If you’re running a business, you can deduct a variety of educational expenses as business expenses. This can include tuition, books, conferences, and more. Learn how to deduct education expenses as a business expense and save money on your taxes.
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If you are a business owner or in management, you know that employees need continual education to stay sharp and keep up with an ever-changing marketplace. You also know that education can be expensive. The good news is that you can often deduct the cost of employee education as a business expense.
The Internal Revenue Service (IRS) defines education expenses as those incurred to maintain or improve job skills. This includes tuition, books, supplies, conferences, and other related costs. To deduct employee education expenses, the IRS requires that the education:
-Maintain or improve job skills
-Be necessary for the business
-Be usual in your industry
If you are self-employed, you can deduct the cost of your own educational expenses as long as they meet the same criteria.
What are the requirements for claiming the deduction?
To deduct education expenses as a business expense, the IRS requires that the education meets one of the following two tests:
-The education improves or maintains the skills required in the individual’s present occupation, or
-The education is required by the employer or by law to keep the individual’s present salary, status or job.
What expenses are eligible?
In order to deduct education expenses as a business expense, the IRS requires that the education meets one of the following two criteria:
-The education maintains or improves skills required in your current occupation, or
-The education is required by your employer or by law to keep your salary, status or job.
Eligible expenses include tuition, books, supplies, and equipment required for coursework. Fees paid to the institution, such as application fees, registration fees, and lab fees may also be deducted. If you are required to travel away from home overnight in order to attend classes, you may be able to deduct travel expenses as well.
How do you calculate the deduction?
The IRS allows you to deduct education expenses as a business expense if the education maintains or improves the skills required in your trade or business. The type of education, how often you receive it, and whether it is required by your employer are not relevant to the deduction. You can deduct the cost of tuition, books, supplies, laboratory fees, and similar expenses. You can also deduct the cost of traveling to and from classes if the main purpose of the trip is education
What if you have multiple employees?
If you have more than one employee, you can deduct the cost of their education as a business expense as well. This includes the cost of their tuition, books, and other necessary supplies. You can also deduct the cost of their travel to and from their educational institution, as well as the cost of their lodging while they are attending classes.
How do you claim the deduction?
To calculate your deduction for education expenses, you will need to fill out Form 2106 (Employee Business Expenses), which is found on the IRS website. This form will ask for detailed information about your education expenses, such as the name and address of the educational institution, the dates of attendance, and the amount of money paid for tuition, books, supplies, and other necessary expenses. Once you have completed Form 2106, you will attach it to your Form 1040 (Individual Income Tax Return).
Assuming you qualify, you can deduct education expenses as a business expense. The key is to make sure the education is directly related to your business. If you’re not sure, it’s always best to speak with a tax professional to get clarification.