Tax Deductions for Work-Related Educational Expenses
It is well-known that education costs money and tuition is expensive. These days, more and more people are going back to school to improve their technical or professional skills, qualify for promotion or advancement, earn higher paychecks, or purely to enhance their quality of life. Claiming a deduction on your tax return for your work-related educational expenses may help offset the high cost of education.
There are a few rules regarding the tax deduction of work-related educational expenses. They are as follows:
• You must itemize deductions on your tax return (Form 1040, Schedule A) ― you cannot take the standard deduction. Taxpayers generally itemize deductions when they do not qualify for the standard deduction, or when their total number of qualified deductible expenses is more than the standard deduction. (The standard deduction is $5,700 for single filers and $11,400 for joint filers, for the year 2009.)
• When work-related educational costs are itemized, they are considered “miscellaneous” expenses and are subject to a 2% minimum ― only the amount of miscellaneous expenses that exceed 2% of your gross income can be deducted.
For expenses to be tax deductible, they must meet all of the following conditions (as stated by the IRS):
1. Your expenses must be for education that maintains or improves your job performance.
2. Your expenses must serve the purpose of your employer, and must be required by your employer (or by law) in order to keep your status, salary, or job.
3. Your expenses must be for education that is closely related to your current job skills. They cannot be used for an education program that will qualify you for a new trade or business.
Expenses that do qualify for a tax deduction include the following:
• Tuition, supplies, books, lab fees, and other similar items
• Certain travel and transportation
• The cost of research and typing (when part of an educational program)
Expenses that do not qualify for a tax deduction include the following:
• Expenses for the education needed to meet the minimum requirements of your trade or business
• Expenses for a program that will qualify you for a new trade or business
• Capital or personal expenses (e.g., the dollar value of vacation time or annual leave taken to attend classes)
• Any expenses that qualify for reimbursement from your employer (even if you do not receive the reimbursement)
Employees are generally required to complete Tax Form 2106 (Employee Business Expenses) or Tax Form 2106-EZ (Unreimbursed Employee Business Expenses) to claim this tax deduction, and attach it to their 1040 Form.
Those who are self-employed can report their educational expenses on Form 1040 Schedule C (Profit or Loss From Business), Form 1040 Schedule C-EZ (Net Profit From Business), or Form 1040 Schedule F (Profit or Loss From Farming).