not return to filing affidavits for that election. Candidates for any other offices may never file an affidavit. K. Special Reports are required during the 20 day period immediately preceding an election if: 1. a contribution or loan in excess of $1,000 for major office candidates, $500 for district office candidates, or $250 for any other office candidates is received and accepted during the 20 day period, or 2. an expenditure in excess of $200 is made during the 20 day period to a candidate, committee or other person required to file disclosure reports who makes endorsements. Note: Special Reports must be filed within 48 hours after the transaction. L. Supplemental Reports are required to be filed annually by February 15, complete through the preceding December 31, if the last report of a candidate for an election shows outstanding debts or loans or surplus funds. Exception: A supplemental report need not be filed if the candidate is not elected and shows outstanding debts and loans or a surplus totaling less than $2,500. M. Withdrawn and Unopposed Candidates: The final report of a candidate who withdraws or is unopposed is the next report due as of the date that the candidate withdraws or becomes unopposed. N. Proposition Elections: Reports are required 30 days prior to the election, 10 days prior to the election and 40 days after the election. Special reports are required for any contribution or expenditure in excess of $200 during the 20 day period immediately preceding the election. O. Recall Elections: A statement of organization is required within 3 days of the filing of the recall petition. Reports are due 45 days, 135 days, and 200 days after the filing of the recall petition. If the recall effort is successful, the rules for proposition elections then apply. The application of the campaign finance rules are governed to a large degree by the type of office which the candidate is vying for. Electronic Filing Requirements Candidates for major and district offices who have contributions or expenditures in excess of $25,000 are required to file their campaign finance reports electronically. All other filers are welcome to do so, but it is not required. File your reports electronically with the Louisiana Ethics Administration Disclosure and Electronic Reporting System (L.E.A.D.E.R.S.). Free software may be downloaded from the following website: The software can be used to produce paper forms also if electronic filing is not required. Enter your data and file your reports electronically via the Internet, direct dial-up or on a diskette. You must obtain a password and ID number before electronically submitting your report. To obtain a password and ID number, contact the IT Department at You can test the software without obtaining a password. 30 Income Tax Guide for State Legislators

31 Recordkeeping For tax purposes, what kind of information do I need to substantiate my deductions for travel, entertainment and other business expenses that are in excess of reimbursement? Because estimates are not conclusive, you must substantiate by adequate records or sufficient evidence which corroborate your own statements, all expenditures for travel, entertainment, and gifts. If actual expense amounts are used in lieu of per diems for lodging, proper receipts must be maintained. Other business expenses must be supported by receipts, canceled checks and books of record. In every case, the business nature of the expense must be evidenced in some fashion. The elements for recording travel expenses are: 1. The amount of each separate expenditure for traveling away from home, such as the cost of transportation or lodging. The daily cost of breakfast, lunch, and dinner and other incidental travel elements may be aggregated if they are set forth in reasonable categories such as for meals, oil and gas, taxi fares, etc. 2. The costs of travel by automobile may be substantiated in certain cases by using the standard mileage allowance not in excess of 53.5 cents per mile for 2017 and 54.5 per mile for Record the dates of departure and return and the number of days spent on business. 4. Record the destination or locality of the travel. 5. Report the business purpose of the trip or the business benefit derived or expected to be derived as a result of travel. Entertainment expenses should be recorded as follows: 1. The amount and description (i.e., dinner or theater ) of each separate expenditure; however, incidental items such as taxi fares and telephone calls may be aggregated on a daily basis. 2. The date, time, and place the entertainment was provided. 3. The business purpose of the activity, including a description of any business benefit derived or expected, and the nature of the business discussion with the person entertained. 4. The business relationship to the person or persons entertained, which may be indicated by reference to name, title, occupation or other designation sufficient to establish the relationship. To deduct the cost of business gifts, you must substantiate: 1. The cost and a description of the gift. 2. The date the gift was made. 3. The business reason for or the benefit derived or expected to be derived as a result of the gift. 4. The relationship of the recipient to you, including his name, title or other designation sufficient to establish such relationship. (It is not necessary to record the recipient s name in certain situations if the business relationship of the gift is clear and if it is apparent that you are not attempting to avoid the $25-per-donee limitation.) Thus, if you purchase a large number of inexpensive tickets to local high school basketball games and distribute one or two of them to each of a large number of constituents, you need not record the names of the recipients. However, you must still substantiate the cost, date, description, and business purpose of the gift. You must record the aforementioned elements for each separate expenditure. Generally, a single payment for goods, services or facilities will be considered a separate expenditure. Thus, when you entertain a guest at dinner and the theater, the payment for the meal and the one for the tickets are deemed to constitute separate expenditures, each of which must be individually recorded. If you hold season or series tickets to an event, you must treat each ticket in the series as a separate item and record the use of each for entertainment or gift purposes. Society of Louisiana CPAs 31

32 However, concurrent or repetitious payments of a similar nature made during the course of a single event may be treated as a single expenditure. Thus, rounds of drinks paid for separately during an evening s entertainment at one place may be treated as a whole. In some instances certain kinds of expenses may be aggregated on a daily basis. Thus, the IRS regulations permit you to treat as one expenditure the total meal expenses (breakfast, lunch and dinner) incurred in one day. Tips may be aggregated with the expense of the services to which they relate. Other expenses that may be grouped include gasoline and oil, taxi, and telephone calls. Adequate records consist of: 1. Diaries and Account Books It is necessary that the elements of an expenditure be recorded at or near the time when the expense was incurred. Such records are believed to have a high degree of credibility not present with respect to a statement prepared subsequent thereto when generally there is a lack of accurate recall. Thus, although no special form of records must be maintained, it is clear that the Internal Revenue Service contemplates that the taxpayer will keep a diary or account book in which entries are made on a daily basis. The degree of specificity of entries in a diary or account book will vary with the facts and circumstances of each expenditure. When documentary evidence is required, it is not necessary to make a diary entry that duplicates information contained in the receipt if the receipt and diary complement each other in an orderly fashion. Again, when the business purpose of an expenditure is evident from surrounding facts and circumstances, a written statement of such business purpose is not required. Confidential or highly sensitive information need not be recorded in a diary or account book. However, you should be ready to submit a record of the expenditure to the district director during an audit if you are to obtain a deduction for the expenditure. 2. Documentary Evidence A diary or account book standing alone is not sufficient substantiation in all circumstances. You must be prepared to produce documentary evidence (i.e., receipts, paid bills, etc.) in order to deduct non per diem lodging expenses incurred while traveling away from home and other expenses of $75 or more. Documentary evidence supporting expenditure for transportation of $75 or more will not be required if such is not readily available. Such expenses can be easily authenticated by fare schedules and by mileage rates. Usually a receipt will suffice if it contains enough information to establish the amount, date, place, and character of an expense. Thus, a hotel receipt must include the name, location, date, and the separate charges for lodging, meals, telephone etc., if it is to serve as adequate substantiation of a business travel expense. Similarly, a restaurant receipt must indicate the name and location of the restaurant, the date and the charge for food, beverages, and other items. A canceled check will not ordinarily constitute adequate documentary evidence since it does not show in detail the specific items composing the total expenditure. Thus, if you make a long-distance telephone call to your home (a personal expense), a hotel receipt would usually indicate this fact while a canceled check would not. However, a canceled check, in connection with your bill, ordinarily will establish the cost but may not alone show business purpose. The detail required is important, for it is the basis upon which the business purpose is established and an allocation between personal and business expenses is made. Moreover, if expenses incurred with respect to certain persons (i.e., spouses) are not deductible, it is essential that evidence of the cost incurred with respect to them be available. Otherwise, they will be deemed to bear a proportionate share of the total charge. 32 Income Tax Guide for State Legislators

33 How long do I have to keep documentary evidence such as diaries, receipts, etc.? You must retain records and related documentary evidence in support of travel, entertainment, gifts, and other deductions during the period in which your tax return is subject to audit. Normally, this period is three years from the due date for filing the tax return in which you claimed a deduction. However, the period of limitations may be longer if you consent to an extension, your return is filed late or if there has been omission of more than 25 percent of gross income. Moreover, there is no statute of limitations in cases of fraud. The Supreme Court has held that an amended return will not commence the beginning of a three-year statutory period if a fraudulent return was filed originally. For campaign purposes, candidates are required to keep their records for two years after their last report is filed for an election. Must my certified public accountant (CPA) issue a compilation report when submitting campaign finance reports to the Campaign Finance? CPAs who are not officers of the campaign should follow the Statements on Standards for Accounting and Review Services (SSARS), which requires a compilation report. (Note that the SSARS 8 exception for Management Use Only reports is not applicable since the financial statement will be used by third parties.) CPAs who are officers of the campaign should either (1) follow SSARS (which requires issuance of a report) or (2) use a transmittal letter that clearly indicates the CPA s relationship to the campaign. The following is an example of the type of communication that may be used by the CPA: The accompanying Campaign Finance Report of Campaign X for the period ended December 31, 20XX has been prepared by [name of accountant], CPA. I have prepared such financial statements in my capacity [describe capacity, for example, as an officer] of Campaign X. The CPA should also consider current guidance for independence. A CPA is not precluded from issuing a compilation report if they lack independence, but they must disclose the lack of independence in the compilation report. Note that the reason for the lack of independence may not be disclosed. Your CPA should also consider AR section 300, which contains an alternative form for a compilation report. This alternate form precludes the CPA from having to disclose departures from GAAP that are inherent in the Campaign Finance Report. All GAAP departures must be disclosed if the CPA issues the standard compilation report. When are campaign reports of legislators due to Campaign Finance? Annual reports are generally due February 15th of each year. During election years, reports are also due 30 days prior to the primary election, as well as 10 days prior to the primary and 10 days prior to the general election (see page 29). A legislator participating in the general election must file a report 40 days after the general election. Reports should be mailed to: Campaign Finance Post Office Box 4368 Baton Rouge, LA Phone Fax ethics.state.la.us Effective January 1, 2012, state legislators are required to electronically file campaign finance disclosure reports. Electronic filing is voluntary for candidates that are not major or district level office candidates. Can the Ethics Board assess penalties for failure to file or late filing of required campaign reports? Yes. Act No. 352 of 1997 allows the Ethics Board to assess automatic penalties for campaign reports not filed on a timely basis. For example, candidates for district office will be charged $60 per day not to exceed $2,000 per report for failure to file or late filing. An additional penalty of up to $10,000 may be assessed if the report is more than 11 days late. Society of Louisiana CPAs 33

34 34 Income Tax Guide for State Legislators

35 Form 2106 Department of the Treasury Internal Revenue Service (99) Your name Employee Business Expenses OMB No Attachment Sequence No. 129 Attach to Form 1040 or Form 1040NR. Go to for instructions and the latest information. Occupation in which you incurred expenses Social security number Part I Employee Business Expenses and Reimbursements Step 1 Enter Your Expenses Column A Other Than Meals and Entertainment Column B Meals and Entertainment 1 Vehicle expense from line 22 or line 29. (Rural mail carriers: See instructions.) Parking fees, tolls, and transportation, including train, bus, etc., that didn't involve overnight travel or commuting to and from work Travel expense while away from home overnight, including lodging, airplane, car rental, etc. Don't include meals and entertainment Business expenses not included on lines 1 through 3. Don't include meals and entertainment Meals and entertainment expenses (see instructions) Total expenses. In Column A, add lines 1 through 4 and enter the result. In Column B, enter the amount from line Note: If you weren't reimbursed for any expenses in Step 1, skip line 7 and enter the amount from line 6 on line 8. Step 2 Enter Reimbursements Received From Your Employer for Expenses Listed in Step 1 7 Enter reimbursements received from your employer that weren't reported to you in box 1 of Form W-2. Include any reimbursements reported under code L in box 12 of your Form W-2 (see instructions) Step 3 Figure Expenses To Deduct on Schedule A (Form 1040 or Form 1040NR) 8 Subtract line 7 from line 6. If zero or less, enter -0-. However, if line 7 is greater than line 6 in Column A, report the excess as income on Form 1040, line 7 (or on Form 1040NR, line 8) Note: If both columns of line 8 are zero, you can't deduct employee business expenses. Stop here and attach Form 2106 to your return. 9 In Column A, enter the amount from line 8. In Column B, multiply line 8 by 50% (0.50). (Employees subject to Department of Transportation (DOT) hours of service limits: Multiply meal expenses incurred while away from home on business by 80% (0.80) instead of 50%. For details, see instructions.) Add the amounts on line 9 of both columns and enter the total here. Also, enter the total on Schedule A (Form 1040), line 21 (or on Schedule A (Form 1040NR), line 7). (Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and individuals with disabilities: See the instructions for special rules on where to enter the total.). 10 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No N Form 2106 (2017) Society of Louisiana CPAs 35

36 Form 2106 (2017) Page 2 Part II Vehicle Expenses Section A General Information (You must complete this section if you are claiming vehicle expenses.) (a) Vehicle 1 (b) Vehicle 2 11 Enter the date the vehicle was placed in service / / / / 12 Total miles the vehicle was driven during miles miles 13 Business miles included on line miles miles 14 Percent of business use. Divide line 13 by line % % 15 Average daily roundtrip commuting distance miles miles 16 Commuting miles included on line miles miles 17 Other miles. Add lines 13 and 16 and subtract the total from line miles miles 18 Was your vehicle available for personal use during off-duty hours? Yes No 19 Do you (or your spouse) have another vehicle available for personal use? Yes No 20 Do you have evidence to support your deduction? Yes No 21 If Yes, is the evidence written? Yes No Section B Standard Mileage Rate (See the instructions for Part II to find out whether to complete this section or Section C.) 22 Multiply line 13 by 53.5 (0.535). Enter the result here and on line Section C Actual Expenses (a) Vehicle 1 (b) Vehicle 2 23 Gasoline, oil, repairs, vehicle insurance, etc a Vehicle rentals a b Inclusion amount (see instructions). 24b c Subtract line 24b from line 24a. 24c 25 Value of employer-provided vehicle (applies only if 100% of annual lease value was included on Form W-2 see instructions) Add lines 23, 24c, and Multiply line 26 by the percentage on line Depreciation (see instructions) Add lines 27 and 28. Enter total here and on line Section D Depreciation of Vehicles (Use this section only if you owned the vehicle and are completing Section C for the vehicle.) (a) Vehicle 1 (b) Vehicle 2 30 Enter cost or other basis (see instructions) Enter section 179 deduction and special allowance (see instructions) Multiply line 30 by line 14 (see instructions if you claimed the section 179 deduction or special allowance) Enter depreciation method and percentage (see instructions) Multiply line 32 by the percentage on line 33 (see instructions) Add lines 31 and Enter the applicable limit explained in the line 36 instructions Multiply line 36 by the percentage on line Enter the smaller of line 35 or line 37. If you skipped lines 36 and 37, enter the amount from line 35. Also enter this amount on line 28 above Form 2106 (2017) 36 Income Tax Guide for State Legislators

37 2017 Instructions for Form 2106 Employee Business Expenses Department of the Treasury Internal Revenue Service Section references are to the Internal Revenue Code unless otherwise noted. Future Developments For the latest developments related to Form 2106 and its instructions, such as legislation enacted after they were published, go to IRS.gov/Form2106. What's New Standard mileage rate. The 2017 rate for business use of your vehicle is 53.5 cents (0.535) a mile. Depreciation limits on vehicles. For 2017, the first-year limit on depreciation, special depreciation allowance, and section 179 deduction for most vehicles remains at $11,160 ($3,160 if you elect not to claim the special depreciation allowance). For trucks and vans, the first-year limit is $11,560 ($3,560 if you elect not to claim the special depreciation allowance). For more details, see the discussion under Section D, later. Also, for vehicles purchased and placed in service after September 27, 2017, you may be able to take a special depreciation allowance of 100% and you may apply the deduction to used vehicles. General Instructions Purpose of Form Use Form 2106 if you were an employee deducting ordinary and necessary expenses for your job. See the flowchart below to find out if you must file this form. An ordinary expense is one that is common and accepted in your field of trade, business, or profession. A necessary expense is one that is helpful and appropriate for your business. An expense doesn't have to be required to be considered necessary. Form 2106-EZ. You can file Form 2106-EZ, Unreimbursed Employee Business Expenses, provided you were an employee deducting ordinary and necessary expenses for your job and you: Use the standard mileage rate (if claiming vehicle expense), and Weren't reimbursed by your employer for any expense (amounts your employer included in box 1 of your Form W-2, Wage and Tax Statement, aren't considered reimbursements for this purpose). Who Must File Form 2106 A Were you an employee during the year? Yes No Don t file Form See the instructions for Schedule C, C-EZ, E, or F. B Did you have job-related business expenses? No Don t file Form C F Yes Were you reimbursed for any of your business expenses (count only reimbursements your employer did not include in box 1 of your Form W-2)? Yes Did you use a vehicle in your job in 2017 that you also used for business in a prior year? No No E D Are you claiming job-related vehicle, travel, transportation, meals, or entertainment expenses? No Are you a reservist, a qualified performing artist, a fee-basis state or local government official, or an individual with a disability claiming impairment-related work expenses? See the line 10 instructions for definitions. Yes File Form 2106 (but see Notes below). Yes Yes H Are your deductible expenses more than your reimbursements (count only reimbursements your employer didn t include in box 1 of your Form W-2)? For rules covering employer reporting of reimbursed expenses, see the instructions for line 7. No No Don t file Form Enter expenses on Schedule A (Form 1040), line 21; or Schedule A (Form 1040NR), line 7. These expenses include business gifts, education (tuition and books), home office, trade publications, etc. Don t file Form G Is either (1) or (2) true? 1 You owned this vehicle and used the actual expense method in the first year you used the vehicle for business. 2 You used a depreciation method other than straight line for this vehicle in a prior year. Yes File Form No Yes File Form 2106 (but see Notes). Notes Generally, employee expenses are deductible only on line 21 of Schedule A (Form 1040) or line 7 of Schedule A (Form 1040NR). But reservists, qualified performing artists, fee-basis state or local government officials, and individuals with disabilities should see the instructions for line 10 to find out where to deduct employee expenses. Don t file Form 2106 if none of your expenses are deductible because of the 2% limit on miscellaneous itemized deductions. Society of Louisiana CPAs 37

38 Recordkeeping You can't deduct expenses for travel (including meals unless you used the standard meal allowance), entertainment, gifts, or use of a car or other listed property unless you keep records to prove the time, place, business purpose, business relationship (for entertainment and gifts), and amounts of these expenses. Generally, you must also have receipts for all lodging expenses (regardless of the amount) and any other expense of $75 or more. Additional Information For more details about employee business expenses, see the following. Pub. 463, Travel, Entertainment, Gift, and Car Expenses. Pub. 529, Miscellaneous Deductions. Pub. 587, Business Use of Your Home (Including Use by Daycare Providers). Pub. 946, How To Depreciate Property. Specific Instructions Part I Employee Business Expenses and Reimbursements Fill in all of Part I if you were reimbursed for employee business expenses. If you weren't reimbursed for your expenses, complete steps 1 and 3 only. Step 1 Enter Your Expenses Line 1. If you were a rural mail carrier, you can treat the amount of qualified reimbursement you received as the amount of your allowable expense. Because the qualified reimbursement is treated as paid under an accountable plan, your employer shouldn't include the amount of reimbursement in your income. You were a rural mail carrier if you were an employee of the United States Postal Service (USPS) who performed services involving the collection and delivery of mail on a rural route. Qualified reimbursements. These are the amounts paid by the USPS as an equipment maintenance allowance under a collective bargaining agreement between the USPS and the National Rural Letter Carriers' Association, but only if such amounts don't exceed the amount that would have been paid under the 1991 collective bargaining agreement (adjusted for changes in the Consumer Price Index since 1991). If you were a rural mail carrier and your vehicle expenses were: Less than or equal to your qualified reimbursements, don't file Form 2106 unless you have deductible expenses other than vehicle expenses. If you have deductible expenses other than vehicle expenses, skip line 1 and don't include any qualified reimbursements in column A on line 7. More than your qualified reimbursements, first complete Part II of Form Enter your total vehicle expenses from line 29 on line 1 and the amount of your qualified reimbursements in column A on line 7. If you are a rural mail carrier! and received a qualified CAUTION reimbursement, you can't use the standard mileage rate. Line 2. The expenses of commuting to and from work aren't deductible. See the line 15 instructions for the definition of commuting. Line 3. Enter lodging and transportation expenses connected with overnight travel away from your tax home (defined next). Don't include expenses for meals and entertainment. For more details, including limits, see Pub Tax home. Generally, your tax home is your regular or main place of business or post of duty regardless of where you maintain your family home. If you don't have a regular or main place of business because of the nature of your work, then your tax home may be the place where you regularly live. If you don't have a regular or a 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 are never away from home and can't claim a travel expense deduction. For more details on the definition of a tax home, see Pub Generally, you can't deduct any expenses for travel away from your tax home for any period of temporary employment of more than 1 year. However, this 1-year rule doesn't apply for a temporary period in which you were a federal employee certified by the Attorney General (or his or her designee) as traveling in temporary duty status for the U.S. government to investigate or prosecute a federal crime (or to provide support services for the investigation or prosecution of a federal crime). 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. 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 you use the standard meal allowance (defined later in the instructions for line 5). Line 4. Enter other job-related expenses not listed on any other line of this form. Include expenses for business gifts, education (tuition, fees, and books), home office, trade publications, etc. For details, including limits, see Pub. 463 and Pub If you are deducting home office expenses, see Pub. 587 for special instructions on how to report these expenses. If you are deducting depreciation or claiming a section 179 deduction, see Form 4562, Depreciation and Amortization, to figure the depreciation and section 179 deduction to enter on Form 2106, line 4. Don't include on line 4 any (a) educator expenses you deducted on Form 1040, line 23, or Form 1040NR, line 24; or (b) tuition and fees you deducted on Form 1040, line Income Tax Guide for State Legislators

39 At the time these instructions! went to print, the tuition and CAUTION fees deduction formerly claimed on line 34 had expired. To find out if legislation extended the deduction so you can claim it on your 2017 return, go to IRS.gov/Extenders. You may be able to take a TIP credit for your educational expenses instead of a deduction. See Form 8863, Education Credits, for details. Don't include expenses for meals and entertainment, taxes, or interest on line 4. Deductible taxes are entered on Schedule A (Form 1040), Itemized Deductions, lines 5 through 9; or Schedule A (Form 1040NR), line 1. Employees can't deduct car loan interest. Note. If line 4 is your only entry, don't complete Form 2106 unless you are claiming: Performing-arts-related business expenses as a qualified performing artist, Expenses for performing your job as a fee-basis state or local government official, or Impairment-related work expenses as an individual with a disability. See the line 10 instructions. If you aren't required to file Form 2106, enter your expenses directly on Schedule A (Form 1040), line 21 (or Schedule A (Form 1040NR), line 7). Line 5. Enter your allowable meals and entertainment expense. Include meals while away from your tax home overnight and other business meals and entertainment. Standard meal allowance. Instead of actual cost, you may be able to claim the standard meal allowance for your daily meals and incidental expenses (M&IE) while away from your tax home overnight. Under this method, instead of keeping records of your actual meal expenses, you deduct a specified amount, depending on where you travel. However, you must still keep records to prove the time, place, and business purpose of your travel. The standard meal allowance is the federal M&IE rate. For most small localities in the United States, this rate is $51 a day. Most major cities and many other localities in the United States qualify for higher rates. You can find the rates that applied during 2017 on the Internet at GSA.gov/ perdiem. At the Per Diem Overview page, select 2017 for the rates in effect for the period January 1, 2017 September 30, Select Fiscal Year 2018 for the period October 1, 2017 December 31, However, you can apply the rates in effect before October 1, 2017, for expenses of all travel within the United States for 2017 instead of the updated rates. For the period October 1, 2017 December 31, 2017, you must consistently use either the rates for the first 9 months of 2017 or the updated rates. For locations outside the continental United States, the applicable rates are published each month. You can find these rates on the Internet at State.gov/travel and select the option for Foreign Per Diem Rates. See Pub. 463 for details on how to figure your deduction using the standard meal allowance, including special rules for partial days of travel and transportation workers. Step 2 Enter Reimbursements Received From Your Employer for Expenses Listed in Step 1 Line 7. Enter reimbursements received from your employer (or third party) for expenses shown in Step 1 that weren't reported to you in box 1 of your Form W-2. This includes reimbursements reported under code L in box 12 of Form W-2. Amounts reported under code L are reimbursements you received for business expenses that weren't included as wages on Form W-2 because the expenses met specific IRS substantiation requirements. Generally, when your employer pays for your expenses, the payments shouldn't be included in box 1 of your Form W-2 if, within a reasonable period of time, you: Accounted to your employer for the expenses; and Were required to return, and did return, any payment not spent (or considered not spent) for business expenses. If these payments were incorrectly included in box 1, ask your employer for a corrected Form W-2. Accounting to your employer. This means that you gave your employer documentary evidence and an account book, diary, log, statement of expenses, trip sheets, or similar statement to verify the amount, time, place, and business purpose of each expense. You are also treated as having accounted for your expenses if either of the following applies. Your employer gave you a fixed travel allowance that is similar in form to the per diem allowance specified by the federal government and you verified the time, place, and business purpose of the travel for that day. Your employer reimbursed you for vehicle expenses at the standard mileage rate or according to a flat rate or stated schedule, and you verified the date of each trip, mileage, and business purpose of the vehicle use. See Pub. 463 for more details. Allocating your reimbursement. If your employer paid you a single amount that covers meals and entertainment as well as other business expenses, you must allocate the reimbursement so that you know how much to enter in Column A and Column B of line 7. Use the following worksheet to figure this allocation. Society of Louisiana CPAs 39

40 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 Enter the total amount of your expenses for the periods covered by this reimbursement Enter the part of the amount on line 2 that was your total expense for meals and entertainment Divide line 3 by line 2. Enter the result as a decimal (rounded to three places) Multiply line 1 by line 4. Enter the result here and in Column B, line Subtract line 5 from line 1. Enter the result here and in Column A, line Step 3 Figure Expenses To Deduct on Schedule A (Form 1040 or Form 1040NR) Line 9. Generally, you can deduct only 50% of your business meal and entertainment expenses, including meals incurred while away from home on business. However, if you were an employee subject to the DOT hours of service limits, that percentage is increased to 80% for business meals consumed during, or incident to, any period of duty for which those limits are in effect. Employees subject to the DOT hours of service limits include certain air transportation employees, such as pilots, crew, dispatchers, mechanics, and control tower operators; interstate truck operators and interstate bus drivers; certain railroad employees, such as engineers, conductors, train crews, dispatchers, and control operations personnel; and certain merchant mariners. Line 10. If you are one of the individuals discussed below, special rules apply to deducting your employee business expenses. Any part of the line 10 total that isn't deducted according to the special rules should be entered on Schedule A (Form 1040), line 21 (or Schedule A (Form 1040NR), line 7). Ministers. Before entering your total expenses on line 10, you must reduce them by the amount allocable to your tax-free allowance(s). See Pub. 517, Social Security and Other Information for Members of the Clergy and Religious Workers, for more information. Armed Forces reservist (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. If you qualify, complete Form 2106 and include the part of the line 10 amount attributable to the expenses for travel more than 100 miles away from home in connection with your performance of services as a member of the reserves on Form 1040, line 24, and attach Form 2106 to your return. The amount of expenses you can deduct on Form 1040, line 24, is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses), plus any parking fees, ferry fees, and tolls. These reserve-related travel expenses are deductible whether or not you itemize deductions. See Pub. 463 for additional details on how to report these expenses. Fee-basis state or local government official. You are a qualifying fee-basis official if you are employed by a state or political subdivision of a state and are compensated, in whole or in part, on a fee basis. If you qualify, include the part of the line 10 amount attributable to the expenses you incurred for services performed in that job in the total on Form 1040, line 24, and attach Form 2106 to your return. These employee business expenses are deductible whether or not you itemize deductions. Qualified performing artist. You are a qualified performing artist if you: 1. Performed services in the performing arts as an employee for at least two employers during the tax year, 2. Received from at least two of those employers wages of $200 or more per employer, 3. Had allowable business expenses attributable to the performing arts of more than 10% of gross income from the performing arts, and 4. Had adjusted gross income of $16,000 or less before deducting expenses as a performing artist. In addition, if you are married, you must file a joint return unless you lived apart from your spouse for all of 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 the combined adjusted gross income of both you and your spouse. If you meet all the requirements for a qualified performing artist, include the part of the line 10 amount attributable to performing-arts-related expenses in the total on Form 1040, line 24 (or Form 1040NR, line 35), and attach Form 2106 to your return. Your performing-arts-related business expenses are deductible whether or not you itemize deductions. Disabled employee with impairment-related work expenses. Impairment-related work expenses are the allowable expenses of an individual with physical or mental disabilities for attendant care at his or her place of employment. They also include other expenses in connection with the place of employment that enable the employee to work. See Pub. 463 for more details. If you qualify, enter the part of the line 10 amount attributable to impairment-related work expenses on Schedule A (Form 1040), line 28 (or Schedule A (Form 1040NR), line 14). These expenses aren't subject to the 2% limit that applies to most other employee business expenses. Part II Vehicle Expenses There are two methods for figuring vehicle expenses the standard mileage rate and the actual expense 40 Income Tax Guide for State Legislators

41 method. You can use the standard mileage rate for 2017 only if: You owned the vehicle and used the standard mileage rate for the first year you placed the vehicle in service, or You leased the vehicle and are using the standard mileage rate for the entire lease period (except the period, if any, before 1998). You can't use actual expenses for a leased vehicle if you previously used the standard mileage rate for that vehicle. If you have the option of using either the standard mileage rate or actual expense method, you should figure your expenses both ways to find the method most beneficial to you. But when completing Form 2106, fill in only the sections that apply to the method you choose. If you were a rural mail carrier and received an equipment maintenance allowance, see the line 1 instructions. For more information on the standard mileage rate and actual expenses, see Pub Section A General Information If you used two vehicles for business during the year, use a separate column in Sections A, C, and D for each vehicle. If you used more than two vehicles, complete and attach a second Form 2106, page 2. Line 11. Date placed in service is generally the date you first start using your vehicle. However, if you first start using your vehicle for personal use and later convert it to business use, the vehicle is treated as placed in service on the date you start using it for business. Line 12. Enter the total number of miles you drove each vehicle during Change from personal to business use. If you converted your vehicle during the year from personal to business use (or vice versa) and you don't have mileage records for the time before the change to business use, enter the total number of miles driven after the change to business use. Line 13. Don't include commuting miles on this line; commuting miles aren't considered business miles. See the line 15 instructions for the definition of commuting. Line 14. Divide line 13 by line 12 to figure your business use percentage. Change from personal to business use. If you entered on line 12 the total number of miles driven after the change to business use, multiply the percentage you figured by the number of months you drove the vehicle for business and divide the result by 12. Line 15. Enter your average daily round trip commuting distance. If you went to more than one work location, figure the average. Commuting. Generally, commuting is travel between your home and a work location. However, travel that meets any of the following conditions isn't commuting. You have at least one regular work location away from your home and the travel is to a temporary work location in the same trade or business, regardless of the distance. Generally, a temporary work location is one where your employment is expected to last 1 year or less. See Pub. 463 for more details. The travel is to a temporary work location outside the metropolitan area where you live and normally work. Your home is your principal place of business under section 280A(c)(1)(A) (for purposes of deducting expenses for business use of your home) and the travel is to another work location in the same trade or business, regardless of whether that location is regular or temporary and regardless of distance. Line 16. If you don't know the total actual miles you used your vehicle for commuting during the year, figure the amount to enter on line 16 by multiplying the number of days during the year that you used each vehicle for commuting by the average daily round trip commuting distance in miles. However, if you converted your vehicle during the year from personal to business use (or vice versa), enter your commuting miles only for the period you drove your vehicle for business. Section B Standard Mileage Rate You may be able to use the standard mileage rate instead of actual expenses to figure the deductible costs of operating a passenger vehicle, including a van, sport utility vehicle (SUV), pickup, or panel truck. If you want to use the standard mileage rate for a vehicle you own, you must do so in the first year you place your vehicle in service. In later years, you can deduct actual expenses instead, but you must use straight line depreciation. If you lease your vehicle, you can use the standard mileage rate, but only if you use the rate for the entire lease period (except for the period, if any, before January 1, 1998). If you use more than two vehicles, complete and attach a second Form 2106, page 2, providing the information requested in lines 11 through 22. Be sure to include the amount from line 22 of both pages in the total on Form 2106, line 1. You can also deduct state and local personal property taxes. Enter these taxes on Schedule A (Form 1040), line 7. (Personal property taxes aren't deductible on Form 1040NR.) If you are claiming the standard mileage rate for mileage driven in more than one business activity, you must figure the deduction for each business on a separate form or schedule (for example, Form 2106, Schedule C (Form 1040), Profit or Loss From Business; Schedule C-EZ (Form 1040), Net Profit From Business; Schedule E (Form 1040), Supplemental Income and Loss; or Schedule F (Form 1040), Profit or Loss From Farming). Section C Actual Expenses Line 23. Enter your total annual expenses for gasoline, oil, repairs, insurance, tires, license plates, and similar items. Don't include state and local personal property taxes or interest expense you paid. Deduct state and local personal property taxes on Schedule A (Form 1040), line 7. Employees can't deduct car loan interest. Line 24a. If during 2017 you rented or leased instead of using your own vehicle, enter the cost of renting. Also, include on this line any temporary rentals, such as when your car was being repaired, except for amounts included on line 3. Society of Louisiana CPAs 41

42 Line 24b. If you leased a vehicle for a term of 30 days or more, you may have to reduce your deduction for vehicle lease payments by an amount called the inclusion amount. You may have an inclusion amount for a passenger automobile if: Passenger Automobiles (Except Trucks and Vans) The lease term began in: And the vehicle's fair market value on the first day of the lease exceeded: 2013, 2014, 2015, 2016, or $19,000 If the lease term began before 2013, see Pub. 463 to find out if you have an inclusion amount. You may have an inclusion amount for a truck or van if: Trucks and Vans The lease term began in: And the vehicle's fair market value on the first day of the lease exceeded: $19, , , , ,000 If the lease term began before 2013, see Pub. 463 to find out if you have an inclusion amount. See Pub. 463 to figure the inclusion amount. Line 25. If during 2017 your employer provided a vehicle for your business use and included 100% of its annual lease value in box 1 of your Form W-2, enter this amount on line 25. If less than 100% of the annual lease value was included in box 1 of your Form W-2, skip line 25. Line 28. If you completed Section D, enter the amount from line 38. If you used Form 4562 to figure your depreciation deduction, enter the total of the following amounts. Depreciation allocable to your vehicle(s) (from Form 4562, line 28). Any section 179 deduction allocable to your vehicle(s) (from Form 4562, line 29). Section D Depreciation of Vehicles Depreciation is an amount you can deduct to recover the cost or other basis of your vehicle over a certain number of years. In some cases, you can elect to claim a special depreciation allowance or to expense, under section 179, part of the cost of your vehicle in the year of purchase. For details, see Pub Vehicle trade-in. If you traded in one vehicle (the old vehicle ) for another vehicle (the new vehicle ) in 2017, there are two ways you can treat the transaction. 1. You can elect to treat the transaction as a tax-free disposition of the old vehicle and the purchase of the new vehicle. If you make this election, you treat the old vehicle as disposed of at the time of the trade-in. The depreciable basis of the new vehicle is the adjusted basis of the old vehicle (figured as if 100% of the vehicle's use had been for business purposes) plus any additional amount you paid for the new vehicle. You then figure your depreciation deduction for the new vehicle beginning with the date you placed it in service. You make this election by completing Form 2106, Part II, Section D. 2. If you don't make the election described in (1), you must figure depreciation separately for the remaining basis of the old vehicle and for any additional amount you paid for the new vehicle. You must apply two depreciation limits. The limit that applies to the remaining basis of the old vehicle generally is the amount that would have been allowed had you not traded the old vehicle. The limit that applies to the additional amount you paid for the new vehicle generally is the limit that applies for the tax year it was placed in service, reduced by the depreciation allowance for the remaining basis of the old vehicle. You must use Form 4562 to figure your depreciation deduction. You can't use Form 2106, Part II, Section D. If you elect to use the method described in (1), you must do so on a timely filed tax return (including extensions). Otherwise, you must use the method described in (2). Line 30. Enter the vehicle's actual cost or other basis. Don't reduce your basis by any prior year's depreciation. However, you must reduce your basis by any deductible casualty loss, deduction for clean-fuel vehicle, gas guzzler tax, alternative motor vehicle credit, or qualified plug-in electric vehicle credit you claimed. Increase your basis by any sales tax paid (unless you deducted sales taxes in the year you purchased your vehicle) and any substantial improvements to your vehicle. If you traded in your vehicle, your basis is the adjusted basis of the old vehicle (reduced by depreciation figured as if 100% of the vehicle's use had been for business purposes) plus any additional amount you pay for the new vehicle. See Pub. 463 for more information. If you converted the vehicle from personal use to business use, your basis for depreciation is the smaller of the vehicle's adjusted basis or its fair market value on the date of conversion. Line 31. Enter the amount of any section 179 deduction and, if applicable, any special depreciation allowance claimed for this year. Section 179 deduction. If 2017 is the first year your vehicle was placed in service and the percentage on line 14 is more than 50%, you can elect to deduct as an expense a portion of the cost (subject to a yearly limit). To figure this section 179 deduction, multiply the part of the cost of the vehicle that you choose to expense by the percentage on line 14. The total of your depreciation and section 179 deduction generally can't be more than the percentage on line 14 multiplied by the applicable limit explained in the line 36 instructions. Your section 179 deduction for the year can't be more than the income from your job and any other active trade or business on your Form If you are claiming a section! 179 deduction on other CAUTION property, or you placed more than $2 million of section 179 property in service during the year, use Form 4562 to figure your section 179 deduction. Enter the amount of the section 179 deduction allocable to your vehicle from Form 4562, line 12, on Form 2106, line 31. Note. For section 179 purposes, the cost of the new vehicle doesn't include the adjusted basis of the vehicle you traded in. 42 Income Tax Guide for State Legislators

43 Example. Cost including taxes... $25,000 Adjusted basis of trade-in... 3,000 Section 179 basis... $22,000 Limit on depreciation and section 179 deduction... $11,160* Smaller of: Section 179 basis, or limit on depreciation... $11,160 Percentage on line Section 179 deduction... $8,370 *$3,160 if electing out of special depreciation allowance or not qualified property. Limit for sport utility and certain other vehicles. For sport utility and certain other vehicles placed in service in 2017, the portion of the vehicle's cost taken into account in figuring your section 179 deduction is limited to $25,000. This rule applies to any 4-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 in the line 36 instructions and is rated at no more than 14,000 pounds gross vehicle weight. However, the $25,000 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. Special depreciation allowance. The special depreciation allowance applies only for the first year a vehicle is placed in service. Further, while it applies to a new vehicle regardless of the date in 2017 when it was placed in service, it applies to a used vehicle only if the vehicle was purchased and placed in service after September 27, To qualify for the special depreciation allowance, the new vehicle must be qualified property (see Pub. 463, chapter 4, for more information). The special allowance is an additional first year depreciation deduction of 50%. This allowance is increased to 100% if the vehicle was purchased and placed in service after September 27, Your total section 179 deduction, special depreciation allowance, and regular depreciation deduction can't be more than $11,160 for cars and $11,560 for trucks and vans, multiplied by your business use percentage on line 14. See the line 36 instructions for depreciation limits. You can't recover the amount by which your depreciation deduction exceeds the depreciation limits for the year placed in service until after the end of the recovery period for your vehicle. Use the following worksheet to figure the amount of the special depreciation allowance. Worksheet for the Special Depreciation Allowance (keep for your records) 1. Enter the total amount from Form 2106, line Multiply line 1 by the percentage on Form 2106, line 14, and enter the result Enter any section 179 deduction Subtract line 3 from line Multiply the applicable limit explained in the line 36 instructions by the percentage on Form 2106, line 14, and enter the result Subtract line 3 from line Enter the smaller of line 4 or line 6. Add the result to any section 179 deduction (line 3 above) and enter the total on Form 2106, line Election out. You can elect not to claim the special depreciation allowance for your vehicle. If you make this election, it applies to all property in the same class placed in service during the year. To make the election, attach a statement to your timely filed return (including extensions) indicating that you are electing not to claim the special depreciation allowance and the class of property for which you are making the election. More information. See Pub. 463, chapter 4, for more information on the special depreciation allowance. Line 32. To figure the basis for depreciation, multiply line 30 by the percentage on line 14. From that result, subtract the total amount of any section 179 deduction and special depreciation allowance claimed this year (see line 31) or any section 179 deduction and special depreciation allowance claimed in any previous year for this vehicle. Line 33. If you used the standard mileage rate in the first year the vehicle was placed in service and now elect to use the actual expense method, you must use the straight line method of depreciation for the vehicle's estimated useful life. Otherwise, use the Depreciation Method and Percentage Chart, later, to find the depreciation method and percentage to enter on line 33. To use the chart, first find the date you placed the vehicle in service (line 11). Then, select the depreciation method and percentage from column (a), (b), or (c). For example, if you placed a car in service on July 1, 2017, and you use the method in column (a), enter 200 DB 20% on line 33. For vehicles placed in service before 2017, use the same method you used on last year's return unless a decline in your business use requires a change to the straight line method. For vehicles placed in service during 2017, select the depreciation method and percentage after reading the explanation for each column. Column (a) 200% declining balance method. You can use column (a) only if the business use percentage on line 14 is more than 50%. Of the three depreciation methods, the 200% declining balance method may give you the largest depreciation deduction for the first 3 years (after considering the Society of Louisiana CPAs 43

44 Depreciation Method and Percentage Chart Line 33 Date Placed in Service (a) 1 (b) 1 (c) Oct. 1 Dec. 31, DB 5.0 % 150 DB 3.75% SL 2.5% Jan. 1 Sept. 30, DB DB 15.0 SL 10.0 Oct. 1 Dec. 31, DB DB SL 20.0 Jan. 1 Sept. 30, DB DB 25.5 SL 20.0 Oct. 1 Dec. 31, DB DB SL 20.0 Jan. 1 Sept. 30, DB DB SL 20.0 Oct. 1 Dec. 31, DB DB 16.4 SL 20.0 Jan. 1 Sept. 30, DB DB SL 20.0 Oct. 1 Dec. 31, DB DB SL 20.0 Jan. 1 Sept. 30, DB DB SL 20.0 Oct. 1 Dec. 31, DB DB SL 17.5 Jan. 1 Sept. 30, DB DB 8.33 SL 10.0 Prior to 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 Pub. 463 for more information. depreciation limit for your vehicle). See the depreciation limit tables, later. Column (b) 150% declining balance method. You can use column (b) only if the business use percentage on line 14 is more than 50%. The 150% declining balance method may give you a smaller depreciation deduction than in column (a) for the first 3 years. However, you won't have a depreciation adjustment on this vehicle for the alternative minimum tax. This may result in a smaller tax liability if you must file Form 6251, Alternative Minimum Tax Individuals. Column (c) straight line method. You must use column (c) if the business use percentage on line 14 is 50% or less. The method for these vehicles is the straight line method over 5 years. The use of this column is optional for these vehicles if the business use percentage on line 14 is more than 50%. Note. If your vehicle was used more than 50% for business in the year it was placed in service and used 50% or less in a later year, part of the depreciation, section 179 deduction, and special depreciation allowance previously claimed may have to be added back to your income in the later year. Figure the amount to be included in income in Part IV of Form 4797, Sales of Business Property. More information. For more information on depreciating your vehicle, see Pub If you placed other business! property in service in the CAUTION same year you placed your vehicle in service or you used your vehicle mainly within an Indian reservation, you may not be able to use the chart. See Pub. 946 to figure your depreciation. Line 34. If you sold or exchanged your vehicle during the year, use the following instructions to figure the amount to enter on line 34. If your vehicle was placed in service: 1. Before 2012, enter the result of multiplying line 32 by the percentage on line 33; 2. After 2011, from January 1 through September 30, enter the amount figured by multiplying the result in (1) by 50%; or 3. After 2011, from October 1 through December 31, enter the amount figured by multiplying the result in (1) by the percentage shown below for the month you disposed of the vehicle. Month of Disposal Percentage Jan., Feb., March % April, May, June % July, Aug., Sept % Oct., Nov., Dec % Line 36. Using the applicable chart for your type of vehicle, find the date you placed your vehicle in service. Then, enter on line 36 the corresponding amount from the Limit column. Before using the charts, please read the following definitions. A passenger automobile is a 4-wheeled vehicle manufactured primarily for use on public roads that is rated at 6,000 pounds unloaded gross vehicle weight or less. Certain vehicles, such as ambulances, hearses, and taxicabs, aren't considered passenger automobiles and aren't subject to the line 36 limits. See Pub. 463 for more details. A truck or van is a passenger automobile that is classified by the manufacturer as a truck or van, and that is rated at 6,000 pounds gross vehicle weight or less. If your vehicle isn't subject to any of the line 36 limits, skip lines 36 and 37, and enter the amount from line 35 on line Income Tax Guide for State Legislators

45 Form 2106-EZ (2017) Page 4 If you qualify, complete Form 2106-EZ and include the part of the line 6 amount attributable to the expenses for travel more than 100 miles away from home in connection with your performance of services as a member of the reserves on Form 1040, line 24, and attach Form 2106-EZ to your return. The amount of expenses you can deduct on Form 1040, line 24, is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses), plus any parking fees, ferry fees, and tolls. These reserve-related travel expenses are deductible whether or not you itemize deductions. Enter the remaining expenses from line 6 on Schedule A (Form 1040), line 21. See Pub. 463 for more information. Fee-basis state or local government official. You are a qualifying fee-basis official if you are employed by a state or political subdivision of a state and are compensated, in whole or part, on a fee basis. If you qualify, include the part of the line 6 amount attributable to expenses you incurred for services performed in that job in the total on Form 1040, line 24, and attach Form 2106-EZ to your return. These employee business expenses are deductible whether or not you itemize deductions. Enter the remaining expenses from line 6 on Schedule A (Form 1040), line 21. Qualified performing artist. You are a qualified performing artist if you: 1. Performed services in the performing arts as an employee for at least two employers during the tax year, 2. Received at least $200 each from any two of these employers, 3. Had allowable business expenses attributable to the performing arts of more than 10% of gross income from the performing arts, and 4. Had adjusted gross income of $16,000 or less before deducting expenses as a performing artist. In addition, if you are married, you must file a joint return unless you lived apart from your spouse for all of 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 the combined adjusted gross income of both you and your spouse. If you meet all of the above requirements, include the part of the line 6 amount attributable to performing-artsrelated expenses in the total on Form 1040, line 24 (or on Form 1040NR, line 35), and attach Form 2106-EZ to your return. Your performing-arts-related business expenses are deductible whether or not you itemize deductions. Enter the remaining expenses from line 6 on Schedule A (Form 1040), line 21 (or on Schedule A (Form 1040NR), line 7). Disabled employee with impairmentrelated work expenses. Impairmentrelated work expenses are the allowable expenses of an individual with physical or mental disabilities for attendant care at his or her place of employment. They also include other expenses in connection with the place of employment that enable the employee to work. See Pub. 463 for details. If you qualify, enter the part of the line 6 amount attributable to impairment-related work expenses on Schedule A (Form 1040), line 28 (or on Schedule A (Form 1040NR), line 14). These expenses aren t subject to the 2% limit that applies to most other employee business expenses. Enter the remaining expenses from line 6 on Schedule A (Form 1040), line 21 (or on Schedule A (Form 1040NR), line 7). Part II Information on Your Vehicle If you claim vehicle expense, you must provide certain information on the use of your vehicle by completing Part II. Include an attachment listing the information requested in Part II for any additional vehicles you used for business during the year. Line 7. The date placed in service is generally the date you first start using your vehicle. However, if you first start using your vehicle for personal use and later convert it to business use, the vehicle is treated as placed in service on the date you started using it for business. Line 8a. Don t include commuting miles on this line; commuting miles aren t considered business miles. See the definition of commuting under Line 8b next. Line 8b. If you don t know the total actual miles you used your vehicle for commuting during the year, figure the amount to enter on line 8b by multiplying the number of days during the year that you used your vehicle for commuting by the average daily roundtrip commuting distance in miles. However, if you converted your vehicle during the year from personal to business use (or vice versa), enter your commuting miles only for the period you drove your vehicle for business. Generally, commuting is travel between your home and a work location. However, travel that meets any of the following conditions isn t commuting. You have at least one regular work location away from your home and the travel is to a temporary work location in the same trade or business, regardless of the distance. Generally, a temporary work location is one where your employment is expected to last 1 year or less. See Pub. 463 for details. The travel is to a temporary work location outside the metropolitan area where you live and normally work. Your home is your principal place of business under section 280A(c)(1)(A) (for purposes of deducting expenses for business use of your home) and the travel is to another work location in the same trade or business, regardless of whether that location is regular or temporary and regardless of distance. Society of Louisiana CPAs 45

46 Form 2106-EZ Unreimbursed Employee Business Expenses OMB No Attach to Form 1040 or Form 1040NR Department of the Treasury Attachment Internal Revenue Service (99) Go to for the latest information. Sequence No. 129A Your name Occupation in which you incurred expenses Social security number You Can Use This Form Only if All of the Following Apply. You are an employee deducting ordinary and necessary expenses attributable to your job. An ordinary expense is one that is common and accepted in your field of trade, business, or profession. A necessary expense is one that is helpful and appropriate for your business. An expense doesn t have to be required to be considered necessary. You don t get reimbursed by your employer for any expenses (amounts your employer included in box 1 of your Form W-2 aren t considered reimbursements for this purpose). If you are claiming vehicle expense, you are using the standard mileage rate for Caution: You can use the standard mileage rate for 2017 only if: (a) you owned the vehicle and used the standard mileage rate for the first year you placed the vehicle in service, or (b) you leased the vehicle and used the standard mileage rate for the portion of the lease period after Part I Figure Your Expenses 1 Complete Part II. Multiply line 8a by 53.5 (0.535). Enter the result here Parking fees, tolls, and transportation, including train, bus, etc., that didn t involve overnight travel or commuting to and from work Travel expense while away from home overnight, including lodging, airplane, car rental, etc. Don t include meals and entertainment Business expenses not included on lines 1 through 3. Don t include meals and entertainment. 4 5 Meals and entertainment expenses: $ 50% (0.50). (Employees subject to Department of Transportation (DOT) hours of service limits: Multiply meal expenses incurred while away from home on business by 80% (0.80) instead of 50%. For details, see instructions.) 5 6 Total expenses. Add lines 1 through 5. Enter here and on Schedule A (Form 1040), line 21 (or on Schedule A (Form 1040NR), line 7). (Armed Forces reservists, fee-basis state or local government officials, qualified performing artists, and individuals with disabilities: See the instructions for special rules on where to enter this amount.) Part II Information on Your Vehicle. Complete this part only if you are claiming vehicle expense on line 1. 7 When did you place your vehicle in service for business use? (month, day, year) / / 8 Of the total number of miles you drove your vehicle during 2017, enter the number of miles you used your vehicle for: a Business b Commuting (see instructions) c Other 9 Was your vehicle available for personal use during off-duty hours? Yes No 10 Do you (or your spouse) have another vehicle available for personal use? Yes No 11a Do you have evidence to support your deduction? Yes No b If Yes, is the evidence written? Yes No For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No Q Form 2106-EZ (2017) 46 Income Tax Guide for State Legislators

47 Form 2106-EZ (2017) Page 3 Instructions for Form 2106-EZ Section references are to the Internal Revenue Code. Future Developments For the latest information about developments related to Form 2106-EZ and its instructions, such as legislation enacted after they were published, go to What s New Standard mileage rate. The 2017 rate for business use of your vehicle is 53.5 cents (0.535) a mile. Purpose of Form You can use Form 2106-EZ instead of Form 2106 to claim your unreimbursed employee business expenses if you meet all the requirements listed above Part I of the form. Recordkeeping You can t deduct expenses for travel (including meals, unless you used the standard meal allowance), entertainment, gifts, or use of a car or other listed property, unless you keep records to prove the time, place, business purpose, business relationship (for entertainment and gifts), and amounts of these expenses. Generally, you must also have receipts for all lodging expenses (regardless of the amount) and any other expense of $75 or more. Additional Information For more details about employee business expenses, see the following. Pub. 463, Travel, Entertainment, Gift, and Car Expenses. Pub. 529, Miscellaneous Deductions. Pub. 587, Business Use of Your Home. Pub. 946, How To Depreciate Property. Specific Instructions Part I Figure Your Expenses Line 2. See the line 8b instructions for the definition of commuting. Line 3. Enter lodging and transportation expenses connected with overnight travel away from your tax home (defined on this page). You generally can t deduct expenses for travel away from your tax home for any period of temporary employment of more than 1 year. Don t include expenses for meals and entertainment on this line. For more details, including limits, see Pub If you didn t pay or incur meal expenses on a day you were traveling away from your tax home, you can use an optional method for deducting incidental expenses instead of keeping records of your actual incidental expenses. The amount of the deduction is $5 a day. The term incidental expenses Society of Louisiana CPAs means fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. It doesn 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. You can t use this method on any day that you use the standard meal allowance (as explained in the instructions for line 5). Tax home. Generally, your tax home is your regular or main place of business or post of duty regardless of where you maintain your family home. If you don t have a regular or main place of business because of the nature of your work, then your tax home may be the place where you regularly live. If you don t fit in either of these categories, you are considered an itinerant and your tax home is wherever you work. As an itinerant, you are never away from home and can t claim a travel expense deduction. For more information about determining your tax home, see Pub Line 4. Enter other job-related expenses not listed on any other line of this form. Include expenses for business gifts, education (tuition, fees, and books), home office, trade publications, etc. For details, including limits, see Pub. 463 and Pub If you are deducting home office expenses, see Pub. 587 for special instructions on how to report these expenses. If you are deducting depreciation or claiming a section 179 deduction, see Form 4562, Depreciation and Amortization, to figure the depreciation and section 179 deduction to enter on line 4. Don t include on line 4 any educator expenses you deducted on Form 1040, line 23, or Form 1040NR.! CAUTION At the time these instructions went to print, the tuition and fees deduction formerly claimed on line 34 had expired. To find out if legislation extended the deduction so you can claim it on your 2017 return, go to You may be able to take a credit for your educational TIP expenses instead of a deduction. See Form 8863, Education Credits, for details. Don t include expenses for meals and entertainment, taxes, or interest on line 4. Deductible taxes are entered on Schedule A (Form 1040), lines 5 through 9; or Schedule A (Form 1040NR), line 1. Employees can t deduct car loan interest. Note: If line 4 is your only entry, don t complete Form 2106-EZ unless you are claiming: Expenses for performing your job as a fee-basis state or local government official, Performing-arts-related business expenses as a qualified performing artist, or Impairment-related work expenses as an individual with a disability. See the line 6 instructions below for definitions. If you aren t required to file Form 2106-EZ, enter your expenses directly on Schedule A (Form 1040), line 21 (or on Schedule A (Form 1040NR), line 7). Line 5. Generally, you can deduct only 50% of your business meal and entertainment expenses, including meals incurred while away from home on business. If you were an employee subject to the DOT hours of service limits, that percentage is 80% for business meals consumed during, or incident to, any period of duty for which those limits are in effect. Employees subject to the DOT hours of service limits include certain air transportation employees, such as pilots, crew, dispatchers, mechanics, and control tower operators; interstate truck operators and interstate bus drivers; certain railroad employees, such as engineers, conductors, train crews, dispatchers, and control operations personnel; and certain merchant mariners. Instead of actual cost, you may be able to claim the standard meal allowance for your daily meals and incidental expenses (M&IE) while away from your tax home overnight. Under this method, instead of keeping records of your actual meal expenses, you deduct a specified amount, depending on where you travel. However, you must still keep records to prove the time, place, and business purpose of your travel. The standard meal allowance is the federal M&IE rate. For most small localities in the United States, this rate is $51 a day. Most major cities and many other localities in the United States qualify for higher rates. You can find these rates at perdiem. For locations outside the continental United States, the applicable rates are published each month. You can find these rates at and select Travel Per Diem Allowances for Foreign Areas, under Foreign Per Diem Rates. See Pub. 463 for details on how to figure your deduction using the standard meal allowance, including special rules for partial days of travel and for transportation workers. Line 6. If you are one of the individuals discussed below, special rules apply to deducting your employee business expenses. Ministers. Before entering your total expenses on line 6, you must reduce them by the amount allocable to your tax-free allowance(s). See Pub. 517 for more information. Armed Forces reservist (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. 47

48 Form 2106-EZ (2017) Page 4 If you qualify, complete Form 2106-EZ and include the part of the line 6 amount attributable to the expenses for travel more than 100 miles away from home in connection with your performance of services as a member of the reserves on Form 1040, line 24, and attach Form 2106-EZ to your return. The amount of expenses you can deduct on Form 1040, line 24, is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses), plus any parking fees, ferry fees, and tolls. These reserve-related travel expenses are deductible whether or not you itemize deductions. Enter the remaining expenses from line 6 on Schedule A (Form 1040), line 21. See Pub. 463 for more information. Fee-basis state or local government official. You are a qualifying fee-basis official if you are employed by a state or political subdivision of a state and are compensated, in whole or part, on a fee basis. If you qualify, include the part of the line 6 amount attributable to expenses you incurred for services performed in that job in the total on Form 1040, line 24, and attach Form 2106-EZ to your return. These employee business expenses are deductible whether or not you itemize deductions. Enter the remaining expenses from line 6 on Schedule A (Form 1040), line 21. Qualified performing artist. You are a qualified performing artist if you: 1. Performed services in the performing arts as an employee for at least two employers during the tax year, 2. Received at least $200 each from any two of these employers, 3. Had allowable business expenses attributable to the performing arts of more than 10% of gross income from the performing arts, and 4. Had adjusted gross income of $16,000 or less before deducting expenses as a performing artist. In addition, if you are married, you must file a joint return unless you lived apart from your spouse for all of 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 the combined adjusted gross income of both you and your spouse. If you meet all of the above requirements, include the part of the line 6 amount attributable to performing-artsrelated expenses in the total on Form 1040, line 24 (or on Form 1040NR, line 35), and attach Form 2106-EZ to your return. Your performing-arts-related business expenses are deductible whether or not you itemize deductions. Enter the remaining expenses from line 6 on Schedule A (Form 1040), line 21 (or on Schedule A (Form 1040NR), line 7). Disabled employee with impairmentrelated work expenses. Impairmentrelated work expenses are the allowable expenses of an individual with physical or mental disabilities for attendant care at his or her place of employment. They also include other expenses in connection with the place of employment that enable the employee to work. See Pub. 463 for details. If you qualify, enter the part of the line 6 amount attributable to impairment-related work expenses on Schedule A (Form 1040), line 28 (or on Schedule A (Form 1040NR), line 14). These expenses aren t subject to the 2% limit that applies to most other employee business expenses. Enter the remaining expenses from line 6 on Schedule A (Form 1040), line 21 (or on Schedule A (Form 1040NR), line 7). Part II Information on Your Vehicle If you claim vehicle expense, you must provide certain information on the use of your vehicle by completing Part II. Include an attachment listing the information requested in Part II for any additional vehicles you used for business during the year. Line 7. The date placed in service is generally the date you first start using your vehicle. However, if you first start using your vehicle for personal use and later convert it to business use, the vehicle is treated as placed in service on the date you started using it for business. Line 8a. Don t include commuting miles on this line; commuting miles aren t considered business miles. See the definition of commuting under Line 8b next. Line 8b. If you don t know the total actual miles you used your vehicle for commuting during the year, figure the amount to enter on line 8b by multiplying the number of days during the year that you used your vehicle for commuting by the average daily roundtrip commuting distance in miles. However, if you converted your vehicle during the year from personal to business use (or vice versa), enter your commuting miles only for the period you drove your vehicle for business. Generally, commuting is travel between your home and a work location. However, travel that meets any of the following conditions isn t commuting. You have at least one regular work location away from your home and the travel is to a temporary work location in the same trade or business, regardless of the distance. Generally, a temporary work location is one where your employment is expected to last 1 year or less. See Pub. 463 for details. The travel is to a temporary work location outside the metropolitan area where you live and normally work. Your home is your principal place of business under section 280A(c)(1)(A) (for purposes of deducting expenses for business use of your home) and the travel is to another work location in the same trade or business, regardless of whether that location is regular or temporary and regardless of distance. 48 Income Tax Guide for State Legislators

49 SCHEDULE A (Form 1040) Department of the Treasury Internal Revenue Service (99) Name(s) shown on Form 1040 Medical and Dental Expenses Taxes You Paid Interest You Paid Note: Your mortgage interest deduction may be limited (see instructions). Gifts to Charity If you made a gift and got a benefit for it, see instructions. Casualty and Theft Losses Job Expenses and Certain Miscellaneous Deductions Other Miscellaneous Deductions Total Itemized Deductions Itemized Deductions Go to for instructions and the latest information. Attach to Form Caution: If you are claiming a net qualified disaster loss on Form 4684, see the instructions for line 28. Caution: Do not include expenses reimbursed or paid by others. 1 Medical and dental expenses (see instructions) Enter amount from Form 1040, line Multiply line 2 by 7.5% (0.075) Subtract line 3 from line 1. If line 3 is more than line 1, enter State and local (check only one box): a Income taxes, or b General sales taxes } Real estate taxes (see instructions) Personal property taxes Other taxes. List type and amount 8 9 Add lines 5 through Home mortgage interest and points reported to you on Form Home mortgage interest not reported to you on Form If paid to the person from whom you bought the home, see instructions and show that person s name, identifying no., and address Points not reported to you on Form See instructions for special rules Reserved for future use Investment interest. Attach Form 4952 if required. See instructions Add lines 10 through Gifts by cash or check. If you made any gift of $250 or more, see instructions Other than by cash or check. If any gift of $250 or more, see instructions. You must attach Form 8283 if over $ Carryover from prior year Add lines 16 through Casualty or theft loss(es) other than net qualified disaster losses. Attach Form 4684 and enter the amount from line 18 of that form. See instructions Unreimbursed employee expenses job travel, union dues, job education, etc. Attach Form 2106 or 2106-EZ if required. See instructions Tax preparation fees Other expenses investment, safe deposit box, etc. List type and amount Add lines 21 through Enter amount from Form 1040, line Multiply line 25 by 2% (0.02) Subtract line 26 from line 24. If line 26 is more than line 24, enter Other from list in instructions. List type and amount 29 Is Form 1040, line 38, over $156,900? No. Your deduction is not limited. Add the amounts in the far right column for lines 4 through 28. Also, enter this amount on Form 1040, line 40. Yes. Your deduction may be limited. See the Itemized Deductions Worksheet in the instructions to figure the amount to enter. }.. OMB No Attachment Sequence No. 07 Your social security number 30 If you elect to itemize deductions even though they are less than your standard deduction, check here For Paperwork Reduction Act Notice, see the Instructions for Form Cat. No C Schedule A (Form 1040) Society of Louisiana CPAs 49

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52 AMERICA COUNTS ON CPAS BDM = BUSINESS DECISION-MAKER 88% of BDMs respect CPAs as valuable assets to their organizations. 84% of BDMs are MORE CONFIDENT in a job done by a CPA than an accountant who is not a CPA. 70 Nearly 70% of BDMs rely on CPAs for their EXCEPTIONAL competence. More than two-thirds of BDMs equate CPAs with INTEGRITY. BDMs VALUE CPAs 15% BDMs rank CPAs as their most TRUSTED MORE THAN MBAs WITHIN THEIR ORGANIZATION. adviser, the highest of all finance professionals. More than HALF of BDMs regard CPAs as objective financial EXPERTS. Source: Applied Research & Consulting LLC, 2015 Copyright 2016 American Institute of CPAs. All rights reserved