Can I deduct work related education expenses? 

December 23, 2020 by Robin Scott-Hutchens, EA
Instructor teaching students

Some folks may find themselves in a job or running a business while taking classes to improve themselves. Those people may ask themselves if they can deduct the costs of these classes on their tax return. Depending on the nature of the education, there may be an avenue to account for these expenses on their tax return.

The IRS lays out two qualifications to consider for work-related education expenses:

 

  1. The education must help you improve or maintain skills you currently use in your job, or
  2. The education is required by law or your employer in order to keep your current position, salary or license.

Also, the type of work you do matters when determining if you can deduct these costs.
 
  1. You are self-employed, or
  2. You are working as a qualified performing artist, a fee-based government official on a local or state level, or a person with a disability who has impairment-related work expenses.
 

Deduction Qualifications for Employees


First, let us start by looking at employees – those who work for and receive a paycheck from a company or someone else. Perhaps you are a licensed CPA (Certified Public Accountant) working for a large accounting firm. Just to maintain your license, you are required by law to rack up a certain number of continuing education hours each year, which can get costly. Unfortunately, there is no means for you to deduct the expense of these classes on your tax return as an employee expense. Since the passage of the Tax Cut and Jobs Act, the ability of most employees to deduct work-related education costs has been eliminated (for tax years 2018 through 2025). You may want to check with your employer to see if they offer reimbursement of education costs to offset the out-of-pocket expense to yourself. And if all else fails, you may investigate whether your education expenses qualify for an education credit, such as the Lifetime Learning Credit.

Employees who are fee-based government officials and qualified performing artists are eligible to deduct certain unreimbursed business expenses that may include educational expenses related to work. Additionally, employees with disabilities may be able to deduct work-related expenses (such as education expenses). There are very particular requirements that must be met to even qualify in one of these categories, however.

If you do qualify in one of these instances, fee-based government officials and performing artists would report qualified work-related education expenses on a Form 2106, which would go on the return as an adjustment to income on a Form 1040, Schedule 1. For those folks with disabilities who have impairment-related expenses necessary to get qualifying work-related education, their expenses would be deducted on Schedule A with other itemized deductions and listed on Form 2106 which will be included in the return.
 

Deduction Qualifications for Self-employed


Now, let us move on to the self-employed – those who work for themselves or contract out as a freelance worker. As mentioned in the qualifications above, if the education is to maintain or improve a skill needed for the work you are currently doing, you can deduct the cost. These costs include tuition and fees, books, certain supplies, and the cost of research as well as other related costs. Also, if the education is required by law, such as a CPA needing continuing education hours to maintain their license, these are also deductible if you are self-employed. For example, let us say you are a self-employed accountant, and you take a class on depreciating assets. You could report the cost of the class and related materials as an expense on your Schedule C. However, keeping the scenario of being a self-employed accountant, perhaps learning about depreciation of assets just does not sound like the most entertaining way to spend a Saturday. So instead, you opt for a class on decorating cupcakes. The cost of the class would not be deductible as a business expense because it is not directly related to your business activity. Education that prepares you for a new role or provides a skill not used in your day-to-day work does not qualify to be expensed. In this instance, you may want to again investigate whether your educational costs qualify for an education credit instead.

Self-employed individuals will report the qualified education costs on a Schedule C or Schedule F, depending if the work is connected to running a sole proprietorship or farming activity, respectively. (Schedule C is the form used to report business income and expenses by self-employed individuals who are not in a partnership or incorporated.)

So, when taking courses related to your job, it is important to remember two things:
  1. Does the education help you improve or maintain skills you currently use in your job?
  2. Is the education required by law or your employer in order to keep your current position, salary or license?

If you answer yes to either of these questions, the next thing to consider would be the nature of your work.
 
  1. Are you self-employed, or
  2. Are you working as a qualified performing artist, a fee-based government official on a local or state level, or a disabled person with impairment-related work expenses?

If you can also answer yes to one of those scenarios, you may qualify to report work related education expenses on your tax return.

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Robin Scott-Hutchens, EA
Corporate Trainer

 

Robin Scott-Hutchens is an Enrolled Agent who has worked in the tax industry for over a decade.   She has a Bachelor of Science degree in Accounting.  Her love of taxes has led her to prepare taxes with large corporations as well as private practice.  She joined TaxAudit in 2016 as an Audit Representative where she enjoyed working with taxpayers to help them navigate the stressful landscape of being audited.  She then moved to the Learning and Development Team at TaxAudit, where she now serves as a Corporate Trainer.  When she is not preparing tax returns or teaching tax concepts, she enjoys reading and writing about taxes, being outdoors, and petting any dog that will allow her to do so.


 

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