ABCs of Business Education Deductions

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Tax Tips The ABCs of business education deductions Now that the kids are back in school, you may have the itch to return to the classroom yourself, perhaps to brush up on certain skills in your field or expand your horizons. Can you deduct the cost of business education? It depends. Generally, you can deduct business expenses only if one of these two requirements is met: The education is required by your employer or is mandated by law. The education maintains or improves the skills needed in your present work. A couple caveats That sounds simple enough, but there are also a couple things that can disqualify you for the deduction. First, if the education is required to meet the minimum educational requirements of your trade or business, then you are expected to pay that cost as a normal part of doing business — and without a tax break. Second, if the education qualifies you for an entirely new trade or business, then you also don't get to use the deduction. It's the second caveat that often trips up taxpayers. For instance, if a nurse starts taking courses that will result in a degree as a physician, the courts have said that the education expenses can't be deducted because it qualifies the nurse for a new line of work. If you qualify for the deductions Assuming you do qualify, you may deduct expenses like tuition, books, laboratory fees, equipment and transportation between work and school. Typically, the cost of the trip is deductible if you go straight to class after work. You can't write off travel costs if you stop at home for a snack or to change into more comfortable clothes, however. When you pay business education costs out your own pocket, the expenses are deductible as miscellaneous expenses, subject to a floor of 2 percent of adjusted gross income (AGI). However, if your company reimburses you, payments are generally deductible in full by the company and tax-free to you. Alternatively, an employer may establish an educational assistance plan (EAP) that provides up to $5,250 in annual tax-free benefits to each participant. Please call us if you have any questions. 2016 Tax Extension Deadlines are approaching. Go to www.tenfortyplus.com and complete your online organizer (under forms and documents). Make your appointment using our online appointment system. Call 281-397-7777 and get a user id with password set up so you can send us all your information through our online secure portal and do your taxes from the comfort of your home or office or come see us at our office. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker EA www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000. • Sale or purchase of a residence or other real estate.