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Education & Work-Related Expenses

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Can I deduct the cost of classes I need for work?

In some cases, you may be able to deduct the cost of classes you need for work. This deduction, however, would be subject to the 2 percent of AGI floor, along with most other miscellaneous deductions you list on Form 1040, Schedule A (PDF), Itemized Deductions.

To be deductible, your expenses must be for education that:

  • Maintains or improves skills required in your present job, or
  • Serves a business purpose and is required by your employer, or by law to keep your present salary, status, or job.

However, these same expenses are not deductible if:

  • The education is required to meet the minimum educational requirements of your job, or
  • The education is part of a program that will lead to qualifying you in a new trade or business.

Educational expenses, related to your present work, that are incurred during periods of temporary absence from your job may also be deductible provided you return to the same job or same type of work. Generally, absence from work for one year or less is considered temporary.

For more information, refer to Publication 508 (PDF), Tax Benefits for Work-Related Education; and Tax Topic 513, Educational Expenses.

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Am I eligible to claim both my job education expenses (minus 2% of AGI) and the Lifetime Learning Credit on my taxes?

If you are eligible to deduct educational expenses and are also eligible for the lifetime learning credit, then it is possible to claim both, as long as you do NOT use the same educational expenses to claim both benefits. Your expenses must be divided between the two. This is sometimes desirable because a qualifying expense for one benefit may not be a qualifying expense for the other tax benefit. For more information, refer to Publication 508 (PDF), Tax Benefits for Work-Related Education; Form 8863 (PDF), Education Credit (Hope and Lifetime Learning Credit); and Tax Topic 513, Educational Expenses.

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I am employed as a Registered Nurse and am currently taking classes to be an Advanced Practitioner of Nursing (which is a master's Degree in Nursing). My classes are not required by my employer but they do increase my knowledge to do my job well. I will probably continue working for the same employer when I graduate. Can I claim the cost of tuition, books, travel to the university, etc., as an unreimbursed business expense?

You may be able to claim this deduction as long as the position of Advanced Practitioner of Nursing does not constitute a change of trade or business. If the education merely maintains or improves the skills required in your employment and you merely have a change of duties, your expenses would likely be deductible as job education expenses, subject to certain limitations. However, you should consider the relative merits of taking a tax deduction versus taking a tax . Consider the relative merits of taking a tax deduction or taking a tax credit (the Hope and Lifetime Learning Credits) for the same expense. For more information on the Education Credits, including the Hope and Lifetime Learning Credits, refer to Publication 970 (PDF), Tax Benefits for Higher Education. For more information on deducting education expenses, refer to Publication 508 (PDF), Tax Benefits for Work-Related Higher Education; Tax Topic 513, Educational Expenses; and Instructions for Form 2106, Employee Business Expenses

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I took an accounting course in order to keep my salary on my current job. My employer did not reimburse me for the expenses. Can I take a deduction on my tax return for the cost of the course?

If you itemize deductions you may be able to deduct work-related educational expenses as job expenses which, when combined with your other miscellaneous deductions, are subject to the 2% of adjusted gross income limitation on Form 1040, Schedule A (PDF), Itemized Deductions. To be deductible, your expenses must be for education that:

  • Maintains or improves skills required in your present job, or
  • Serves a business purpose and is required by your employer, or by law, to keep your present salary, status, or job.

Your expenses are not deductible if the education is required to meet the minimum educational requirements of your job or is part of a program that will lead to qualifying you in a new trade or business. For more information on deductible educational expenses, refer to Tax Topic 513, Educational Expenses; or Publication 508 (PDF),Educational Expenses; Tax Benefits for Work-related Education;, and Instructions for Form 2106, Employee Business Expenses.

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My employer is including my graduate school tuition reimbursements on my W-2. Where do I claim these education expenses on my Form 1040?

If your graduate school tuition is deductible and the reimbursements are included in your income as wages, you may take the expense as a miscellaneous itemized deduction on Form 1040, Schedule A (PDF), Itemized Deductions, line 20. You may also need to attach Form 2106 (PDF), Employee Business Expenses. For more information, refer to Publication 508 (PDF), Tax Benefits for Work-Related Education; Tax Topic 513, Educational Expenses; and Form 2106 (PDF), Employee Business Expense.

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Is the exclusion from income of up to $5,250 of employer-provided educational assistance under a qualified program still available?

Yes, but for 2002, it applies only to benefits you receive for undergraduate courses. With the year 2002, employer-provided educational assistance will include graduate level courses. For more information, refer to Publication 508 (PDF), Educational Expenses.

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I am an employee. What form do I use to claim business expenses for local transportation?

Generally, you must use Form 2106 (PDF), Employee Business Expenses, or Form 2106-EZ (PDF), Unreimbursed Employee Business Expenses, to claim a deduction for employee business expenses. Your deductible expense is then taken on line 20 of Form 1040, Schedule A (PDF) , as a miscellaneous itemized deduction, subject to the 2% of adjusted gross income floor. Special rules may apply, depending on the reimbursement arrangement you have with your employer. For additional information, refer to Publication 463 (PDF), Travel, Entertainment, Gift, and Car Expenses, Tax Topic 514, Employee Business Expenses, and Publication 529 (PDF), Miscellaneous Deductions.

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I moved to a different state to accept a new job. Will I be able to deduct all of my moving expenses?

When moving expenses coincide closely with a job transfer or the start of a new job, some of those expenses may qualify for deduction as an adjustment to income on Form 1040 (PDF), U.S. Individual Income Tax Return. You must have moved far enough, and, generally, closer to your new job than you were before you moved. You must have started and kept full-time work for a specific period after the move. Not all moving expenses are deductible. Deductible expenses are generally limited to one-way transportation, including lodging, of your household members along the most direct route to your new residence, and transportation, parking and storage of household goods. You cannot deduct a reimbursed expense, unless the reimbursement has been counted in your wages. For more information, refer to Publication 521 (PDF), Moving Expenses; Tax Topic 455, Moving Expenses; and the Instructions for Form 3903 (PDF), Moving Expenses.

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11.1 Sale or Trade of Business, Depreciation, Rentals: Depreciation & Recapture
I purchased a computer to support my job-related activities. As an employee, can I write-off the entire allowed cost or will I have to depreciate it over a few years?

You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is:

  • For the convenience of your employer, and
  • Required as a condition of your employment. You cannot take a section 179 deduction for the item or claim accelerated depreciation unless your use of the computer is more than 50% business or job-related use (and you meet the two conditions listed above).

Section 179 deductions and accelerated depreciation methods are explained in Publication 946 (PDF), How to Depreciate Property.

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12.7 Small Business/Self-Employed/Other Business: Income & Expenses
For business travel, are there limits on the amounts deductible for meals?

Meal expenses are deductible only if your trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. The amount of the meal expenses must be substantiated, but instead of keeping records of the actual cost of your meal expenses you can generally use a standard meal allowance ranging from $30 to $46 in 2001 depending on where and when you travel.

Generally, the deduction for unreimbursed business meals is limited to 50% of the cost that would otherwise be deductible.

For more information on business travel expenses and restrictions, refer to Tax Topic 511, or Publication 463 (PDF), Travel, Entertainment, Gift, and Car Expenses, and Publication 1542, Per Diem Rates.

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