Tax Deduction of Education As a Business Expense
To encourage professional development, the IRS allows education and training expenses related to your career to be deducted from your taxable income. You must be working to be eligible for this deduction, and your expenses must be reasonable, work-related, and common in your industry.
Eligibility Requirements
To be eligible for deduction from your taxable income, education and training expenses must be required either by your employer or by law to keep your job, your particular position, or your salary (a good example is the continuing legal education requirements for lawyers to maintain membership in their state bar association), or practically necessary to maintain or improve your professional skills. Two exceptions exist, however. Expenses for re-training for another position are not eligible for deduction. And expenses necessary to meet the minimum requirements of your position are excluded (a law student working part-time at a law firm while studying for the bar exam, for example).
Deductible Expenses
Even if your education or training program qualifies for the IRS tax deduction, not all of your expenses can be deducted. Tuition, fees, books and supplies are all deductible, as are certain necessary travel expenses (commuting, for example). If you use your a car to commute, you may deduct actual expenses for fuel or you may use the standard IRS mileage deduction. If you have to miss work or take annual leave in order to take classes or perform research, you cannot deduct the value of this time as education and training expenses. Likewise, if your employer offers reimbursement of some or all of your expenses and you fail to claim it, you may not deduct these expenses from your taxable income.
Reporting Requirements
Reporting requirements differ depending on whether you are an employee or are self-employed. If you are an employee, you must complete Schedule A of Form 1040, and in most cases Form 2106. Your deduction will be limited to 2 percent of your adjusted gross income from Form 1040. If you are self-employed, you must complete Schedule C or Schedule F (depending on the nature of your position). Both employees and self-employed persons must report their claimed deductions on Form 1040.
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