Claiming Business-Related Education Expenses
December 2018
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Claiming Business-Related Education Expenses
What does and does not qualify as an expense that you can claim on your taxes

Being a lifelong learner is an admirable quality, but some knowledge comes with a hefty price tag. If you’ve been tasked by your employer to take classes or broaden your education for your current job, you don’t need to immediately stress over the cost. Some classes and education-related expenses designed to propel you forward in your line of work can be claimed on your tax return.

What qualifies?

Unfortunately, not every class or excursion you take or every book you read in pursuit of knowledge will be deductible. For example, building upon your personal passion for pottery by taking a class will not be covered if you work as a bank teller — even if you feel it somehow makes you better able to perform your job. If your class, expedition or supplies directly help with your profession, or if your education-related expenses are mandated by the law or your employer to effectively hold onto your job, the Internal Revenue Service states that they can be deducted. In addition to tuition, the IRS states that you can deduct the cost of supplies, books, lab fees, research and some travel costs from your taxes, too.

If education-related endeavors require you to stop working temporarily, the IRS says that the expenses incurred during your absence can be deducted under two conditions: They must meet the proper criteria for a work-related education expense, and you must go back to the same line of work once your studies are complete. The IRS typically considers temporary leave to be any absence of one year or less.

If you’re self-employed, you obviously don’t have an employer mandating your course of study, but that doesn’t mean you have to forego educational pursuits. According to The Balance’s Jean Murray, self-employed business owners can also benefit from deducting business-related education expenses if the expenses qualify.

What doesn’t qualify?

Education-related expenses that earn you a new trade or business position are not deductible, according to the IRS. Determining what constitutes a new trade or business is where matters can get more complicated. The official tax regulations offer some guidance, but it’s not exactly crystal clear.

Tony Notti of WithumSmith+Brown’s National Tax Service Group writes for Forbes that in most cases, someone seeking advancement in a field they are already professionally a part of would be able to claim their educational expenses on their taxes. If you’re changing your status from a non-lawyer to a lawyer, an intern pharmacist to a registered pharmacist or a practical nurse to a physician’s assistant, you’ve effectively entered a new business or trade even if it is in an adjacent field. This means the education and its related expenses are not deductible. Since the regulations are confusing and the circumstances of education not being covered can be extensive, do some research before you commit to pursuing further education if you may be reliant on a tax deduction.

Continuing education can help you advance in your career or maintain your current position, and being able to deduct the qualifying business-related expenses will lessen your financial investment. To ensure that you are qualified for these deductions, speak with a financial advisor and learn what options are available to you.

Published by Heritage Bank of Nevada
Copyright © 2018 Heritage Bank of Nevada All rights reserved.
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Disclaimer - All content contained in this newsletter is for informational purposes only and should not be relied upon to make any financial, accounting, tax, legal or other related decisions. Each person must consider his or her objectives, risk tolerances and level of comfort when making financial decisions and should consult a competent professional advisor prior to making any such decisions. Any opinions expressed through the content in this newsletter are the opinions of the particular author only.
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