Deductions & credits

YAU · ‎June 8, 2020

Thank you CatinaT1. I do understand what you are referencing; however, I am still confused on this topic after reading the IRS Article?

The document you sent says: Limit on overall itemized deductions suspended.
You may be able to deduct more of your total itemized deductions if your itemized deductions were limited in the past due to the amount of your adjusted gross income. The old rule that limited the total itemized deductions for certain higher-income individuals has been suspended.
THIS MEANS THAT…if you do itemize… your itemized deductions are no longer limited if your adjusted gross
income is over a certain amount.

And although I did read further and saw the section: Miscellaneous itemized deductions suspended.
The previous deduction for job-related expenses or other miscellaneous itemized deductions that exceeded
2 percent of your adjusted gross income is suspended. This includes unreimbursed employee expenses such
as uniforms, union dues and the deduction for business-related meals, entertainment and travel, as well as
any deductions you may have previously been able to claim for tax preparation fees and investment expenses, including investment management fees, safe deposit box fees and investment expenses from pass-through entities. The business standard mileage rate cannot be used to claim an itemized deduction for unreimbursed employee travel expenses during the suspension.

It appears that the miscellaneous itemized deductions are different than his overall itemized deductions used in previous years because he works in the transportation industry.

The document I have been referring to at the IRS websites says:

Publication 463 (2019), Travel, Gift, and Car Expenses

For use in preparing 2019 Returns:

Special rate for transportation workers.

You can use a special standard meal allowance if you work in the transportation industry. You are in the transportation industry if your work:

Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck; and
Regularly requires you to travel away from home and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates.

If this applies, you can claim a standard meal allowance of $66 a day ($71 for travel outside the continental United States) for travel in 2019.

50% Limit

In general, you can deduct only 50% of your business-related meal expenses, unless an exception applies. (If you are subject to the Department of Transportation's "hours of service" limits, you can deduct 80% of your business-related meal expenses. See Individuals subject to "hours of service" limits , later.)

The 50% limit applies to employees or their employers, and to self-employed persons (including independent contractors) or their clients, depending on whether the expenses are reimbursed.

Exception to the 50% Limit for Meals

Your meal expense isn’t subject to the 50% limit if the expense meets one of the following exceptions.

1—Expenses treated as compensation.

In general, expenses for goods, services, and facilities, to the extent the expenses are treated by the taxpayer, with respect to entertainment, amusement, or recreation, as compensation to an employee and as wages to the employee for tax purposes.

2—Employee's reimbursed expenses.

If you are an employee, you aren’t subject to the 50% limit on expenses for which your employer reimburses you under an accountable plan. Accountable plans are discussed in chapter 6.

3—Self-employed reimbursed expenses.

If you are self-employed, your deductible meal expenses aren’t subject to the 50% limit if all of the following requirements are met.

You have these expenses as an independent contractor.
Your customer or client reimburses you or gives you an allowance for these expenses in connection with services you perform.
You provide adequate records of these expenses to your customer or client. (See chapter 5.)

In this case, your client or customer is subject to the 50% limit on the expenses.

Example.

You are a self-employed attorney who adequately accounts for meal expenses to a client who reimburses you for these expenses. You aren’t subject to the limitation on meal expenses. If the client can deduct the expenses, the client is subject to the 50% limit.

If you (as an independent contractor) have expenses for meals related to providing services for a client but don’t adequately account for and seek reimbursement from the client for those expenses, you are subject to the 50% limit on non-entertainment-related meals and the entertainment-related meal expenses are nondeductible to you.

4—Recreational expenses for employees.

You aren't subject to the 50% limit for expenses for recreational, social, or similar activities (including facilities) such as a holiday party or a summer picnic.

5—Advertising expenses.

You aren’t subject to the 50% limit if you provide meals to the general public as a means of advertising or promoting goodwill in the community. For example, neither the expense of sponsoring a television or radio show nor the expense of distributing free food and beverages to the general public is subject to the 50% limit.

6—Sale of meals.

You aren’t subject to the 50% limit if you actually sell meals to the public. For example, if you run a restaurant, your expense for the food you furnish to your customers isn’t subject to the 50% limit.

Individuals subject to "hours of service" limits.

You can deduct a higher percentage of your meal expenses while traveling away from your tax home if the meals take place during or incident to any period subject to the Department of Transportation's "hours of service" limits. The percentage is 80%.

Individuals subject to the Department of Transportation's "hours of service" limits include the following persons.

Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations.
Interstate truck operators and bus drivers who are under Department of Transportation regulations.
Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations.
Certain merchant mariners who are under Coast Guard regulations.

I hope these citations help clarify why I am so confused about the 50% versus 80% deductions?

Thank you for your help!