This document summarizes key tax concepts related to business income and expenses. It discusses deductions that are taken "above the line" or "below the line" and classification of business deductions. It also provides details on deducting various business expenses such as travel, transportation, home offices, entertainment, education, gifts and dues. Examples are provided to illustrate concepts such as calculating deductions for business use of personal vehicles and home offices. Special rules for hobbies, moving expenses and manufacturer's deductions are also covered.

1. CHAPTER 4 Business Income & Expenses Part II Income Tax Fundamentals 2011 Gerald E. Whittenburg Martha Altus-Buller 2011 Cengage Learning

4. Classification of Business Deductions 2011 Cengage Learning Deduct For AGI Yes No Schedules C, E or F Deduct From AGI Are expenses from self-employment? Next Slide

5. Classification of Business Deductions 2011 Cengage Learning Are expenses reimbursed by employer? No If necessary for performance of job, itemize deductions on Schedule A (subject to 2% AGI) Yes Does firm have accountable plan? Did employee substantiate & return excess funds? - Reimbursement included in gross wages - Deduction on Schedule A - miscellaneous itemized (2% AGI) No Yes From prior No tax effect No Yes

40. The End 2011 Cengage Learning