Training costs are tax-deductible if these educational expenses meet the strict criteria defined by the Internal Revenue Service. Publication 970 states that employees can deduct training costs if the workshops, seminars or courses allow individuals to improve and develop their job-related skills, especially if the employees require the training to remain in their roles. Similarly, the IRS allows self-employed workers to deduct some training costs, including transportation to and from course locations. You cannot deduct training expenses related to transitioning to a new career.
Deductible Training Expenses
The lRS allows you to deduct training expenses, such as tuition, books, laboratory fees and other materials. Other activity fees, such as making copies of assignments, can also be deducted. Deduct transportation and travel costs but only if going to class and returning home occurs on a temporary basis, for less than a year. These costs include hotels or meals. A personal expense, such as the time taken off work to attend training, is not deductible. Employees who do not claim the amount of training course reimbursement paid to them as income by their employers cannot deduct related training expenses.
Tax-deductible training courses must allow an employee to sustain or develop in his current job, which includes learning about new technology, getting updates on new regulations or developing professional skills such as time management, decision making, communication and negotiation. If these courses prepare an employee to transition to a new career or role, the costs cannot be deducted since the work-related training must only pertain to the current job. Training costs incurred during a gap in employment can be deducted if they allow the employee to maintain skills related to returning to the same job.
Claiming the Deduction
To deduct training costs, employees itemize their deductions on Schedule A. Self-employed workers file Schedule C, Schedule C-EZ or Schedule F. To qualify for job-related education expenses, an employee must determine whether the training is required to keep his job or improves his skills. The training cannot be deducted if it’s required to meet the minimum requirements for a job or leads to a new role. Deductions reduce the amount of the employee’s income that gets taxed. To calculate the deduction, he needs to determine the dollar value of the training costs plus other job expenses is no greater than 2 percent of his adjusted gross income.
Tax-Free Educational Payments
If an employee partially pays for training with tax-free scholarships, Pell Grants, veterans educational assistance or other nontaxable payments, the employee cannot deduct all the training costs. The employee must reduce the amount she claims by the amount of the tax-free contribution she received. Pell Grants are awarded to students in need of assistance and are treated as scholarships for tax reporting purposes. Veterans who receive payment for training do not include them as income on their federal tax returns. Use the resources provided by the Veterans Administration website to get more information about VA benefits.
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