San Francisco is a city of education, with many wonderful universities and colleges. For example, San Francisco is home to the University of San Francisco, San Francisco City College, and other fine universities. Indeed, many San Francisco residents are what is called “life-long learners.” Many of our clients at Safe Harbor LLP are small business owners and entrepreneurs, who recognize the value of education. And we advise them on how to minimize the tax bite of all business expenses. So the question arises, when is an educational expense tax deductible, and when not?
- The education is required by your employer or, by law, for you to maintain your employment status (e.g., licensing requirements).
- The education maintains or improves skills needed in your present line of work.
According to the official IRS website –
You may be able to deduct work-related educational expenses paid during the year as an itemized deduction on Form 1040, Schedule A (PDF). To be deductible, your expenses must be for education that (1) maintains or improves your job skills or (2) is required by your employer or by law to keep your salary, status or job. However, even if the education meets either of these tests, the education cannot be part of a program that will qualify you for a new trade or business, or is needed to meet the minimal educational requirements of your trade or business.
Although the education must relate to your present work, educational expenses incurred during temporary absence from your job may be deductible. However, 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 can be deducted include:
- Tuition, books, supplies, lab fees, and similar items
- Certain transportation and travel costs, and
- Other educational expenses, such as the cost of research and typing
So, for example, if your employer requires you to take CPR training, as most San Francisco schools do, then – yes – this expense would be tax deductible. Or if your employer sends you to a trade conference where you learn the latest teaching techniques for your job as a San Francisco teacher – then that, too, would be tax deductible. If you are working at Twitter, Facebook, Google or LinkedIn, and that employer requires you to attend Social Media World or the SES conference on Internet marketing – those expenses would indeed be tax deductible.
But, if you are wanting to CHANGE careers FROM a teach TO a fireman, and you go to fireman school, then that “career change” expense is generally not tax deductible. If you decide – on your own – to take a class that bolsters your existing skillset then that is, generally, tax deductible. If it is to change skills, or is in an adjacent skillset, then it may not be tax deductible.
The bottom lines –
- If you work for someone else and have high education / training expenses that relate to your job, please call us and we’ll advise you directly.
- If you are an employer and want to offer educational benefits to your employees, please call us and we can advise you if that is tax deductible.