Tax Credit & the CFA Exam

To become a Chartered Financial Analyst -- CFA, for short -- you must first pass a series of rigorous exams. There's no tax credit for taking the CFA exam, and testing fees don't count as qualified educational expenses. However, the costs you incur to take the CFA may be deductible in some circumstances as work-related expenses.

The tuition fees that you paid to complete a bachelor's, Master's or certificate program are deductible as qualified educational expenses as long as the learning institution is accredited. However, qualified educational expenses only include tuition and fees that are mandatory as part of enrollment. As a result, CFA exam fees can't usually be deducted as educational expenses.

If you took the CFA exam and you work in the financial field, you might be able to deduct the cost of the fees as an unreimbursed business expense. The IRS allows you to deduct the cost of work-related education as long as one of the two following scenarios applies:

1. Your employer requires the education to keep your present salary, status or job.
   
2. The education maintains or improves skills that you need for your current job.

You cannot deduct the expense if either of following scenarios apply:

1. The education is needed to meet minimum requirements for your trade or business. 
   
2. You're completing the education to enter a new field or trade.

In this context, a minimum requirement is a professional requirement maintained by a local, state or federal government for certain lines of work. For example, a state may require that a high-school teacher have a bachelor's degree to teach at a public school, while the federal government only allows CPAs, enrolled agents and attorneys to represent taxpayers. In contrast, obtaining a certification that your employer encourages, but you're not legally required to have to do your job, falls under the category of maintaining or improving job skills.

In short, you can deduct CFA exam fees as long as the certification maintains or improves the skills you need at your current job, it's not a mandatory requirement for your profession, and you've already been working in the financial field.

If you do qualify for the deduction, the following expenses may be deducted:

• Exam test prep fees for items like books, guides, videos and lectures.
  
• CFA registration and exam fees.
• Transportation and travel costs that you incurred getting to the CFA exam center.

Unreimbursed business expenses are miscellaneous itemized deductions subject to 2 percent of your adjusted gross income. In other words, you can only deduct the amount of miscellaneous itemized deductions that exceed 2 percent of your adjusted gross income. If your AGI is $50,000, for example, you can only claim deductions that exceed $1,000. To claim the deduction, complete Form 2106, Unreimbursed Employee Business Expense.