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Myfreetaxes. Myfreetaxes.com/everett com/everett 12. Myfreetaxes.com/everett   Business Deduction for Work-Related Education Table of Contents What's New Introduction Qualifying Work-Related EducationEducation Required by Employer or by Law Education To Maintain or Improve Skills Education To Meet Minimum Requirements Education That Qualifies You for a New Trade or Business What Expenses Can Be DeductedUnclaimed reimbursement. Myfreetaxes.com/everett Transportation Expenses Travel Expenses No Double Benefit Allowed How To Treat ReimbursementsAccountable Plans Nonaccountable Plans Deducting Business ExpensesSelf-Employed Persons Employees Performing Artists and Fee-Basis Officials Impairment-Related Work Expenses Recordkeeping Illustrated Example What's New Standard mileage rate. Myfreetaxes.com/everett  Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount you can deduct for miles driven from January 1, 2013 through December 31, 2013, is 56. Myfreetaxes.com/everett 5 cents per mile. Myfreetaxes.com/everett For more information, see Transportation Expenses under What Expenses Can Be Deducted, later. Myfreetaxes.com/everett Introduction This chapter discusses work-related education expenses that you may be able to deduct as business expenses. Myfreetaxes.com/everett To claim such a deduction, you must: Itemize your deductions on Schedule A (Form 1040 or 1040NR) if you are an employee, File Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming if you are self-employed, and Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education , later. Myfreetaxes.com/everett What is the tax benefit of taking a business deduction for work-related education. Myfreetaxes.com/everett   If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. Myfreetaxes.com/everett Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses (except for impairment-related work expenses of disabled individuals) is greater than 2% of your adjusted gross income. Myfreetaxes.com/everett An itemized deduction reduces the amount of your income subject to tax. Myfreetaxes.com/everett   If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. Myfreetaxes.com/everett This reduces the amount of your income subject to both income tax and self-employment tax. Myfreetaxes.com/everett   Your work-related education expenses may also qualify you for other tax benefits, such as the American opportunity and lifetime learning credits. Myfreetaxes.com/everett You may qualify for these other benefits even if you do not meet the requirements listed above. Myfreetaxes.com/everett   Also, your work-related education expenses may qualify you to claim more than one tax benefit. Myfreetaxes.com/everett Generally, you may claim any number of benefits as long as you use different expenses to figure each one. Myfreetaxes.com/everett Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. Myfreetaxes.com/everett This is education that meets at least one of the following two tests. Myfreetaxes.com/everett The education is required by your employer or the law to keep your present salary, status, or job. Myfreetaxes.com/everett The required education must serve a bona fide business purpose of your employer. Myfreetaxes.com/everett The education maintains or improves skills needed in your present work. Myfreetaxes.com/everett However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. Myfreetaxes.com/everett You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. Myfreetaxes.com/everett Use Figure 12-1, Does Your Work-Related Education Qualify as a quick check to see if your education qualifies. Myfreetaxes.com/everett Education Required by Employer or by Law Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. Myfreetaxes.com/everett This additional education is qualifying work-related education if all three of the following requirements are met. Myfreetaxes.com/everett It is required for you to keep your present salary, status, or job, The requirement serves a bona fide business purpose of your employer, and The education is not part of a program that will qualify you for a new trade or business. Myfreetaxes.com/everett When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work. Myfreetaxes.com/everett See Education To Maintain or Improve Skills , later. Myfreetaxes.com/everett Example. Myfreetaxes.com/everett You are a teacher who has satisfied the minimum requirements for teaching. Myfreetaxes.com/everett Your employer requires you to take an additional college course each year to keep your teaching job. Myfreetaxes.com/everett If the courses will not qualify you for a new trade or business, they are qualifying work-related education even if you eventually receive a master's degree and an increase in salary because of this extra education. Myfreetaxes.com/everett This image is too large to be displayed in the current screen. Myfreetaxes.com/everett Please click the link to view the image. Myfreetaxes.com/everett Figure 12-1 Education To Maintain or Improve Skills If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. Myfreetaxes.com/everett This could include refresher courses, courses on current developments, and academic or vocational courses. Myfreetaxes.com/everett Example. Myfreetaxes.com/everett You repair televisions, radios, and stereo systems for XYZ Store. Myfreetaxes.com/everett To keep up with the latest changes, you take special courses in radio and stereo service. Myfreetaxes.com/everett These courses maintain and improve skills required in your work. Myfreetaxes.com/everett Maintaining skills vs. Myfreetaxes.com/everett qualifying for new job. Myfreetaxes.com/everett   Education to maintain or improve skills needed in your present work is not qualifying education if it will also qualify you for a new trade or business. Myfreetaxes.com/everett Education during temporary absence. Myfreetaxes.com/everett   If you stop working for a year or less in order to get education to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. Myfreetaxes.com/everett Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. Myfreetaxes.com/everett Example. Myfreetaxes.com/everett You quit your biology research job to become a full-time biology graduate student for 1 year. Myfreetaxes.com/everett If you return to work in biology research after completing the courses, the education is related to your present work even if you do not go back to work with the same employer. Myfreetaxes.com/everett Education during indefinite absence. Myfreetaxes.com/everett   If you stop work for more than a year, your absence from your job is considered indefinite. Myfreetaxes.com/everett Education during an indefinite absence, even if it maintains or improves skills needed in the work from which you are absent, is considered to qualify you for a new trade or business. Myfreetaxes.com/everett Therefore, it is not qualifying work-related education. Myfreetaxes.com/everett Education To Meet Minimum Requirements Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. Myfreetaxes.com/everett The minimum educational requirements are determined by: Laws and regulations, Standards of your profession, trade, or business, and Your employer. Myfreetaxes.com/everett Once you have met the minimum educational requirements that were in effect when you were hired, you do not have to meet any new minimum educational requirements. Myfreetaxes.com/everett This means that if the minimum requirements change after you were hired, any education you need to meet the new requirements can be qualifying education. Myfreetaxes.com/everett You have not necessarily met the minimum educational requirements of your trade or business simply because you are already doing the work. Myfreetaxes.com/everett Example 1. Myfreetaxes.com/everett You are a full-time engineering student. Myfreetaxes.com/everett Although you have not received your degree or certification, you work part time as an engineer for a firm that will employ you as a full-time engineer after you finish college. Myfreetaxes.com/everett Although your college engineering courses improve your skills in your present job, they are also needed to meet the minimum job requirements for a full-time engineer. Myfreetaxes.com/everett The education is not qualifying work-related education. Myfreetaxes.com/everett Example 2. Myfreetaxes.com/everett You are an accountant and you have met the minimum educational requirements of your employer. Myfreetaxes.com/everett Your employer later changes the minimum educational requirements and requires you to take college courses to keep your job. Myfreetaxes.com/everett These additional courses can be qualifying work-related education because you have already satisfied the minimum requirements that were in effect when you were hired. Myfreetaxes.com/everett Requirements for Teachers States or school districts usually set the minimum educational requirements for teachers. Myfreetaxes.com/everett The requirement is the college degree or the minimum number of college hours usually required of a person hired for that position. Myfreetaxes.com/everett If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. Myfreetaxes.com/everett The determination of whether you are a faculty member of an educational institution must be made on the basis of the particular practices of the institution. Myfreetaxes.com/everett You generally will be considered a faculty member when one or more of the following occurs. Myfreetaxes.com/everett You have tenure. Myfreetaxes.com/everett Your years of service count toward obtaining tenure. Myfreetaxes.com/everett You have a vote in faculty decisions. Myfreetaxes.com/everett Your school makes contributions for you to a retirement plan other than social security or a similar program. Myfreetaxes.com/everett Example 1. Myfreetaxes.com/everett The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional education courses. Myfreetaxes.com/everett In addition, to keep the job a teacher must complete a fifth year of training within 10 years from the date of hire. Myfreetaxes.com/everett If the employing school certifies to the state Department of Education that qualified teachers cannot be found, the school can hire persons with only 3 years of college. Myfreetaxes.com/everett However, to keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years. Myfreetaxes.com/everett Under these facts, the bachelor's degree, whether or not it includes the 10 professional education courses, is considered the minimum educational requirement for qualification as a teacher in your state. Myfreetaxes.com/everett If you have all the required education except the fifth year, you have met the minimum educational requirements. Myfreetaxes.com/everett The fifth year of training is qualifying work-related education unless it is part of a program of study that will qualify you for a new trade or business. Myfreetaxes.com/everett Example 2. Myfreetaxes.com/everett Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. Myfreetaxes.com/everett The additional four education courses can be qualifying work-related education. Myfreetaxes.com/everett Although you do not have all the required courses, you have already met the minimum educational requirements. Myfreetaxes.com/everett Example 3. Myfreetaxes.com/everett Assume the same facts as in Example 1 except that you are hired with only 3 years of college. Myfreetaxes.com/everett The courses you take that lead to a bachelor's degree (including those in education) are not qualifying work-related education. Myfreetaxes.com/everett They are needed to meet the minimum educational requirements for employment as a teacher. Myfreetaxes.com/everett Example 4. Myfreetaxes.com/everett You have a bachelor's degree and you work as a temporary instructor at a university. Myfreetaxes.com/everett At the same time, you take graduate courses toward an advanced degree. Myfreetaxes.com/everett The rules of the university state that you can become a faculty member only if you get a graduate degree. Myfreetaxes.com/everett Also, you can keep your job as an instructor only as long as you show satisfactory progress toward getting this degree. Myfreetaxes.com/everett You have not met the minimum educational requirements to qualify you as a faculty member. Myfreetaxes.com/everett The graduate courses are not qualifying work-related education. Myfreetaxes.com/everett Certification in a new state. Myfreetaxes.com/everett   Once you have met the minimum educational requirements for teachers for your state, you are considered to have met the minimum educational requirements in all states. Myfreetaxes.com/everett This is true even if you must get additional education to be certified in another state. Myfreetaxes.com/everett Any additional education you need is qualifying work-related education. Myfreetaxes.com/everett You have already met the minimum requirements for teaching. Myfreetaxes.com/everett Teaching in another state is not a new trade or business. Myfreetaxes.com/everett Example. Myfreetaxes.com/everett You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. Myfreetaxes.com/everett You move to State B and are promptly hired as a teacher. Myfreetaxes.com/everett You are required, however, to complete certain prescribed courses to get a permanent teaching certificate in State B. Myfreetaxes.com/everett These additional courses are qualifying work-related education because the teaching position in State B involves the same general kind of work for which you were qualified in State A. Myfreetaxes.com/everett Education That Qualifies You for a New Trade or Business Education that is part of a program of study that will qualify you for a new trade or business is not qualifying work-related education. Myfreetaxes.com/everett This is true even if you do not plan to enter that trade or business. Myfreetaxes.com/everett If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business. Myfreetaxes.com/everett Example 1. Myfreetaxes.com/everett You are an accountant. Myfreetaxes.com/everett Your employer requires you to get a law degree at your own expense. Myfreetaxes.com/everett You register at a law school for the regular curriculum that leads to a law degree. Myfreetaxes.com/everett Even if you do not intend to become a lawyer, the education is not qualifying because the law degree will qualify you for a new trade or business. Myfreetaxes.com/everett Example 2. Myfreetaxes.com/everett You are a general practitioner of medicine. Myfreetaxes.com/everett You take a 2-week course to review developments in several specialized fields of medicine. Myfreetaxes.com/everett The course does not qualify you for a new profession. Myfreetaxes.com/everett It is qualifying work- related education because it maintains or improves skills required in your present profession. Myfreetaxes.com/everett Example 3. Myfreetaxes.com/everett While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. Myfreetaxes.com/everett The program will lead to qualifying you to practice psychoanalysis. Myfreetaxes.com/everett The psychoanalytic training does not qualify you for a new profession. Myfreetaxes.com/everett It is qualifying work-related education because it maintains or improves skills required in your present profession. Myfreetaxes.com/everett Bar or CPA Review Course Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are not qualifying work-related education. Myfreetaxes.com/everett They are part of a program of study that can qualify you for a new profession. Myfreetaxes.com/everett Teaching and Related Duties All teaching and related duties are considered the same general kind of work. Myfreetaxes.com/everett A change in duties in any of the following ways is not considered a change to a new business. Myfreetaxes.com/everett Elementary school teacher to secondary school teacher. Myfreetaxes.com/everett Teacher of one subject, such as biology, to teacher of another subject, such as art. Myfreetaxes.com/everett Classroom teacher to guidance counselor. Myfreetaxes.com/everett Classroom teacher to school administrator. Myfreetaxes.com/everett What Expenses Can Be Deducted If your education meets the requirements described earlier under Qualifying Work-Related Education you can generally deduct your education expenses as business expenses. Myfreetaxes.com/everett If you are not self-employed, you can deduct business expenses only if you itemize your deductions. Myfreetaxes.com/everett You cannot deduct expenses related to tax-exempt and excluded income. Myfreetaxes.com/everett Deductible expenses. Myfreetaxes.com/everett   The following education expenses can be deducted. Myfreetaxes.com/everett Tuition, books, supplies, lab fees, and similar items. Myfreetaxes.com/everett Certain transportation and travel costs. Myfreetaxes.com/everett Other education expenses, such as costs of research and typing when writing a paper as part of an educational program. Myfreetaxes.com/everett Nondeductible expenses. Myfreetaxes.com/everett   You cannot deduct personal or capital expenses. Myfreetaxes.com/everett For example, you cannot deduct the dollar value of vacation time or annual leave you take to attend classes. Myfreetaxes.com/everett This amount is a personal expense. Myfreetaxes.com/everett Unclaimed reimbursement. Myfreetaxes.com/everett   If you do not claim reimbursement that you are entitled to receive from your employer, you cannot deduct the expenses that apply to that unclaimed reimbursement. Myfreetaxes.com/everett Example. Myfreetaxes.com/everett Your employer agrees to pay your education expenses if you file a voucher showing your expenses. Myfreetaxes.com/everett You do not file a voucher and you do not get reimbursed. Myfreetaxes.com/everett Because you did not file a voucher, you cannot deduct the expenses on your tax return. Myfreetaxes.com/everett Transportation Expenses If your education qualifies, you can deduct local transportation costs of going directly from work to school. Myfreetaxes.com/everett If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning from school to home. Myfreetaxes.com/everett Temporary basis. Myfreetaxes.com/everett   You go to school on a temporary basis if either of the following situations applies to you. Myfreetaxes.com/everett Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less. Myfreetaxes.com/everett Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. Myfreetaxes.com/everett Your attendance is temporary up to the date you determine it will last more than 1 year. Myfreetaxes.com/everett If you are in either situation (1) or (2) above, your attendance is not temporary if facts and circumstances indicate otherwise. Myfreetaxes.com/everett Attendance not on a temporary basis. Myfreetaxes.com/everett   You do not go to school on a temporary basis if either of the following situations apply to you. Myfreetaxes.com/everett Your attendance at school is realistically expected to last more than 1 year. Myfreetaxes.com/everett It does not matter how long you actually attend. Myfreetaxes.com/everett Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. Myfreetaxes.com/everett Your attendance is not temporary after the date you determine it will last more than 1 year. Myfreetaxes.com/everett Deductible Transportation Expenses If you are regularly employed and go directly from home to school on a temporary basis, you can deduct the round-trip costs of transportation between your home and school. Myfreetaxes.com/everett This is true regardless of the location of the school, the distance traveled, or whether you attend school on nonwork days. Myfreetaxes.com/everett Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. Myfreetaxes.com/everett Transportation expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight. Myfreetaxes.com/everett Example 1. Myfreetaxes.com/everett You regularly work in a nearby town, and go directly from work to home. Myfreetaxes.com/everett You also attend school every work night for 3 months to take a course that improves your job skills. Myfreetaxes.com/everett Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation expenses in going between home and school. Myfreetaxes.com/everett This is true regardless of the distance traveled. Myfreetaxes.com/everett Example 2. Myfreetaxes.com/everett Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. Myfreetaxes.com/everett You can deduct your transportation expenses from your regular work site to school and then home. Myfreetaxes.com/everett Example 3. Myfreetaxes.com/everett Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. Myfreetaxes.com/everett Since you are attending school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school. Myfreetaxes.com/everett Example 4. Myfreetaxes.com/everett Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. Myfreetaxes.com/everett Since your attendance in school is not considered temporary, you cannot deduct your transportation expenses in going between home and school. Myfreetaxes.com/everett If you go directly from work to school, you can deduct the one-way transportation expenses of going from work to school. Myfreetaxes.com/everett If you go from work to home to school and return home, your transportation expenses cannot be more than if you had gone directly from work to school. Myfreetaxes.com/everett Using your car. Myfreetaxes.com/everett    If you use your car (whether you own or lease it) for transportation to school, you can deduct your actual expenses or use the standard mileage rate to figure the amount you can deduct. Myfreetaxes.com/everett The standard mileage rate for miles driven from January 1, 2013 through December 31, 2013, is 56. Myfreetaxes.com/everett 5 cents per mile. Myfreetaxes.com/everett Whichever method you use, you can also deduct parking fees and tolls. Myfreetaxes.com/everett See Publication 463, chapter 4, for information on deducting your actual expenses of using a car. Myfreetaxes.com/everett Travel Expenses You can deduct expenses for travel, meals (see 50% limit on meals , later), and lodging if you travel overnight mainly to obtain qualifying work-related education. Myfreetaxes.com/everett Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business purposes. Myfreetaxes.com/everett For more information, see chapter 1 of Publication 463. Myfreetaxes.com/everett You cannot deduct expenses for personal activities such as sightseeing, visiting, or entertaining. Myfreetaxes.com/everett Mainly personal travel. Myfreetaxes.com/everett   If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging. Myfreetaxes.com/everett You can deduct only your expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities. Myfreetaxes.com/everett   Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. Myfreetaxes.com/everett An important factor is the comparison of time spent on personal activities with time spent on educational activities. Myfreetaxes.com/everett If you spend more time on personal activities, the trip is considered mainly educational only if you can show a substantial nonpersonal reason for traveling to a particular location. Myfreetaxes.com/everett Example 1. Myfreetaxes.com/everett John works in Newark, New Jersey. Myfreetaxes.com/everett He traveled to Chicago to take a deductible 1-week course at the request of his employer. Myfreetaxes.com/everett His main reason for going to Chicago was to take the course. Myfreetaxes.com/everett While there, he took a sightseeing trip, entertained some friends, and took a side trip to Pleasantville for a day. Myfreetaxes.com/everett Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. Myfreetaxes.com/everett He cannot deduct his transportation expenses of going to Pleasantville. Myfreetaxes.com/everett He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities. Myfreetaxes.com/everett Example 2. Myfreetaxes.com/everett Sue works in Boston. Myfreetaxes.com/everett She went to a university in Michigan to take a course for work. Myfreetaxes.com/everett The course is qualifying work-related education. Myfreetaxes.com/everett She took one course, which is one-fourth of a full course load of study. Myfreetaxes.com/everett She spent the rest of the time on personal activities. Myfreetaxes.com/everett Her reasons for taking the course in Michigan were all personal. Myfreetaxes.com/everett Sue's trip is mainly personal because three-fourths of her time is considered personal time. Myfreetaxes.com/everett She cannot deduct the cost of her round-trip train ticket to Michigan. Myfreetaxes.com/everett She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended the university. Myfreetaxes.com/everett Example 3. Myfreetaxes.com/everett Dave works in Nashville and recently traveled to California to take a 2-week seminar. Myfreetaxes.com/everett The seminar is qualifying work-related education. Myfreetaxes.com/everett While there, he spent an extra 8 weeks on personal activities. Myfreetaxes.com/everett The facts, including the extra 8-week stay, show that his main purpose was to take a vacation. Myfreetaxes.com/everett Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. Myfreetaxes.com/everett He can deduct only his expenses for meals (subject to the 50% limit) and lodging for the 2 weeks he attended the seminar. Myfreetaxes.com/everett Cruises and conventions. Myfreetaxes.com/everett   Certain cruises and conventions offer seminars or courses as part of their itinerary. Myfreetaxes.com/everett Even if the seminars or courses are work related, your deduction for travel may be limited. Myfreetaxes.com/everett This applies to: Travel by ocean liner, cruise ship, or other form of luxury water transportation, and Conventions outside the North American area. Myfreetaxes.com/everett   For a discussion of the limits on travel expense deductions that apply to cruises and conventions, see Luxury Water Travel and Conventions in chapter 1 of Publication 463. Myfreetaxes.com/everett 50% limit on meals. Myfreetaxes.com/everett   You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related education. Myfreetaxes.com/everett If you were reimbursed for the meals, see How To Treat Reimbursements , later. Myfreetaxes.com/everett   Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit. Myfreetaxes.com/everett Travel as Education You cannot deduct the cost of travel as a form of education even if it is directly related to your duties in your work or business. Myfreetaxes.com/everett Example. Myfreetaxes.com/everett You are a French language teacher. Myfreetaxes.com/everett While on sabbatical leave granted for travel, you traveled through France to improve your knowledge of the French language. Myfreetaxes.com/everett You chose your itinerary and most of your activities to improve your French language skills. Myfreetaxes.com/everett You cannot deduct your travel expenses as education expenses. Myfreetaxes.com/everett This is true even if you spent most of your time learning French by visiting French schools and families, attending movies or plays, and engaging in similar activities. Myfreetaxes.com/everett No Double Benefit Allowed You cannot do either of the following. Myfreetaxes.com/everett Deduct work-related education expenses as business expenses if you benefit from these expenses under any other provision of the law, for example, as a tuition and fees deduction. Myfreetaxes.com/everett Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance. Myfreetaxes.com/everett See Adjustments to Qualifying Work-Related Education Expenses, next. Myfreetaxes.com/everett Adjustments to Qualifying Work-Related Education Expenses If you pay qualifying work-related education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. Myfreetaxes.com/everett You must reduce the qualifying expenses by the amount of such expenses allocable to the tax-free educational assistance. Myfreetaxes.com/everett Tax-free educational assistance. Myfreetaxes.com/everett   This includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions). Myfreetaxes.com/everett Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Myfreetaxes.com/everett Amounts that do not reduce qualifying work-related education expenses. Myfreetaxes.com/everett   Do not reduce the qualifying work-related education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. Myfreetaxes.com/everett Also, do not reduce the qualifying work-related education expenses by any scholarship or fellowship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualifying work-related education expenses. Myfreetaxes.com/everett How To Treat Reimbursements How you treat reimbursements depends on the arrangement you have with your employer. Myfreetaxes.com/everett There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. Myfreetaxes.com/everett You can tell the type of plan you are reimbursed under by the way the reimbursement is reported on your Form W-2. Myfreetaxes.com/everett Note. Myfreetaxes.com/everett The following rules about reimbursement arrangements also apply to expense allowances received from your employer. Myfreetaxes.com/everett Accountable Plans To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules. Myfreetaxes.com/everett Your expenses must have a business connection. Myfreetaxes.com/everett This means your expenses must be deductible under the rules for qualifying work-related education explained earlier. Myfreetaxes.com/everett You must adequately account to your employer for your expenses within a reasonable period of time. Myfreetaxes.com/everett You must return any reimbursement or allowance in excess of the expenses accounted for within a reasonable period of time. Myfreetaxes.com/everett If you are reimbursed under an accountable plan, your employer should not include any reimbursement in your income in box 1 of your Form W-2. Myfreetaxes.com/everett If your employer included reimbursements in box 1 of your Form W-2 and you meet all three rules for accountable plans, ask your employer for a corrected Form W-2. Myfreetaxes.com/everett Accountable plan rules not met. Myfreetaxes.com/everett   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules for accountable plans. Myfreetaxes.com/everett Those expenses that fail to meet the three rules are treated as having been reimbursed under a Nonaccountable Plan (discussed later). Myfreetaxes.com/everett Expenses equal reimbursement. Myfreetaxes.com/everett   Under an accountable plan, if your expenses equal your reimbursement, you do not complete Form 2106 or 2106-EZ. Myfreetaxes.com/everett Because your expenses and reimbursements are equal, you do not have a deduction. Myfreetaxes.com/everett Excess expenses. Myfreetaxes.com/everett   If your expenses are more than your reimbursement, you can deduct your excess expenses. Myfreetaxes.com/everett This is discussed later, under Deducting Business Expenses . Myfreetaxes.com/everett Allocating your reimbursements for meals. Myfreetaxes.com/everett   Because your excess meal expenses are subject to the 50% limit, you must figure them separately from your other expenses. Myfreetaxes.com/everett If your employer paid you a single amount to cover both meals and other expenses, you must allocate the reimbursement so that you can figure your excess meal expenses separately. Myfreetaxes.com/everett Make the allocation as follows. Myfreetaxes.com/everett Divide your meal expenses by your total expenses. Myfreetaxes.com/everett Multiply your total reimbursement by the result from (1). Myfreetaxes.com/everett This is the allocated reimbursement for your meal expenses. Myfreetaxes.com/everett Subtract the amount figured in (2) from your total reimbursement. Myfreetaxes.com/everett The difference is the allocated reimbursement for your other expenses of qualifying work-related education. Myfreetaxes.com/everett Example. Myfreetaxes.com/everett Your employer paid you an expense allowance of $2,000 under an accountable plan. Myfreetaxes.com/everett The allowance was to cover all of your expenses of traveling away from home to take a 2-week training course for work. Myfreetaxes.com/everett There was no indication of how much of the reimbursement was for each type of expense. Myfreetaxes.com/everett Your actual expenses equal $2,500 ($425 for meals + $700 lodging + $150 transportation expenses + $1,225 for books and tuition). Myfreetaxes.com/everett Using the steps listed above, allocate the reimbursement between the $425 meal expenses and the $2,075 other expenses. Myfreetaxes.com/everett   1. Myfreetaxes.com/everett $425 meal expenses  $2,500 total expenses = . Myfreetaxes.com/everett 17   2. Myfreetaxes.com/everett $2,000 (reimbursement)×. Myfreetaxes.com/everett 17     =$340 (allocated reimbursement for meal expenses)   3. Myfreetaxes.com/everett $2,000 (reimbursement)−$340 (meals)     = $1,660 (allocated reimbursement for other qualifying work-related education expenses) Your excess meal expenses are $85 ($425 − $340) and your excess other expenses are $415 ($2,075 − $1,660). Myfreetaxes.com/everett After you apply the 50% limit to your meals, you have a deduction for work-related education expenses of $458 (($85 × 50%) + $415). Myfreetaxes.com/everett Nonaccountable Plans Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a nonaccountable plan with your wages, salary, or other pay and report the total in box 1 of your Form W-2. Myfreetaxes.com/everett You can deduct your expenses regardless of whether they are more than, less than, or equal to your reimbursement. Myfreetaxes.com/everett This is discussed later under Deducting Business Expenses . Myfreetaxes.com/everett An illustrated example of a nonaccountable plan, using Form 2106-EZ, is shown at the end of this chapter. Myfreetaxes.com/everett Reimbursements for nondeductible expenses. Myfreetaxes.com/everett   Reimbursements you received for nondeductible expenses are treated as paid under a nonaccountable plan. Myfreetaxes.com/everett You must include them in your income. Myfreetaxes.com/everett For example, you must include in your income reimbursements your employer gave you for expenses of education that: You need to meet the minimum educational requirements for your job, or Is part of a program of study that can qualify you for a new trade or business. Myfreetaxes.com/everett   For more information on accountable and nonaccountable plans, see chapter 6 of Publication 463. Myfreetaxes.com/everett Deducting Business Expenses Self-employed persons and employees report their business expenses differently. Myfreetaxes.com/everett The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense. Myfreetaxes.com/everett Self-Employed Persons If you are self-employed, you must report the cost of your qualifying work-related education on the appropriate form used to report your business income and expenses (generally Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040)). Myfreetaxes.com/everett If your education expenses include expenses for a car or truck, travel, or meals, report those expenses the same way you report other business expenses for those items. Myfreetaxes.com/everett See the instructions for the form you file for information on how to complete it. Myfreetaxes.com/everett Employees If you are an employee, you can deduct the cost of qualifying work-related education only if you: Did not receive (and were not entitled to receive) any reimbursement from your employer, Were reimbursed under a nonaccountable plan (amount is included in box 1 of Form W-2), or Received reimbursement under an accountable plan, but the amount received was less than your expenses for which you claimed reimbursement. Myfreetaxes.com/everett If either (1) or (2) applies, you can deduct the total qualifying cost. Myfreetaxes.com/everett If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement. Myfreetaxes.com/everett In order to deduct the cost of your qualifying work-related education as a business expense, include the amount with your deduction for any other employee business expenses on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. Myfreetaxes.com/everett (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. Myfreetaxes.com/everett ) This deduction (except for impairment-related work expenses of disabled individuals) is subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. Myfreetaxes.com/everett Form 2106 or 2106-EZ. Myfreetaxes.com/everett   To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or 2106-EZ. Myfreetaxes.com/everett Form not required. Myfreetaxes.com/everett   Do not complete either Form 2106 or 2106-EZ if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are not claiming travel, transportation, meal, or entertainment expenses. Myfreetaxes.com/everett   If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. Myfreetaxes.com/everett (Special rules for expenses of certain Performing Artists and Fee-Basis Officials and for Impairment-Related Work Expenses are explained later. Myfreetaxes.com/everett ) Using Form 2106-EZ. Myfreetaxes.com/everett   This form is shorter and easier to use than Form 2106. Myfreetaxes.com/everett Generally, you can use this form if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are using the standard mileage rate if you are claiming vehicle expenses. Myfreetaxes.com/everett   If you do not meet both of these requirements, use Form 2106. Myfreetaxes.com/everett Performing Artists and Fee-Basis Officials If you are a qualified performing artist, or a state (or local) government official who is paid in whole or in part on a fee basis, you can deduct the cost of your qualifying work-related education as an adjustment to gross income rather than as an itemized deduction. Myfreetaxes.com/everett Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24, or Form 1040NR, line 35. Myfreetaxes.com/everett You do not have to itemize your deductions on Schedule A (Form 1040 or 1040NR), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income limit. Myfreetaxes.com/everett You must complete Form 2106 or 2106-EZ to figure your deduction even if you meet the requirements described earlier under Form not required . Myfreetaxes.com/everett For more information on qualified performing artists, see chapter 6 of Publication 463. Myfreetaxes.com/everett Impairment-Related Work Expenses If you are disabled and have impairment-related work expenses that are necessary for you to be able to get qualifying work-related education, you can deduct these expenses on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14. Myfreetaxes.com/everett They are not subject to the 2%-of-adjusted-gross-income limit. Myfreetaxes.com/everett To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required . Myfreetaxes.com/everett For more information on impairment-related work expenses, see chapter 6 of Publication 463. Myfreetaxes.com/everett Recordkeeping You must keep records as proof of any deduction claimed on your tax return. Myfreetaxes.com/everett Generally, you should keep your records for 3 years from the date of filing the tax return and claiming the deduction. Myfreetaxes.com/everett If you are an employee who is reimbursed for expenses and you give your records and documentation to your employer, you do not have to keep duplicate copies of this information. Myfreetaxes.com/everett However, you should keep your records for a 3-year period if: You claim deductions for expenses that are more than your reimbursement, Your employer does not use adequate accounting procedures to verify expense accounts, You are related to your employer, or Your expenses are reimbursed under a nonaccountable plan. Myfreetaxes.com/everett Examples of records to keep. Myfreetaxes.com/everett   If any of the above cases apply to you, you must be able to prove that your expenses are deductible. Myfreetaxes.com/everett You should keep adequate records or have sufficient evidence that will support your expenses. Myfreetaxes.com/everett Estimates or approximations do not qualify as proof of an expense. Myfreetaxes.com/everett Some examples of what can be used to help prove your expenses are: Documents, such as transcripts, course descriptions, catalogs, etc. Myfreetaxes.com/everett , showing periods of enrollment in educational institutions, principal subjects studied, and descriptions of educational activity. Myfreetaxes.com/everett Canceled checks and receipts to verify amounts you spent for: Tuition and books, Meals and lodging while away from home overnight for educational purposes, Travel and transportation, and Other education expenses. Myfreetaxes.com/everett Statements from your employer explaining whether the education was necessary for you to keep your job, salary, or status; how the education helped maintain or improve skills needed in your job; how much reimbursement you received; and, if you are a teacher, the type of certificate and subjects taught. Myfreetaxes.com/everett Complete information about any scholarship or fellowship grants, including amounts you received during the year. Myfreetaxes.com/everett Illustrated Example Victor Jones teaches math at a private high school in North Carolina. Myfreetaxes.com/everett He was selected to attend a 3-week math seminar at a university in California. Myfreetaxes.com/everett The seminar will improve his skills in his current job and is qualifying work-related education. Myfreetaxes.com/everett He was reimbursed for his expenses under his employer's nonaccountable plan, so his reimbursement of $2,100 is included in the wages shown in box 1 of his Form W-2. Myfreetaxes.com/everett Victor will file Form 1040. Myfreetaxes.com/everett His actual expenses for the seminar are as follows:   Lodging   $1,050     Meals   526     Airfare   550     Taxi fares   50     Tuition and books   400     Total Expenses   $2,576   Victor files Form 2106-EZ with his tax return. Myfreetaxes.com/everett He shows his expenses for the seminar in Part I of the form. Myfreetaxes.com/everett He enters $1,650 ($1,050 + $550 + $50) on line 3 to account for his lodging, airfare, and taxi fares. Myfreetaxes.com/everett He enters $400 on line 4 for his tuition and books. Myfreetaxes.com/everett On the line provided for total meals and entertainment expenses, Victor enters $526 for meal expenses. Myfreetaxes.com/everett He multiplies that amount by 50% and enters the result, $263, on line 5. Myfreetaxes.com/everett On line 6, Victor totals the amounts from lines 3 through 5. Myfreetaxes.com/everett He carries the total, $2,313, to Schedule A (Form 1040), line 21. Myfreetaxes.com/everett Since he does not claim any vehicle expenses, Victor leaves Part II blank. Myfreetaxes.com/everett His filled-in form is shown on the next page. Myfreetaxes.com/everett This image is too large to be displayed in the current screen. Myfreetaxes.com/everett Please click the link to view the image. Myfreetaxes.com/everett Form 2106-EZ for V. Myfreetaxes.com/everett Jones Prev  Up  Next   Home   More Online Publications