The Internal Revenue Service lets you deduct some or all of your training and education expenses. Your deductions for these expenses not only include the cost of classes, but also travel expenses related to getting to the training venue. Your allowable deduction depends on whether you're claiming training expenses as an individual, as a business or self-employed worker, or for training expenses that your business paid for your employees.
The IRS generally expects your training costs to be reasonable and related to the skills that are necessary for your career or business. Deducting expenses for company or personal training trips to Tahiti might raise a red flag.
Training Deductions When You're 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 skills that are required to keep it. Physicians, lawyers, accountants and other licensed professionals who attend mandatory continuing education courses to keep or renew their licenses 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. 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
You can deduct 56 cents per mile in 2021 if you're self-employed and you use your personal vehicle to attend training related to your current career or profession. Your 2021 deductions are claimed on the tax return you'll file in 2022.
Travel expenses such as airfare, hotels and some meals while attending educational conferences and training classes are deductible as well.
Personal Training Expenses
Individual taxpayers can claim the Lifetime Learning Credit for certain types of training and educational expenses. You'll qualify if you take any type of postsecondary courses. You can enroll in almost any course that helps you improve your job skills or to change career paths.
The IRS doesn’t require that your training must lead to a degree, certificate or other credential. Your eligible training expenses include tuition, fees, books and required class supplies.
Your 2021 modified adjusted gross income (MAGI) must be less than $69,000 if you're single, a qualifying widow(er) or head of household. Married couples who file jointly are limited to MAGIs of less than $138,000. Most taxpayers will find that their MAGI is the same as their adjusted gross income or AGI, which can be found on line 11 of your 2021 Form 1040.
The maximum credit is $2,000 per tax return as of the 2021 tax year. This credit subtracts from any tax you owe the IRS, but it's not refundable. You won't receive a refund for anything that might be left over after it eliminates your tax debt.
Read More: Self-Employed Tax Deductions, Benefits & More
Deductions for Employee Training or Reimbursement
Small business owners who provide external training opportunities to their employees can deduct most expenses that they pay for employee training. You can also deduct the expenses when you reimburse your employee for work-related training. You must provide this training to your employees as a company fringe benefit to be eligible.
You can deduct educational assistance expenses for each employee who uses the company’s plan at a qualifying educational venue. The maximum that the IRS allows you to reimburse or pay for employee educational assistance is $5,250 in the 2021 tax year. You must report amounts greater as additional wages paid to the employee.
- Internal Revenue Service: Publication 535 (2019), Business Expenses
- Internal Revenue Service: Publication 970 (2019), Tax Benefits for Education
- Internal Revenue Service: Publication 15-B (2020), Employer's Tax Guide to Fringe Benefits
- Internal Revenue Service: Standard Mileage Rates
- Internal Revenue Service: Compare Education Credits
- Internal Revenue Service: Form 1040 U.S. Individual Income Tax Return 2021
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.