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Deductible Work-Related Education

Getting some extra schooling for your job is sometimes necessary, either because it's mandated or you just have to keep your skills current. Depending on the circumstances, you may be able to write off some of these expenses when you do your taxes.

A couple of points: First, you have to itemize deductions to claim the deduction. Second, along with other employee business expenses and certain other items, you can only deduct the amount of qualifying expenses that exceed 2 percent of your adjusted gross income. But even if you don't itemize or have enough expenses to deduct under the 2-percent rule, you're not out of the running: you might qualify for the two education credits – the American Opportunity Credit or the Lifetime Learning Credit.

(By the way, this discussion is relevant only to employees. If you're self-employed, the picture is quite a bit easier: you can deduct your expenses for qualifying work-related education directly from your self-employment income. Itemizing and the 2 percent rule don't apply.)

The Rules

Two questions must be satisfied before you can deduct work-related education:

  1. Does the work-related education qualify as business expenses?
  2. Are you eligible for that deduction?

In order to qualify as business expense, your work-related has to meet at least one of the following conditions:

  • The education is required by your employer or the law to keep your present salary, status or job. The required education must serve a bona fide business purpose of your employer.
  • The education maintains or improves skills needed in your present work.

But even if your education meets one of those requirements, it still doesn’t qualify if:

  • The education is needed to meet the minimum educational requirements of your present trade or business.
  • The education is part of a program of study that will qualify you for a new trade or business.

If your education isn’t required by your employer or the law, it’s considered qualifying work-related education only if it maintains or improves skills needed in your present work. That could include refresher courses or courses on current developments, as well as academic or vocational courses.

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