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Education and Training Expenses:

Can you Deduct that Trip to Hawaii?

By Stephanie Mullins, CPA

The Internal Revenue Code allows taxpayers to deduct education and training expenses related to their employment, even if the class or training takes place out of town, but only if certain requirements are met.  If you can satisfy the requirements, yes, you can even deduct a trip to Hawaii!

When Is Training Deductible? 

First, let’s take a look at the basic ground rules.  The education or training must fall within one of two categories to be deductible:

1.  It must be required by your employer or by law to retain your current position or salary.  For example, a bank may require a loan officer to get additional education concerning changes in mortgage lending laws as a condition of continuing on the job.  This would be an example of training required by an employer.  Or, there may be legal requirements which require an employee to take additional courses to keep his or her current position.  An example of this would be a teacher who is required by law to take additional courses to retain for his or her position.

2.  The education maintains or improves the skills needed at your present job.  Most employees can improve their job skills by additional training or education.  It is not necessary for the employer to require the additional training to meet this requirement, but the training must be directed at improving the specific skills or knowledge needed for the job.   For example, an IT (Information Technology) employee may deduct the cost of a course intended to teach network maintenance.  However, that same employee could not deduct the cost of a course on English literature because it is not directed specifically at improving job skills.  Note that this category of deduction is available even to those who are self-employed.

When Is Training Not Deductible? 

Now, let’s take a look at some things which do not qualify:

1.  Education or training which qualifies you for a new trade or business.  For example, an auto mechanic cannot deduct the cost of courses which train him to become an accountant.    Whether he actually becomes an accountant as a result of the training makes no difference.

2.  Education which is needed to meet the minimum requirements of your present job.  For example, an employee without a college degree who is working in a position requiring a degree cannot deduct the cost of the education required to obtain the degree so that he or she can keep the job.  

What Kind of Expenses Are Deductible?  

Tuition, training fees, books, and lab fees are deductible.  Travel expenses can be deducted if they are considered ordinary and necessary.  This could include air travel if necessary to attend the training.  Thus, if you have to travel to Hawaii to attend the course, that expense would be deductible so long as you satisfy the other requirements described above.  Automobile travel can be deductible at the mileage rate specified by the IRS for the trip from work to the training site, and if you are regularly employed and your education is considered temporary in nature (lasting less than a year), you can also deduct the return trip from the training site to your home.  The travel itself cannot be considered as a form of education or training, and travel for personal purposes is not deductible.  Any portion of a qualifying trip which is for personal purposes is not deductible, so if a trip for education or training is part personal, a reasonable allocation of the expenses must be made between the deductible and non-deductible portions.

You may also deduct lodging and meals if you travel overnight, but the deduction for meals is limited to 50% of the cost.    It might be more advantageous to claim a credit such as the American Opportunity credit or the Lifetime learning credit for your qualifying education expenses.  The expenses which qualify for the credit will vary and the credits do not allow travel expenses or meal expenses.  The American Opportunity Credit will allow expenses for course related supplies and equipment and books.  Whereas the Lifetime learning credit will not allow any of these expenses, but only allows tuition and required enrollment fees.  

How Do I Deduct Education and Training Expenses?

Qualifying business education expenses can be deducted on Form 1040 Schedule A.  If you are self-employed use Form 1040 Schedule C.  However, consideration should be given to determining the tax implications of the lifetime learning credit and the American Opportunity Credit.  These various credits do not always allow the same expenses.  Because this can be complicated, it is often advisable to ask a tax professional to assist you to determine which method best suits your needs and results in the lowest tax liability. Remember you cannot take both the credit and the deduction and should consider which method results in the least tax for you.  

If you have taken qualifying courses or training during the year, don’t forget to deduct it on your tax return.  And if you wish to visit an out-town-locale, you might want to see if there is qualifying training available that could allow you to deduct all or part of that trip.

Stephanie Mullins CPA, MBA, EA (Enrolled to Practice before the IRS)