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Frequently Asked Tax Questions

Small Business/Self-Employed/Other Business - Income & Expenses


Rev. date: 1/2010


How do you distinguish between a business and a hobby?

previous topic occurrence Activity Not for Profit next topic occurrence
previous topic occurrence Business Expenses next topic occurrence
previous topic occurrence Hobby Expenses next topic occurrence
previous topic occurrence Home Used for Business next topic occurrence
previous topic occurrence New Trade or Business next topic occurrence

In making the distinction between a hobby or business activity, all facts and circumstances with respect to the activity are taken into account. No one factor alone is decisive. The most common factors which should normally be considered to establish that the activity is a business engaged in to make a profit are the following:
Additional information on this topic is available in section 1.183-2 (b) of the federal tax regulations.

Rev. date: 1/2010


If I pay personal expenses out of my business bank account, should I count the money used as part of my income, or can I write these expenses off?

previous topic occurrence Business Expenses next topic occurrence
previous topic occurrence Personal Versus Business Expenses next topic occurrence
previous topic occurrence Recordkeeping next topic occurrence
previous topic occurrence Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) next topic occurrence


Rev. date: 1/2010


For business travel, are there limits on the amounts deductible for meals?

previous topic occurrence Business Expenses next topic occurrence
previous topic occurrence Employee Business Expenses next topic occurrence
previous topic occurrence Meals and Entertainment next topic occurrence
previous topic occurrence Out-of-town Transportation next topic occurrence
previous topic occurrence Standard Meal Allowance next topic occurrence
previous topic occurrence Travel, Entertainment, Gift, and Car Expenses next topic occurrence

  1.  Actual cost. If you use this method, you must keep records of your actual cost.
  2. The standard meal allowance which is the federal M&IE rate. These rates are listed in Publication 1542.                                                                                                          

Rev. date: 1/2010


Where can I find the per diem rates for foreign countries?

Per Diem
Per Diem Rates
Per Diem Rates (For Travel Within the Continental United States)

Per diem rates are on the Internet. You will find links to per diem rate at usa.gov. Search "Per Diem Rates" for links to:

Rev. date: 1/2010


I use my home for business. Can I deduct the expenses?

previous topic occurrence Business Expenses next topic occurrence
Business Use of Your Home (Including Use by Day-Care Providers)
Expenses for Business Use of Your Home
previous topic occurrence Home Used for Business next topic occurrence

To deduct expenses related to the business use of part of your home, you must meet specific requirements. Even then, your deduction may be limited.
Your use of the business part of your home must be:
The business part of your home must be one of the following:
NOTE: You do not have to meet the exclusive use test if you satisfy the rules that apply in either of the following circumstances:
Form 1040, Schedule C (PDF) filers calculate the business use of home expenses and limits on Form 8829 (PDF). The deduction is then claimed on line 30 of Schedule C.
If you are an employee and you use a part of your home for business, you may qualify for a deduction. You must meet the tests discussed above plus:
Employees claim deduction for business use of home as an itemized deduction on Form 1040 Schedule A (PDF). There is a worksheet in Publication 587 to calculate the amount of the deduction.
NOTE:  Whether the business use of your home is for your employer’s convenience depends on all the facts and circumstances. Business use is not considered to be for your employer’s convenience merely because it is appropriate and helpful.

Rev. date: 1/2010


If you lease a vehicle, can you deduct the cost of the lease payments plus the standard mileage rate?

previous topic occurrence Business Expenses next topic occurrence
previous topic occurrence Employee Business Expenses next topic occurrence
previous topic occurrence Net Profit from Business (Sole Proprietorship) next topic occurrence
previous topic occurrence Profit or Loss from Business (Sole Proprietorship) next topic occurrence
previous topic occurrence Standard Mileage Rate next topic occurrence
previous topic occurrence Standard Mileage Rate Not Allowed next topic occurrence
previous topic occurrence Travel, Entertainment, Gift, and Car Expenses next topic occurrence

If you lease a car you use in business, you may use either:

Rev. date: 3/2010


Are excise taxes for a vehicle deductible?

previous topic occurrence Business Expenses next topic occurrence
previous topic occurrence Deduction, Itemized next topic occurrence
Property Taxes
previous topic occurrence Travel, Entertainment, Gift, and Car Expenses next topic occurrence


Rev. date: 1/2010


If you lease purchase a piece of equipment, like a forklift or boom truck, do you deduct the lease or do you depreciate it?

previous topic occurrence Business Expenses next topic occurrence
previous topic occurrence Depreciation Deduction next topic occurrence
previous topic occurrence How to Depreciate Property next topic occurrence
previous topic occurrence Publication 551 next topic occurrence
previous topic occurrence Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) next topic occurrence

You must first determine whether your agreement is a lease and deducted as rent or a conditional sales contract and will be considered as a purchase of the property.
If, under the agreement, you acquired or will acquire title to or equity in the property, you should treat the agreement as a conditional sales contract: 
Whether the agreement is a conditional sales contract depends on the intent of the parties. Determine intent based on the facts and circumstances that exist when you make the agreement.
In general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true:

Rev. date: 1/2010


Are business gifts deductible?

previous topic occurrence Business Expenses next topic occurrence
previous topic occurrence Gift next topic occurrence
previous topic occurrence Travel, Entertainment, Gift, and Car Expenses next topic occurrence

If you give business gifts in the course of your trade or business you can deduct all or part of the costs subject to the following limitation:
  1. If you and your spouse both give gifts to the same person, both of you are treated as one taxpayer.
  2. Incidental costs such as engraving, packing or shipping do not have to be included in the $25 limit.
  3. Gifts costing $4.00 or less that have your business name permanently engraved on the item, and which you distribute on a regular basis is excluded from $25 per person limit.