Adult students who
attend Community Business College may be
eligible for tax deductions for the expenses they incur while attending school.
Questions come up as to how the expenses that come getting training can be used
at tax time. The most common questions are: Who is eligible for work-related
tax deductions? Which expenses can be taken as deductions? What do I need to
take a deduction if I’m eligible?
So here’s what the
folks at the Internal Revenue Service say about educational expenses. (By the way, this information is specifically for
work-related education expenses. For
full-time academic students at eligible institutions, see this webpage: http://www.irs.gov/publications/p970/ch06.html).
You may be able to
deduct work-related educational expenses paid during the fiscal year as itemized
deductions on IRS Form
1040, Schedule A, Itemized
Deductions.
Which Expenses Are
Eligible?
In order to be
deductible, your expenses must be for education that either:
(1)
maintains or improves your job skills or
(2)
that your employer or a law requires to keep your salary, status or job.
However, even if the
education meets either of these two tests, the education cannot be part of a
program that will qualify you for a new
trade or business or training that you need to meet the minimal educational requirements
of your trade or business.
Are There Exceptions?
Although the
education must relate to your present line of work, educational expenses
incurred during temporary absence from your job may be deductible. After your
temporary absence, you must return to the same kind of work. Usually, absence
from work for one year or less is considered temporary.
Expenses that you
can deduct under this category include:
- Tuition,
books, supplies, lab fees, and similar items that support your education
- Certain
transportation and travel costs, and
- Other
educational expenses, such as the cost of research and typing
If you are an
employee when you incur these expenses, you generally must complete Form 2106 , Employee Business Expenses,
or Form 2106-EZ , Unreimbursed Employee Business
Expenses. Deduct these educational expenses as miscellaneous
itemized deductions on Form
1040, Schedule A ; they are subject to the 2% of adjusted gross income
limit. For information on the 2% limit, refer to Publication 529, Miscellaneous Deductions,
and/or Form 1040,
Schedule A Instructions .
Remember, any expenses paid by an employer on your behalf
are not tax deductible on your tax forms.
What If You’re
Self-Employed?
Keep in mind that if
you are not self-employed, your employer may report the educational assistance
payments on your Form W-2,
Wage and Tax Statement,
in the appropriate box under "other." In this case, taxable
reimbursements will be reported by your employer as income to you in the
appropriate box of Form W-2. Consult a tax professional for more advice on how
to manage your deductions.
What’s the Key For
Deductions?
The three most important
things to remember if you’re taking deductions are: 1) document everything; 2)
document everything; and 3) document everything. Documentation is very important to the IRS and can help
you in justifying any deductions you take. If you are eligible for mileage
deductions, print a Google
maps page that shows the miles you travel. Keep all your receipts for your
expenses together and don’t be afraid to take pictures. Take a snapshot that shows
other class members with the same books and materials you purchased. If you are going to claim clothing, take a
photo of your clothes before you started training and the ones you got for
attending school. The two photos should show that you needed to meet dress code
requirements.
Need More
Information?
For more information
on educational expenses, education tax credits or information for specific
types of employees, such as performing artists, refer to Publication 970, Tax Benefits for Education.
