What Kind of Education Qualifies as a Business Expense?

You're not really getting paid to learn, but it definitely pays to learn.

Continuing education that directly relates to your business may be written off as an education credit on your business tax returns. After all, the economy thrives when a country's businesses are doing well.

This is just one way that the IRS encourages you and your business to succeed.

Education credits mean more money in your pocket. So, how can you fully utilize this tax saving?

What Type of Education Qualifies For Education Credit?

The IRS permits certain types of education as an education credit that is deductible from business expenses.

However, the continuing education must be for either of these two reasons:

  1. It maintains or improves the skills necessary for your present work

  2. It satisfies the law in order to keep your job, status, or salary

The education must be directly related to your business, but even with these conditions met, there are situations where you cannot deduct the cost of education as a business expense.

When Is Education Non-Deductible?

Tax law does not permit education credits for education that help you meet the minimum educational requirements for your business.

It also does not allow you to claim education credits for education that helps you to pursue a new business or trade.

You might not be able to win it all. Some education does not classify as a business expense.

However, a good business tax strategy will help you to minimize the amount of taxable income on your business and keep more money in your pocket.

Limitations on Education Expenses

For the tax year 2020, any kind of personal living or activity expense incurred during education does not qualify as a business expense. This includes room and board, travel expenses, entertainment expenses, and similar expenditures. 

You must also be working (your business) while pursuing education in order to claim education credits.

After all, this would be considered a deductible business expense.

Where to Report Education Expenses on Your Business Tax Return

For the self-employed, use:

  • Schedule C, Profit or Loss from Business

  • Schedule F, Profit or Loss from Farming

For qualified artists and government officials, use:

  • Form 2106, Employee Business Expenses

For more help on how to file your business tax return with the most savings, consult with one of our trusted accountants. We have your back.

Create a Plan for Filing Taxes

Running a business is stressful enough. Not only do you have to manage clients and employees, but you have to manage your business strategy to remain competitive in the market.

Continuing education is one way to retain a competitive edge over your competitors. It may also be written off as an education credit on your business' tax return.

To learn more on how to save further on your business taxes, book a free call with us today. We help you find the smartest tax strategy for your business so that you can keep more of the profits.

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