Tax Deductible Professional Job Skills

by Michael Marz

When the job market is competitive, it becomes even more important to stay current on the job skills for your profession and to acquire new ones that can make you a more valuable employee. With tuition costs on the rise, enrolling in professional job skills courses can break your budget, but you can save some money on your next tax return, since the cost of many skills courses are tax deductible.

Work-Related Deduction

If it makes sense to itemize your deductions on Schedule A, you can increase your deduction with the cost of enrolling in a professional job skills course. In addition to enrollment fees, your deduction can include amounts you pay for books, classroom supplies and some of your commuting expenses. All that’s required to take the deduction is that each course helps maintain or improve the skills you use in your current profession, or that your employer or a government agency requires the course in order to maintain your current employment or a professional license.

Tuition Deduction

The tuition and fees deduction can offset the income you report on your taxes by up to $4,000 for amounts you pay in tuition and any fees required as a condition of enrollment in any course, not just the ones that improve your job skills. Unlike the work-related deduction, the IRS requires that the school you attend be eligible to participate in the U.S. Department of Education’s student financial aid program. Whether you register for just one class at your local college, sign up at a vocational school or decide to start working toward a degree, make sure that the school offers financial aid. One thing to be aware of is that the deduction is only available to people whose income is below certain levels, according to Internal Revenue Service Publication 970.

Taking a Credit

A lifetime learning credit can sometimes save you more in tax than a deduction that covers the same expense, since it lowers the tax you owe rather than your taxable income. For this reason, you may want to consider taking a lifetime learning credit for the cost of your job skills courses instead of a deduction. Just like with a tuition deduction, the institution you enroll at must be eligible to offer financial aid and your income must be below the maximum level that applies to the tax year. However, it isn’t necessary for you to be working toward a degree to take the credit. The maximum credit you can take is $2,000, which is calculated as 20 percent of the tuition and fees you pay, as well as the cost of any books and supplies that the school requires you to purchase, notes Internal Revenue Service Publication 970.

For Your Employees

Perhaps you operate a small business on the side when not at work or are entirely self-employed and hire your own employees. In this situation, you should remember that any skills courses you require your employees to take are deductible on your return as long as you either reimburse your employees for the cost or make payment directly to the school. According to Internal Revenue Service Publication 334, not every skills course is deductible as a business expense.

About the Author

Michael Marz has worked in the financial sector since 2002, specializing in wealth and estate planning. After spending six years working for a large investment bank and an accounting firm, Marz is now self-employed as a consultant, focusing on complex estate and gift tax compliance and planning.

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