Instructions For Form 2106 - Employee Business Expenses

went to more than one work location,

If you use more than two vehicles,

Line 25. If during 2006 your

figure the average.

complete and attach a second Form

employer provided a vehicle for your

2106, page 2, providing the

business use and included 100% of

Commuting. Generally,

information requested in lines 11

its annual lease value in box 1 of your

commuting is travel between your

through 22. Be sure to include the

Form W-2, enter this amount on line

home and a work location. However,

amount from line 22 of both pages in

25. If less than 100% of the annual

travel that meets any of the following

the total on Form 2106, line 1.

lease value was included in box 1 of

conditions is not commuting.

your Form W-2, skip line 25.

•

You can also deduct state and

You have at least one regular work

Line 28. If you completed Section D,

local personal property taxes. Enter

location away from your home and

enter the amount from line 38. If you

these taxes on Schedule A (Form

the travel is to a temporary work

used Form 4562 to figure your

1040), line 7. (Personal property

location in the same trade or

depreciation deduction, enter the total

taxes are not deductible on Form

business, regardless of the distance.

of the following amounts.

1040NR.)

Generally, a temporary work location

•

Depreciation allocable to your

is one where your employment is

If you are claiming the standard

vehicle(s) (from Form 4562, line 28).

expected to last 1 year or less. See

•

mileage rate for mileage driven in

Any section 179 deduction

Pub. 463 for more details.

more than one business activity, you

•

allocable to your vehicle(s) (from

The travel is to a temporary work

must figure the deduction for each

Form 4562, line 29).

location outside the metropolitan area

business on a separate form or

where you live and normally work.

schedule (for example, Form 2106 or

Section D—Depreciation of

•

Your home is your principal place

Schedule C, C-EZ, E, or F).

Vehicles

of business under section

280A(c)(1)(A) (for purposes of

Section C—Actual Expenses

Depreciation is an amount you can

deducting expenses for business use

deduct to recover the cost or other

Line 23. Enter your total annual

of your home) and the travel is to

basis of your vehicle over a certain

expenses for gasoline, oil, repairs,

another work location in the same

number of years. In some cases, you

insurance, tires, license plates, and

trade or business, regardless of

can elect to expense, under section

similar items. Do not include state

whether that location is regular or

179, part of the cost of your vehicle in

and local personal property taxes or

temporary and regardless of distance.

the year of purchase. For details, see

interest expense you paid. Deduct

Pub. 463.

Line 16. If you do not know the total

state and local personal property

actual miles you used your vehicle for

taxes on Schedule A (Form 1040),

At the time these instructions

commuting during the year, figure the

line 7. Employees cannot deduct car

went to print, Congress was

amount to enter on line 16 by

loan interest.

considering legislation that

CAUTION

multiplying the number of days during

would extend many expiring

Line 24a. If during 2006 you rented

the year that you used each vehicle

provisions. The sales tax deduction

or leased instead of using your own

for commuting by the average daily

(affecting basis) and faster recovery

vehicle, enter the cost of renting.

round trip commuting distance in

periods for certain Indian reservation

Also, include on this line any

miles. However, if you converted your

property are among them. To find out

temporary rentals, such as when your

vehicle during the year from personal

if this legislation was enacted, and for

car was being repaired, except for

to business use (or vice versa), enter

more details, go to , click

amounts included on line 3.

your commuting miles only for the

on More Forms and Publications, and

period you drove your vehicle for

Line 24b. If you leased a vehicle for

then on What’s Hot in forms and

business.

a term of 30 days or more after June

publications, or see Pub. 553,

18, 1984, you may have to reduce

Highlights of 2006 Tax Changes.

Section B—Standard

your deduction for vehicle lease

Vehicle trade-in. If you traded

payments by an amount called the

Mileage Rate

one vehicle (the “old vehicle”) in on

inclusion amount. You may have an

You may be able to use the standard

another vehicle (the “new vehicle”) in

inclusion amount if:

mileage rate instead of actual

2006, there are two ways you can

expenses to figure the deductible

And the vehicle’s

treat the transaction.

fair market value on

costs of operating a passenger

1. You can elect to treat the

The lease term

the first day of the

automobile, including a van, sport

transaction as a tax-free disposition

began in:

lease exceeded:

utility vehicle (SUV), pickup, or panel

of the old vehicle and the purchase of

truck.

the new vehicle. If you make this

2005 or 2006 . . . . . . . . . . . . . . $ 15,200

election, you treat the old vehicle as

If you want to use the standard

disposed of at the time of the trade-in.

2004 . . . . . . . . . . . . . . . . . . . .

17,500

mileage rate for a vehicle you own,

The depreciable basis of the new

you must do so in the first year you

2003 . . . . . . . . . . . . . . . . . . . .

18,000

vehicle is the adjusted basis of the

place your vehicle in service. In later

old vehicle (figured as if 100% of the

1999 through 2002 . . . . . . . . . .

15,500

years, you can deduct actual

vehicle’s use had been for business

expenses instead, but you cannot use

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

15,800

purposes) plus any additional amount

a depreciation method other than

you paid for the new vehicle. You

straight line.

If the lease term began before 1997, see

then figure your depreciation

Pub. 463 to find out if you have an

If you lease your vehicle, you can

deduction for the new vehicle

inclusion amount.

use the standard mileage rate, but

beginning with the date you placed it

only if you use the rate for the entire

in service. You make this election by

lease period (except for the period, if

See Pub. 463 to figure the

completing Form 2106, Part II,

any, before January 1, 1998).

inclusion amount.

Section D.

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Instructions For Form 2106 - Employee Business Expenses - 2006 Page 5

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