Education Expense / Business Deduction

[Terry D EA]

 Client has been claiming the AOC for education for the previous four years, started a consulting business in 2020 as a single member LLC. Now wants to deduct the education expenses incurred in 2020 as a business expense instead of utilizing the Life Time Learning credit or tuition and fees deduction because their income level is too high for the education credits. I have never been asked this question before. My first response was no because the education expenses were not continuing Ed or necessary CEU's to maintain a current status. According to the client, the education applies to their current credentialing.

I have prepared this client's taxes for several years and this has never come up in the past. Business expenses were given to me from receipts they were pulling up on their phone. I couldn't see the receipts and some of the expenses seemed unreasonable. At times, it appeared figures were being pulled out of the atmosphere. I advised that all expenses have to be reasonable and allowable expenses and that you just can't create an expense. I also advised that because I now became suspicious of the legitimacy of the expenses, I was ready to terminate the agreement and send them packing. Not quite that harsh but you get the point. At this point I was shown some receipts. I included all of this in statements with the due diligence because there is a dependent child involved and CTC. I still say no regarding deducting the education expenses as a business expense.

[Lee B]

Excerpt from IRS Topic 513:

 

"To be deductible, your expenses must be for education that (1) maintains or improves skills needed in your present work or (2) a law requires to keep your present salary, status or job. However, even if the education meets either of these tests, the education can't be part of a program that will qualify you for a new trade or business or that you need to meet the minimal educational requirements of your present trade or business."

[WITAXLADY]

but that is for the education credits, not as a business expense...

[Lee B]

No, my post was the IRS position regarding the business expense deduction of educational expenses.

[Terry D EA]

I also checked Pub 970. The exact wording cbslee posted is correct and very straight forward.