Gregory S. DuPont
The IRS and Educational Deductions
More individuals in their 30s and 40s are going to college in order to improve their job skills, to qualify for promotions and raises, or just to enjoy learning. The College Board reports that approximately half of all college students are now 25 years of age or older.
But, at the same time that older students are choosing to acquire more education, the Internal Revenue Service has made it more difficult to get an educational deduction. It is more difficult now to meet IRS rules for deductible educational expenses.
First of all, you must itemize deductions on your tax return, rather than take the standard deduction. However, itemizing deductions has become more difficult because the standard deduction has risen. You can itemize only if the total of your deductible expenses is greater than the standard deduction.
Second, you can deduct only those educational and other "miscellaneous" expenses that exceed 2% of your adjusted gross income (AGI). Miscellaneous expenses include the cost of looking for a new job, unreimbursed business outlays, and so forth. Your AGI is your income excluding any tax-free income, minus outlays such as contributions to retirement plans.
Deducting educational expenses, however, is not entirely out of the question. The rules state that you can deduct educational expenses if the schooling enables you to keep your job and salary, or maintains or improves the skills you need in your job. But, there is no deduction if the schooling helps you switch careers. While the IRS provides incentives for you to become more competent at your current occupation, it does not want to financially assist you to qualify for a totally new job.
You need not limit your deductions to expenses for courses from an accredited college or university. A correspondence school qualifies, as do lessons from a private tutor.
The schooling must be linked with your "carrying on a trade or business." That's why someone who has just entered college and is not carrying on a trade or business cannot deduct educational expenses. The schooling must also be closely related to current job skills. An accountant can write off courses that explain the new tax rules, and a professional pianist can write off music lessons.
Educational expenses that qualify an individual for a promotion may also be allowed. The general rule is that if an individual changes duties, it is not a career change so long as that individual remains in the same line of work.
It may be a wise step to consult a tax professional, and as always, keep proper records to support your deductions, in case you are audited.