| Pub. 17, Your Federal Income Tax |
2005 Tax Year |
27.
Tax Benefits for Work-Related Education
Standard mileage rate. Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount
you can deduct for
miles driven from January 1, 2005, through August 31, 2005, is 40½ cents a mile. You can deduct 48½ cents a mile for
miles driven from September 1, 2005, through December 31, 2005. This is up from 37½ cents a mile in 2004. See Transportation
Expenses under What Expenses Can Be Deducted, for more information.
Limit on itemized deductions. If your adjusted gross income for 2005 is more than $145,950 ($72,975 if you are married filing separately), your itemized
deductions may be
limited. See chapter 29 for more information about this limit.
This chapter discusses work-related education expenses that you may be able to deduct as business expenses.
To claim such a deduction, you must:
-
Be working,
-
Itemize your deductions on Schedule A (Form 1040) if you are an employee,
-
File Schedule C (Form 1040) or Schedule F (Form 1040) if you are self-employed, and
-
Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education.
If you are an employee and able to itemize your deductions, you may be able to claim a deduction for the expenses you pay
for your work-related
education. Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain
miscellaneous
expenses is greater than 2% of your adjusted gross income. See chapter 28.
If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment
income.
Your work-related education expenses may also qualify you for other tax benefits, such as the tuition and fees deduction (see
chapter 19) and the
Hope and lifetime learning credits (see chapter 35). You may qualify for these other benefits even if you do not meet the
requirements listed earlier.
Also, keep in mind that your work-related education expenses may qualify you to claim more than one tax benefit. Generally,
you may claim any
number of benefits as long as you use different expenses to figure each one.
When you figure your taxes, you may want to compare these tax benefits so you can choose the method(s) that give you the lowest
tax liability.
First, figure your taxes using the expenses as business deductions. Then, figure your taxes again using any of the other deductions
and credits for
which you qualify. You may find that a combination of credit(s) and deduction(s) gives you the lowest tax.
Useful Items - You may want to see:
Publication
-
463
Travel, Entertainment, Gift, and Car Expenses
-
970
Tax Benefits for Education
Form (and Instructions)
-
2106
Employee Business Expenses
-
2106-EZ
Unreimbursed Employee Business Expenses
-
Schedule A (Form 1040)
Itemized Deductions
Qualifying Work- Related Education
You can deduct the costs of qualifying work- related education as business expenses. This is education that meets at least
one of the following two
tests.
-
The education is required by your employer or the law to keep your present salary, status, or job. The required education
must serve a
bona fide business purpose of your employer.
-
The education maintains or improves skills needed in your present work.
However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it:
-
Is needed to meet the minimum educational requirements of your present trade or business, or
-
Is part of a program of study that will qualify you for a new trade or business.
You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a
degree.
Use Figure 27-A, later, as a quick check to see if your education qualifies.
Education Required by Employer or by Law
Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more
education. This
additional education is qualifying work-related education if all three of the following requirements are met.
-
It is required for you to keep your present salary, status, or job,
-
The requirement serves a business purpose of your employer, and
-
The education is not part of a program that will qualify you for a new trade or business.
When you get more education than your employer or the law requires, the additional education can be qualifying work-related
education only if it
maintains or improves skills required in your present work. See Education To Maintain or Improve Skills.
Example.
You are a teacher who has satisfied the minimum requirements for teaching. Your employer requires you to take an additional
college course each
year to keep your teaching job. If the courses will not qualify you for a new trade or business, they are qualifying work-related
education even if
you eventually receive a master's degree and an increase in salary because of this extra education.
Education To Maintain or Improve Skills
If your education is not required by your employer or the law, it can be qualifying work- related education only if it maintains
or improves skills
needed in your present work. This could include refresher courses, courses on current developments, and academic or vocational
courses.
Example.
You repair televisions, radios, and stereo systems for XYZ Store. To keep up with the latest changes, you take special courses
in radio and stereo
service. These courses maintain and improve skills required in your work.
Maintaining skills vs. qualifying for new job.
Education to maintain or improve skills needed in your present work is not qualifying education if it will also qualify
you for a new trade or
business.
Temporary absence.
If you stop working for a year or less in order to get education to maintain or improve skills needed in your present
work and then return to the
same general type of work, your absence is considered temporary. Education that you get during a temporary absence is qualifying
work-related
education if it maintains or improves skills needed in your present work.
Example.
You quit your biology research job to become a full-time biology graduate student for one year. If you return to work in biology
research after
completing the courses, the education is related to your present work even if you do not go back to work with the same employer.
Indefinite absence.
If you stop work for more than a year, your absence from your job is considered indefinite. Education during an indefinite
absence, even if it
maintains or improves skills needed in the work from which you are absent, is considered to qualify you for a new trade or
business. Therefore, it is
not qualifying work-related education.
Education To Meet Minimum Requirements
Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related
education. The
minimum educational requirements are determined by:
-
Laws and regulations,
-
Standards of your profession, trade, or business, and
-
Your employer.
Once you have met the minimum educational requirements that were in effect when you were hired, you do not have to meet any
new minimum educational
requirements. This means that if the minimum requirements change after you were hired, any education you need to meet the
new requirements can be
qualifying education.
You have not necessarily met the minimum educational requirements of your trade or business simply because you are already
doing the work.
Example 1.
You are a full-time engineering student. Although you have not received your degree or certification, you work part time as
an engineer for a firm
that will employ you as a full-time engineer after you finish college. Although your college engineering courses improve your
skills in your present
job, they are also needed to meet the minimum job requirements for a full-time engineer. The education is not qualifying work-related
education.
Example 2.
You are an accountant and you have met the minimum educational requirements of your employer. Your employer later changes
the minimum educational
requirements and requires you to take college courses to keep your job. These additional courses can be qualifying work-related
education because you
have already satisfied the minimum requirements that were in effect when you were hired.
Requirements for Teachers
States or school districts usually set the minimum educational requirements for teachers. The requirement is the college degree
or the minimum
number of college hours usually required of a person hired for that position.
If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. You
generally will be
considered a faculty member when one or more of the following occurs.
-
You have tenure.
-
Your years of service count toward obtaining tenure.
-
You have a vote in faculty decisions.
-
Your school makes contributions for you to a retirement plan other than social security or a similar program.
Example 1.
The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional
education courses. In
addition, to keep the job, a teacher must complete a fifth year of training within 10 years from the date of hire. If the
employing school certifies
to the state Department of Education that qualified teachers cannot be found, the school can hire persons with only 3 years
of college. However, to
keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years.
Under these facts, the bachelor's degree, whether or not it includes the 10 professional education courses, is considered
the minimum educational
requirement for qualification as a teacher in your state.
If you have all the required education except the fifth year, you have met the minimum educational requirements. The fifth
year of training is
qualifying work-related education unless it is part of a program of study that will qualify you for a new trade or business.
Example 2.
Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. The
additional four education courses can be qualifying work-related education. Although you do not have all the required courses,
you have already met
the minimum educational requirements.
Example 3.
Assume the same facts as in Example 1 except that you are hired with only 3 years of college. The courses you take that lead to a
bachelor's degree (including those in education) are not qualifying work-related education. They are needed to meet the minimum
educational
requirements for employment as a teacher.
Example 4.
You have a bachelor's degree and you work as a temporary instructor at a university. At the same time, you take graduate courses
toward an advanced
degree. The rules of the university state that you can become a faculty member only if you get a graduate degree. Also, you
can keep your job as an
instructor only as long as you show satisfactory progress toward getting this degree. You have not met the minimum educational
requirements to qualify
you as a faculty member. The graduate courses are not qualifying work-related education.
Certification in a new state.
Once you have met the minimum educational requirements for teachers for your state, you are considered to have met
the minimum educational
requirements in all states. This is true even if you must get additional education to be certified in another state. Any additional
education you need
is qualifying work-related education. You have already met the minimum requirements for teaching. Teaching in another state
is not a new trade or
business.
Example.
You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. You move
to State B and are
promptly hired as a teacher. You are required, however, to complete certain prescribed courses to get a permanent teaching
certificate in State B.
These additional courses are qualifying work-related education because the teaching position in State B involves the same
general kind of work for
which you were qualified in State A.
Education That Qualifies You for a New Trade or Business
Education that is part of a program of study that will qualify you for a new trade or business is not qualifying work-related
education. This is
true even if you do not plan to enter that trade or business.
If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business.
Example 1.
You are an accountant. Your employer requires you to get a law degree at your own expense. You register at a law school for
the regular curriculum
that leads to a law degree. Even if you do not intend to become a lawyer, the education is not qualifying because the law
degree will qualify you for
a new trade or business.
Example 2.
You are a general practitioner of medicine. You take a 2-week course to review developments in several specialized fields
of medicine. The course
does not qualify you for a new profession. It is qualifying work-related education because it maintains or improves skills
required in your present
profession.
Example 3.
While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic
institute. The program
will lead to qualifying you to practice psychoanalysis. The psychoanalytic training does not qualify you for a new profession.
It is qualifying
work-related education because it maintains or improves skills required in your present profession.
Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are not qualifying
work-related education.
They are part of a program of study that can qualify you for a new profession.
Teaching and Related Duties
All teaching and related duties are considered the same general kind of work. A change in duties in any of the following ways
is not considered a
change to a new business.
-
Elementary school teacher to secondary school teacher.
-
Teacher of one subject, such as biology, to teacher of another subject, such as art.
-
Classroom teacher to guidance counselor.
-
Classroom teacher to school administrator.
What Expenses Can Be Deducted
If your education meets the requirements described earlier under Qualifying Work-Related Education, you can generally deduct your
education expenses as business expenses. If you are not self-employed, you can deduct business expenses only if you itemize
your deductions.
You cannot deduct expenses related to tax-exempt and excluded income.
Deductible expenses.
The following education expenses can be deducted.
-
Tuition, books, supplies, lab fees, and similar items.
-
Certain transportation and travel costs.
-
Other education expenses, such as costs of research and typing when writing a paper as part of an educational program.
Nondeductible expenses.
You cannot deduct personal or capital expenses. For example, you cannot deduct the dollar value of vacation time or
annual leave you take to attend
classes. This amount is a personal expense.
Unclaimed reimbursement.
If you do not claim reimbursement that you are entitled to receive from your employer, you cannot deduct the expenses
that apply to the
reimbursement.
Example.
Your employer agrees to pay your education expenses if you file a voucher showing your expenses. You do not file a voucher,
and you do not get
reimbursed. Because you did not file a voucher, you cannot deduct the expenses on your tax return.
If your education qualifies, you can deduct local transportation costs of going directly from work to school. If you are regularly
employed and go
to school on a temporary basis, you can also deduct the costs of returning from school to home.
Attendance on a temporary basis.
You go to school on a temporary basis if either of the following situations applies to you.
-
Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less.
-
Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance
is reasonably
expected to last more than 1 year. Your attendance will be considered temporary up to the date you determine it will last
more than 1
year.
Note: If you are in either situation (1) or (2) above, your attendance is not temporary if facts and circumstances indicate otherwise.
Attendance not on a temporary basis.
You do not go to school on a temporary basis if any of the following situations apply to you.
-
Your attendance at school is realistically expected to last more than 1 year. It does not matter how long you actually attend.
-
Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance
is reasonably
expected to last more than 1 year. Your attendance is not temporary after the date you determine it will last more than 1
year.
Deductible Transportation Expenses
If you are regularly employed and go directly from home to school on a temporary basis, you can deduct the round-trip costs
of transportation
between your home and school. This is true regardless of the location of the school, the distance traveled, or whether you
attend school on nonwork
days.
Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car.
Transportation
expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight.
Example 1.
You regularly work in a nearby town, and go directly from work to home. You also attend school every work night for 3 months
to take a course that
improves your job skills. Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation
expenses in going
between home and school. This is true regardless of the distance traveled.
Example 2.
Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. You can deduct
your transportation expenses from your regular work site to school and then home.
Example 3.
Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. Since you are attending
school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school.
Example 4.
Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. Since your attendance in school is not
considered temporary, you cannot deduct your transportation expenses in going between home and school. If you go directly
from work to school, you can
deduct the one-way transportation expenses of going from work to school. If you go from work to home to school and return
home, your transportation
expenses cannot be more than if you had gone directly from work to school.
Using your car.
If you use your car (whether you own or lease it) for transportation to school, you can deduct your actual expenses
or use the standard mileage
rate to figure the amount you can deduct. The standard mileage rate for miles driven from January 1, 2005, through August
31, 2005, is 40½ cents a mile. The rate for miles driven from September 1, 2005, through December 31, 2005, is 48½ cents a
mile. Whichever method
you use, you can also deduct parking fees and tolls. See chapter 26 for information on deducting your actual expenses of using
a car.
You can deduct expenses for travel, meals (see 50% Limit on Meals, later), and lodging if:
-
You travel overnight to obtain qualifying work-related education, and
-
The main purpose of the trip is to attend a work-related course or seminar.
Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business
purposes. For more
information, see chapter 26.
You cannot deduct expenses for personal activities, such as sightseeing, visiting, or entertaining.
Mainly personal travel.
If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging.
You can deduct only your
expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities.
Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. An important
factor is the comparison of time
spent on personal activities with time spent on educational activities. If you spend more time on personal activities, the
trip is considered mainly
educational only if you can show a substantial nonpersonal reason for traveling to a particular location.
Example 1.
John works in Newark, New Jersey. He traveled to Chicago to take a deductible 1-week course at the request of his employer.
His main reason for
going to Chicago was to take the course.
While there, he took a sightseeing trip, entertained some friends, and took a side trip to Pleasantville for a day.
Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. He cannot deduct his transportation
expenses of going to
Pleasantville. He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities.
Example 2.
Sue works in Boston. She went to a university in Michigan to take a course for work. The course is qualifying work-related
education.
She took one course, which is one-fourth of a full course load of study. She spent the rest of the time on personal activities.
Her reasons for
taking the course in Michigan were all personal.
Sue's trip is mainly personal because three-fourths of her time is considered personal time. She cannot deduct the cost of
her round-trip train
ticket to Michigan. She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended
the university.
Example 3.
Dave works in Nashville and recently traveled to California to take a 2-week seminar. The seminar is qualifying work-related
education.
While there, he spent an extra 8 weeks on personal activities. The facts, including the extra 8-week stay, show that his main
purpose was to take a
vacation.
Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. He can deduct only his expenses for meals
(subject to the 50%
limit) and lodging for the 2 weeks he attended the seminar.
Cruises and conventions.
Certain cruises and conventions offer seminars or courses as part of their itinerary. Even if the seminars or courses
are work related, your
deduction for travel may be limited. This applies to:
-
Travel by ocean liner, cruise ship, or other form of luxury water transportation, and
-
Conventions outside the North American area.
For a discussion of the limits on travel expense deductions that apply to cruises and conventions, see Luxury Water Travel and
Conventions in Publication 463.
50% limit on meals.
You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related
education. You cannot have been
reimbursed for the meals.
Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit.
You cannot deduct the cost of travel as a form of education even if it is directly related to your duties in your work or
business.
Example.
You are a French language teacher. While on sabbatical leave granted for travel, you traveled through France to improve your
knowledge of the
French language. You chose your itinerary and most of your activities to improve your French language skills. You cannot deduct
your travel expenses
as education expenses. This is true even if you spent most of your time learning French by visiting French schools and families,
attending movies or
plays, and engaging in similar activities.
No Double Benefit Allowed
You cannot do any of the following.
-
Deduct work-related education expenses as business expenses if you deduct these expenses under any other provision of the
law, for example,
as a tuition and fees deduction. See chapter 19.
-
Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance.
See
Adjustments to Qualifying Work-Related Education Expenses, next.
Adjustments to Qualifying Work-Related Education Expenses
If you pay qualifying work-related education expenses with certain tax-free funds, you cannot claim a deduction for those
amounts. You must reduce
the qualifying expenses by the amount of any tax-free educational assistance you received.
Tax-free educational assistance includes:
-
The tax-free part of scholarships and fellowships (see chapter 1 of Publication 970),
-
Pell grants (see chapter 1 of Publication 970),
-
Employer-provided educational assistance (see chapter 11 of Publication 970),
-
Veterans' educational assistance (see chapter 1 of Publication 970), and
-
Any other nontaxable (tax-free) payments (other than gifts or inheritances) received for education assistance.
Do not reduce the qualifying work-related education expenses by amounts paid with funds the student receives as:
-
Payment for services, such as wages,
-
A loan,
-
A gift,
-
An inheritance, or
-
A withdrawal from the student's personal savings.
Also, do not reduce the qualifying work-related education expenses by any scholarship or fellowship reported as income on
the student's return or
any scholarship which, by its terms, cannot be applied to qualifying work-related education expenses.
How you treat reimbursements depends on the arrangement you have with your employer.
There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. You can tell the type
of plan you are
reimbursed under by the way the reimbursement is reported on your Form W-2.
For information about how to treat reimbursements under both accountable and nonaccountable plans, see Reimbursements in chapter 26.
Deducting Business Expenses
Self-employed persons and employees report business expenses differently.
The following information explains what forms you must use to deduct the cost of your qualifying education as a business expense.
If you are self-employed, you must report the cost of your qualifying work-related education
on the appropriate form used to report your business income and expenses (generally Schedule C, C-EZ, or F). If your educational
expenses include
expenses for a car or truck, travel, or meals, report those expenses the same way you report other business expenses for those
items. See the
instructions for the form you file for information on how to complete it.
If you are an employee, you can deduct the cost of qualifying work-related education only if you:
-
Did not receive any reimbursement from your employer,
-
Were reimbursed under a nonaccountable plan (amount is included in box 1 of Form W-2), or
-
Received reimbursement under an accountable plan, but the amount received was less than your expenses.
If either (1) or (2) applies, you can deduct the total qualifying cost. If (3) applies, you can deduct only the qualifying
costs that were more
than your reimbursement.
In order to deduct the cost of your qualifying work-related education as a business expense, include the amount with your
deduction for any other
employee business expenses on Schedule A (Form 1040), line 20. (Special rules for expenses of certain performing artists and
fee-basis officials and
for impairment-related work expenses are explained later.) This deduction is subject to the 2%-of-adjusted-gross-income limit
that applies to most
miscellaneous itemized deductions. See chapter 28.
Form 2106 or 2106-EZ.
To figure your deduction for employee business expenses, including qualifying work-related education, you generally
must complete Form 2106 or Form
2106-EZ.
Form not required.
Do not complete either Form 2106 or Form 2106-EZ if:
-
All reimbursements, if any, were included in box 1 of your Form W-2, and
-
You are not claiming travel, transportation, meal, or entertainment expenses.
If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 20. (Special rules
for expenses of certain
performing artists and fee-basis officials and for impairment-related work expenses are explained later.)
Using Form 2106-EZ.
This form is shorter and easier to use than Form 2106. Generally, you can use this form if:
-
All reimbursements, if any, were included in box 1 of your Form W-2, and
-
You are using the standard mileage rate if you are claiming vehicle expenses.
If you do not meet both of these requirements, use Form 2106.
Performing Artists and Fee-Basis Officials
If you are a qualified performing artist, or a state (or local) government official who is paid in whole or in part on a fee
basis, you can deduct
the cost of your qualifying work-related education as an adjustment to gross income rather than as an itemized deduction.
Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24.
You do not have to
itemize your deductions on Schedule A (Form 1040), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income
limit. You must
complete Form 2106 or 2106-EZ to figure your deduction, even if you meet the requirements described earlier under Form not required.
For more information on qualified performing artists, see Publication 463.
Impairment-Related Work Expenses
If you are disabled and have impairment-related work expenses that are necessary for you to be able to get qualifying work-related
education, you
can deduct these expenses on Schedule A (Form 1040), line 27. They are not subject to the 2%-of-adjusted-gross-income limit.
To deduct these expenses,
you must complete Form 2106 or 2106-EZ, even if you meet the requirements, described earlier, under Form not required.
For more information on impairment-related work expenses, see Publication 463.
You must keep records as proof of any deduction claimed on your tax return. Generally, you should keep your records for 3
years from the date of
filing the tax return and claiming the deduction.
For specific information about keeping records of business expenses, see Recordkeeping in chapter 26.
Previous | First | Next
Publications Index | 2005 Tax Help Archives | Tax Help Archives Main | Home
|
