Heads up: this article is only relevant for U.S. businesses.
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 or maintain skills in your field
- Seminars and webinars that improve or maintain skills in your field
- Subscriptions to trade or professional publications that improve or maintain skills in your field
- Books tailored to your industry that improve or maintain skills in your field
- Workshops to increase or maintain your expertise and skills
- Transportation expenses to and from classes that improve or maintain skills in your field (note: no deduction is allowed for travel as a form of education in and of itself)
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.
Also, note that the IRS says some educational expenses cannot be deducted and labels them personal education expenses. These educational expenses include those that are necessary to meet the minimum educational requirements and qualify you for your present employment, trade, or business.
Deduction limitations
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 generally not a deductible expense. Although this new skill could very well improve your business, this skill improvement is not required of the business and not expressly required of law, or regulation.
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 if filing as an unincorporated sole proprietor or a single-member LLC.
If filing as a partnership or multi-member LLC, capture these work-related education expenses on Form 1065. If filing as a corporation, capture these expenses on Form 1120.
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.
