Heads up: this article is only relevant for U.S. businesses.
The world of business moves quickly, and entrepreneurs need to work hard to keep up. Investing in your education through workshops, classes, and books are great ways to stay ahead of the curve and ensure you’re constantly growing.
Here’s the fine print on what you can and can’t deduct.
Understanding work-related education
Work-related education costs are fully deductible when they add value to your business and increase your expertise. In order to decide if your class or workshop qualifies, the IRS will look at whether the expense maintains or improves skills that are required in your current business.
Here are some examples of work-related education expenses:
- Classes that improve skills in your field
- Seminars and webinars
- Subscriptions to trade or professional publications
- Books tailored to your industry
- Workshops to increase your expertise and skills
- Transportation expenses to and from classes
Note that if the class or workshop is local, you are able to deduct the cost of traveling from your place of work to the location of the class or workshop. If you’re required to travel in order to take a class, you can deduct travel expenses in the same way that you would deduct general business travel.
If you have employees working for your business, you can choose to offer an educational assistance program, with your business paying the cost of employee training and education. If you cover these costs, you can claim them as fringe benefits. In order to deduct these expenses, they need to be reasonably related to your business.
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Classes or workshops are deductible in many cases, but not if they qualify you for a new career or are simply outside the realm of your business. For example, taking law classes in the evening in order to become adept at contracts for your business is actually not a deductible expense. Although this new skill could very well improve your business, it also technically opens you up to new career opportunities as well.
In general, the cost of a college degree is rarely deductible, since it can qualify the graduate for a variety of new career options. The fact that you don’t intend to use it to pursue a new career likely won’t matter to the IRS.
Reporting work-related education costs
As with all tax claims, it’s key to report your expenses properly and back them up thoroughly with the right documentation (e.g. an invoice or receipt that proves the expense).
To report the costs of work-related education, classes, and workshops, record the expenses as professional development against self-employment income on Schedule C.
Be sure to save all of the receipts for work-related education expenses you generate. This can help you track the smaller purchases that are easy to forget, in addition to acting as proof of your deductions.