The Internal Revenue Service lets you deduct some or all of your training and education expenses. Your deductions for these training expenses not only include the cost of classes, but also travel expenses related to getting to the training venue. Your allowable deduction limits depend on whether you're claiming training expenses as an individual, a business or self-employed worker, or for training expenses your business paid for your employees.
In most cases, the IRS expects your training costs to be reasonable and related to the skills needed for your career or business. Deducting expenses for company or personal training trips to Tahiti might raise a red flag.
Training Deductions When Self-Employed
The IRS states that your training expense deductions should be necessary to maintain or improve the skills you need in your job or be required to keep it. Physicians, lawyers, accountants and other licensed professionals who attend mandatory continuing education courses to keep or renew their license can deduct 100 percent of these expenses.
Unfortunately, expenses related to getting the minimum skills required for your current job or to pursue another career option aren’t deductible when you’re self-employed. Therefore, courses such as the bar exam review don’t qualify as a training expense because this training only helps you meet minimum qualifications for your future career.
Training Travel Expenses
In 2020, if you’re self-employed, you can deduct 57.5 cents per mile when you use your personal vehicle to attend training related to your current career or profession. Travel expenses such as airfare, hotels and some meals while attending educational conferences and training classes are deductible too.
Personal Training Expenses
Individual taxpayers can get a tax deduction for certain types of training using Lifetime Training Credits. You qualify for this credit if you take any type of postsecondary courses. You can enroll in almost any course that helps you improve your job skills or change career paths.
The IRS doesn’t require that your training leads to a degree, certificate or other credential. Your eligible training expenses include tuition, fees and books or required class supplies.
The IRS provides this credit to you only if your 2019 modified adjusted gross income (MAGI) was less than $68,000 for single, widowed or head of household filers. Married couples who file jointly with a MAGI of less than $136,000 also qualify. In 2019, the maximum credit was $2,000 per tax return. This credit reduces your taxes but cannot exceed the amount of tax that you owe.
Deductions For Employee Training or Reimbursement
Small business owners who provide external training opportunities for their employees can deduct most expenses that they paid for employee training. You can also deduct the expenses when you reimburse your employee for work-related training. To be eligible, you must provide this training to your employees as a company fringe benefit.
You can deduct educational assistance expenses for each employee who uses the company’s plan at a qualifying educational venue. For the 2020 tax year, the maximum that the IRS allows you to reimburse or pay for employee educational assistance is $5,250. You must report amounts greater as additional wages for the employee.
Carol Luther has published feature articles in print magazines, ghostwritten blogs, and produced digital content since 2007. She has published personal finance and small business articles for the Houston Chronicle, Mahalo, the Nest, USA Today, Wahm, and Zacks. Carol has designed, implemented and managed multi-year, multimillion-dollar domestic and international projects services for higher education, nonprofits, and small to medium businesses for more than 20 years.