How To Deduct Education Expenses?

If you decide to further your education to benefit your business, you can write off your education expenses. However, you must be able to prove the education maintains or improves skills required in your trade or business, or that it is required by law or regulations, for keeping your license to practice, status, or job. In other words, If you undergo a course or take classes to get certifications in your field or to enhance your business knowledge, you can typically write off those costs.

What exactly can you deduct from your education expenses?

You can deduct the costs of “qualifying work-related education,” including things like tuition, books, supplies, lab fees, transportation to and from classes, and anything else related to your education.

Additionally, education expenses incurred during a temporary absence from your work may also be considered tax-deductible. However, after your temporary absence, you must return to the same field of work. Generally, absence from work for one year or less is considered temporary.

Aside from the above-mentioned expenses, there are some other expenses that you can deduct:

Online web development course: As a freelancer, you may be required to prepare branding and marketing assets for a client. You may be required to acquire certain skills in order to add another skill set to your services. That’s considered work-related education and can lower the amount of taxes owed!

Real estate license renewal: In industries such as real estate, you may be required to get your license or certification periodically renewed. All fees related to the preparation for those renewals are tax-deductible.

However, there are certain expenses that you can’t deduct such as:

  • Traveling to gain experience to improve your skill or education. For example, a Japanese teacher who takes a trip to Japan to improve her knowledge of the Japanese language can’t deduct her travel expenses
  • Vacation expense or annual leave you took to attend classes

Many deductible job-related academic expenses might be eligible for other education credits or deductions such as:

  • An education credit
  • Employee-business expense deduction

How to deduct tuition from self-employment income

As a self-employed individual, you can deduct tuition and other educational costs of the self-employment income you report on Schedule C. Your deductions will not only lower the income subject to income tax, but also self-employment tax.

Here are the steps needed to deduction your tuition costs:

  • To deduct your education expenses, ensure that your education qualifies as a work-related expense.
  • To calculate your expenses, consider your travel costs and add them to the list of deductions. You can claim the costs of traveling, lodging, and some food expenses.
  • Reduce the number of your deductible expenses by any tax-free payments you received to pay for the costs. If you paid for tuition with some educational policy/benefits, that portion of your tuition will not be considered tax-deductible.
  • Report all your total deductible expenses on Schedule C. Most of your educational bills shall fall under the "other expenses" section at the end of the form. Enter any transportation or meal deductions in Section II of the form.

Is student loan interest tax deductible?

Taxpayers who pay interest on student loans can take a tax deduction.

The IRS has an Interactive Tax Assistant through which you can learn whether you are eligible to deduct your student loan interest.

How to calculate student loan interest deduction?

To calculate your student loan interest deduction, you need to file a Form 1040, 1040-SR, or 1040-NR, you can use the Student Loan Interest Deduction worksheet on page 94 of your tax return. If you file Form 2555 or 4563, you’ll use Worksheet 4.1 to calculate your student loan interest deduction. You can find that worksheet in IRS Publication 970, Tax Breaks for Education.

FlyFin can help track all the education-related deductions and more simply by scanning through your expenses and providing you with different categories of deductions that may apply to you.

FlyFin’s team of expert CPAs can help you uncover industry-specific tax deductions that you may not even be aware of. If you’re unsure about an expense, the CPAs can help guide you through it.