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Back tax filing 12. Back tax filing   Business Deduction for Work-Related Education Table of Contents What's New Introduction Qualifying Work-Related EducationEducation Required by Employer or by Law Education To Maintain or Improve Skills Education To Meet Minimum Requirements Education That Qualifies You for a New Trade or Business What Expenses Can Be DeductedUnclaimed reimbursement. Back tax filing Transportation Expenses Travel Expenses No Double Benefit Allowed How To Treat ReimbursementsAccountable Plans Nonaccountable Plans Deducting Business ExpensesSelf-Employed Persons Employees Performing Artists and Fee-Basis Officials Impairment-Related Work Expenses Recordkeeping Illustrated Example What's New Standard mileage rate. Back tax filing  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, 2013 through December 31, 2013, is 56. Back tax filing 5 cents per mile. Back tax filing For more information, see Transportation Expenses under What Expenses Can Be Deducted, later. Back tax filing Introduction This chapter discusses work-related education expenses that you may be able to deduct as business expenses. Back tax filing To claim such a deduction, you must: Itemize your deductions on Schedule A (Form 1040 or 1040NR) if you are an employee, File Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming if you are self-employed, and Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education , later. Back tax filing What is the tax benefit of taking a business deduction for work-related education. Back tax filing   If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. Back tax filing Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses (except for impairment-related work expenses of disabled individuals) is greater than 2% of your adjusted gross income. Back tax filing An itemized deduction reduces the amount of your income subject to tax. Back tax filing   If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. Back tax filing This reduces the amount of your income subject to both income tax and self-employment tax. Back tax filing   Your work-related education expenses may also qualify you for other tax benefits, such as the American opportunity and lifetime learning credits. Back tax filing You may qualify for these other benefits even if you do not meet the requirements listed above. Back tax filing   Also, your work-related education expenses may qualify you to claim more than one tax benefit. Back tax filing Generally, you may claim any number of benefits as long as you use different expenses to figure each one. Back tax filing Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. Back tax filing This is education that meets at least one of the following two tests. Back tax filing The education is required by your employer or the law to keep your present salary, status, or job. Back tax filing The required education must serve a bona fide business purpose of your employer. Back tax filing The education maintains or improves skills needed in your present work. Back tax filing 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. Back tax filing You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. Back tax filing Use Figure 12-1, Does Your Work-Related Education Qualify as a quick check to see if your education qualifies. Back tax filing 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. Back tax filing This additional education is qualifying work-related education if all three of the following requirements are met. Back tax filing It is required for you to keep your present salary, status, or job, The requirement serves a bona fide business purpose of your employer, and The education is not part of a program that will qualify you for a new trade or business. Back tax filing 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. Back tax filing See Education To Maintain or Improve Skills , later. Back tax filing Example. Back tax filing You are a teacher who has satisfied the minimum requirements for teaching. Back tax filing Your employer requires you to take an additional college course each year to keep your teaching job. Back tax filing 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. Back tax filing This image is too large to be displayed in the current screen. Back tax filing Please click the link to view the image. Back tax filing Figure 12-1 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. Back tax filing This could include refresher courses, courses on current developments, and academic or vocational courses. Back tax filing Example. Back tax filing You repair televisions, radios, and stereo systems for XYZ Store. Back tax filing To keep up with the latest changes, you take special courses in radio and stereo service. Back tax filing These courses maintain and improve skills required in your work. Back tax filing Maintaining skills vs. Back tax filing qualifying for new job. Back tax filing   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. Back tax filing Education during temporary absence. Back tax filing   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. Back tax filing Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. Back tax filing Example. Back tax filing You quit your biology research job to become a full-time biology graduate student for 1 year. Back tax filing 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. Back tax filing Education during indefinite absence. Back tax filing   If you stop work for more than a year, your absence from your job is considered indefinite. Back tax filing 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. Back tax filing Therefore, it is not qualifying work-related education. Back tax filing 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. Back tax filing The minimum educational requirements are determined by: Laws and regulations, Standards of your profession, trade, or business, and Your employer. Back tax filing 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. Back tax filing 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. Back tax filing You have not necessarily met the minimum educational requirements of your trade or business simply because you are already doing the work. Back tax filing Example 1. Back tax filing You are a full-time engineering student. Back tax filing 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. Back tax filing 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. Back tax filing The education is not qualifying work-related education. Back tax filing Example 2. Back tax filing You are an accountant and you have met the minimum educational requirements of your employer. Back tax filing Your employer later changes the minimum educational requirements and requires you to take college courses to keep your job. Back tax filing 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. Back tax filing Requirements for Teachers States or school districts usually set the minimum educational requirements for teachers. Back tax filing The requirement is the college degree or the minimum number of college hours usually required of a person hired for that position. Back tax filing If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. Back tax filing The determination of whether you are a faculty member of an educational institution must be made on the basis of the particular practices of the institution. Back tax filing You generally will be considered a faculty member when one or more of the following occurs. Back tax filing You have tenure. Back tax filing Your years of service count toward obtaining tenure. Back tax filing You have a vote in faculty decisions. Back tax filing Your school makes contributions for you to a retirement plan other than social security or a similar program. Back tax filing Example 1. Back tax filing The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional education courses. Back tax filing In addition, to keep the job a teacher must complete a fifth year of training within 10 years from the date of hire. Back tax filing 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. Back tax filing However, to keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years. Back tax filing 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. Back tax filing If you have all the required education except the fifth year, you have met the minimum educational requirements. Back tax filing 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. Back tax filing Example 2. Back tax filing Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. Back tax filing The additional four education courses can be qualifying work-related education. Back tax filing Although you do not have all the required courses, you have already met the minimum educational requirements. Back tax filing Example 3. Back tax filing Assume the same facts as in Example 1 except that you are hired with only 3 years of college. Back tax filing The courses you take that lead to a bachelor's degree (including those in education) are not qualifying work-related education. Back tax filing They are needed to meet the minimum educational requirements for employment as a teacher. Back tax filing Example 4. Back tax filing You have a bachelor's degree and you work as a temporary instructor at a university. Back tax filing At the same time, you take graduate courses toward an advanced degree. Back tax filing The rules of the university state that you can become a faculty member only if you get a graduate degree. Back tax filing Also, you can keep your job as an instructor only as long as you show satisfactory progress toward getting this degree. Back tax filing You have not met the minimum educational requirements to qualify you as a faculty member. Back tax filing The graduate courses are not qualifying work-related education. Back tax filing Certification in a new state. Back tax filing   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. Back tax filing This is true even if you must get additional education to be certified in another state. Back tax filing Any additional education you need is qualifying work-related education. Back tax filing You have already met the minimum requirements for teaching. Back tax filing Teaching in another state is not a new trade or business. Back tax filing Example. Back tax filing You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. Back tax filing You move to State B and are promptly hired as a teacher. Back tax filing You are required, however, to complete certain prescribed courses to get a permanent teaching certificate in State B. Back tax filing 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. Back tax filing 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. Back tax filing This is true even if you do not plan to enter that trade or business. Back tax filing If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business. Back tax filing Example 1. Back tax filing You are an accountant. Back tax filing Your employer requires you to get a law degree at your own expense. Back tax filing You register at a law school for the regular curriculum that leads to a law degree. Back tax filing 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. Back tax filing Example 2. Back tax filing You are a general practitioner of medicine. Back tax filing You take a 2-week course to review developments in several specialized fields of medicine. Back tax filing The course does not qualify you for a new profession. Back tax filing It is qualifying work- related education because it maintains or improves skills required in your present profession. Back tax filing Example 3. Back tax filing While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. Back tax filing The program will lead to qualifying you to practice psychoanalysis. Back tax filing The psychoanalytic training does not qualify you for a new profession. Back tax filing It is qualifying work-related education because it maintains or improves skills required in your present profession. Back tax filing Bar or CPA Review Course Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are not qualifying work-related education. Back tax filing They are part of a program of study that can qualify you for a new profession. Back tax filing Teaching and Related Duties All teaching and related duties are considered the same general kind of work. Back tax filing A change in duties in any of the following ways is not considered a change to a new business. Back tax filing Elementary school teacher to secondary school teacher. Back tax filing Teacher of one subject, such as biology, to teacher of another subject, such as art. Back tax filing Classroom teacher to guidance counselor. Back tax filing Classroom teacher to school administrator. Back tax filing 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. Back tax filing If you are not self-employed, you can deduct business expenses only if you itemize your deductions. Back tax filing You cannot deduct expenses related to tax-exempt and excluded income. Back tax filing Deductible expenses. Back tax filing   The following education expenses can be deducted. Back tax filing Tuition, books, supplies, lab fees, and similar items. Back tax filing Certain transportation and travel costs. Back tax filing Other education expenses, such as costs of research and typing when writing a paper as part of an educational program. Back tax filing Nondeductible expenses. Back tax filing   You cannot deduct personal or capital expenses. Back tax filing For example, you cannot deduct the dollar value of vacation time or annual leave you take to attend classes. Back tax filing This amount is a personal expense. Back tax filing Unclaimed reimbursement. Back tax filing   If you do not claim reimbursement that you are entitled to receive from your employer, you cannot deduct the expenses that apply to that unclaimed reimbursement. Back tax filing Example. Back tax filing Your employer agrees to pay your education expenses if you file a voucher showing your expenses. Back tax filing You do not file a voucher and you do not get reimbursed. Back tax filing Because you did not file a voucher, you cannot deduct the expenses on your tax return. Back tax filing Transportation Expenses If your education qualifies, you can deduct local transportation costs of going directly from work to school. Back tax filing 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. Back tax filing Temporary basis. Back tax filing   You go to school on a temporary basis if either of the following situations applies to you. Back tax filing Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less. Back tax filing 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. Back tax filing Your attendance is temporary up to the date you determine it will last more than 1 year. Back tax filing If you are in either situation (1) or (2) above, your attendance is not temporary if facts and circumstances indicate otherwise. Back tax filing Attendance not on a temporary basis. Back tax filing   You do not go to school on a temporary basis if either of the following situations apply to you. Back tax filing Your attendance at school is realistically expected to last more than 1 year. Back tax filing It does not matter how long you actually attend. Back tax filing 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. Back tax filing Your attendance is not temporary after the date you determine it will last more than 1 year. Back tax filing 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. Back tax filing This is true regardless of the location of the school, the distance traveled, or whether you attend school on nonwork days. Back tax filing Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. Back tax filing Transportation expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight. Back tax filing Example 1. Back tax filing You regularly work in a nearby town, and go directly from work to home. Back tax filing You also attend school every work night for 3 months to take a course that improves your job skills. Back tax filing Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation expenses in going between home and school. Back tax filing This is true regardless of the distance traveled. Back tax filing Example 2. Back tax filing Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. Back tax filing You can deduct your transportation expenses from your regular work site to school and then home. Back tax filing Example 3. Back tax filing Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. Back tax filing Since you are attending school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school. Back tax filing Example 4. Back tax filing Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. Back tax filing Since your attendance in school is not considered temporary, you cannot deduct your transportation expenses in going between home and school. Back tax filing If you go directly from work to school, you can deduct the one-way transportation expenses of going from work to school. Back tax filing 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. Back tax filing Using your car. Back tax filing    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. Back tax filing The standard mileage rate for miles driven from January 1, 2013 through December 31, 2013, is 56. Back tax filing 5 cents per mile. Back tax filing Whichever method you use, you can also deduct parking fees and tolls. Back tax filing See Publication 463, chapter 4, for information on deducting your actual expenses of using a car. Back tax filing Travel Expenses You can deduct expenses for travel, meals (see 50% limit on meals , later), and lodging if you travel overnight mainly to obtain qualifying work-related education. Back tax filing Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business purposes. Back tax filing For more information, see chapter 1 of Publication 463. Back tax filing You cannot deduct expenses for personal activities such as sightseeing, visiting, or entertaining. Back tax filing Mainly personal travel. Back tax filing   If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging. Back tax filing You can deduct only your expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities. Back tax filing   Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. Back tax filing An important factor is the comparison of time spent on personal activities with time spent on educational activities. Back tax filing 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. Back tax filing Example 1. Back tax filing John works in Newark, New Jersey. Back tax filing He traveled to Chicago to take a deductible 1-week course at the request of his employer. Back tax filing His main reason for going to Chicago was to take the course. Back tax filing While there, he took a sightseeing trip, entertained some friends, and took a side trip to Pleasantville for a day. Back tax filing Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. Back tax filing He cannot deduct his transportation expenses of going to Pleasantville. Back tax filing He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities. Back tax filing Example 2. Back tax filing Sue works in Boston. Back tax filing She went to a university in Michigan to take a course for work. Back tax filing The course is qualifying work-related education. Back tax filing She took one course, which is one-fourth of a full course load of study. Back tax filing She spent the rest of the time on personal activities. Back tax filing Her reasons for taking the course in Michigan were all personal. Back tax filing Sue's trip is mainly personal because three-fourths of her time is considered personal time. Back tax filing She cannot deduct the cost of her round-trip train ticket to Michigan. Back tax filing She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended the university. Back tax filing Example 3. Back tax filing Dave works in Nashville and recently traveled to California to take a 2-week seminar. Back tax filing The seminar is qualifying work-related education. Back tax filing While there, he spent an extra 8 weeks on personal activities. Back tax filing The facts, including the extra 8-week stay, show that his main purpose was to take a vacation. Back tax filing Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. Back tax filing He can deduct only his expenses for meals (subject to the 50% limit) and lodging for the 2 weeks he attended the seminar. Back tax filing Cruises and conventions. Back tax filing   Certain cruises and conventions offer seminars or courses as part of their itinerary. Back tax filing Even if the seminars or courses are work related, your deduction for travel may be limited. Back tax filing This applies to: Travel by ocean liner, cruise ship, or other form of luxury water transportation, and Conventions outside the North American area. Back tax filing   For a discussion of the limits on travel expense deductions that apply to cruises and conventions, see Luxury Water Travel and Conventions in chapter 1 of Publication 463. Back tax filing 50% limit on meals. Back tax filing   You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related education. Back tax filing If you were reimbursed for the meals, see How To Treat Reimbursements , later. Back tax filing   Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit. Back tax filing Travel as Education 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. Back tax filing Example. Back tax filing You are a French language teacher. Back tax filing While on sabbatical leave granted for travel, you traveled through France to improve your knowledge of the French language. Back tax filing You chose your itinerary and most of your activities to improve your French language skills. Back tax filing You cannot deduct your travel expenses as education expenses. Back tax filing 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. Back tax filing No Double Benefit Allowed You cannot do either of the following. Back tax filing Deduct work-related education expenses as business expenses if you benefit from these expenses under any other provision of the law, for example, as a tuition and fees deduction. Back tax filing Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance. Back tax filing See Adjustments to Qualifying Work-Related Education Expenses, next. Back tax filing 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. Back tax filing You must reduce the qualifying expenses by the amount of such expenses allocable to the tax-free educational assistance. Back tax filing Tax-free educational assistance. Back tax filing   This includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions). Back tax filing Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Back tax filing Amounts that do not reduce qualifying work-related education expenses. Back tax filing   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. Back tax filing 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. Back tax filing How To Treat Reimbursements How you treat reimbursements depends on the arrangement you have with your employer. Back tax filing There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. Back tax filing You can tell the type of plan you are reimbursed under by the way the reimbursement is reported on your Form W-2. Back tax filing Note. Back tax filing The following rules about reimbursement arrangements also apply to expense allowances received from your employer. Back tax filing Accountable Plans To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules. Back tax filing Your expenses must have a business connection. Back tax filing This means your expenses must be deductible under the rules for qualifying work-related education explained earlier. Back tax filing You must adequately account to your employer for your expenses within a reasonable period of time. Back tax filing You must return any reimbursement or allowance in excess of the expenses accounted for within a reasonable period of time. Back tax filing If you are reimbursed under an accountable plan, your employer should not include any reimbursement in your income in box 1 of your Form W-2. Back tax filing If your employer included reimbursements in box 1 of your Form W-2 and you meet all three rules for accountable plans, ask your employer for a corrected Form W-2. Back tax filing Accountable plan rules not met. Back tax filing   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules for accountable plans. Back tax filing Those expenses that fail to meet the three rules are treated as having been reimbursed under a Nonaccountable Plan (discussed later). Back tax filing Expenses equal reimbursement. Back tax filing   Under an accountable plan, if your expenses equal your reimbursement, you do not complete Form 2106 or 2106-EZ. Back tax filing Because your expenses and reimbursements are equal, you do not have a deduction. Back tax filing Excess expenses. Back tax filing   If your expenses are more than your reimbursement, you can deduct your excess expenses. Back tax filing This is discussed later, under Deducting Business Expenses . Back tax filing Allocating your reimbursements for meals. Back tax filing   Because your excess meal expenses are subject to the 50% limit, you must figure them separately from your other expenses. Back tax filing If your employer paid you a single amount to cover both meals and other expenses, you must allocate the reimbursement so that you can figure your excess meal expenses separately. Back tax filing Make the allocation as follows. Back tax filing Divide your meal expenses by your total expenses. Back tax filing Multiply your total reimbursement by the result from (1). Back tax filing This is the allocated reimbursement for your meal expenses. Back tax filing Subtract the amount figured in (2) from your total reimbursement. Back tax filing The difference is the allocated reimbursement for your other expenses of qualifying work-related education. Back tax filing Example. Back tax filing Your employer paid you an expense allowance of $2,000 under an accountable plan. Back tax filing The allowance was to cover all of your expenses of traveling away from home to take a 2-week training course for work. Back tax filing There was no indication of how much of the reimbursement was for each type of expense. Back tax filing Your actual expenses equal $2,500 ($425 for meals + $700 lodging + $150 transportation expenses + $1,225 for books and tuition). Back tax filing Using the steps listed above, allocate the reimbursement between the $425 meal expenses and the $2,075 other expenses. Back tax filing   1. Back tax filing $425 meal expenses  $2,500 total expenses = . Back tax filing 17   2. Back tax filing $2,000 (reimbursement)×. Back tax filing 17     =$340 (allocated reimbursement for meal expenses)   3. Back tax filing $2,000 (reimbursement)−$340 (meals)     = $1,660 (allocated reimbursement for other qualifying work-related education expenses) Your excess meal expenses are $85 ($425 − $340) and your excess other expenses are $415 ($2,075 − $1,660). Back tax filing After you apply the 50% limit to your meals, you have a deduction for work-related education expenses of $458 (($85 × 50%) + $415). Back tax filing Nonaccountable Plans Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a nonaccountable plan with your wages, salary, or other pay and report the total in box 1 of your Form W-2. Back tax filing You can deduct your expenses regardless of whether they are more than, less than, or equal to your reimbursement. Back tax filing This is discussed later under Deducting Business Expenses . Back tax filing An illustrated example of a nonaccountable plan, using Form 2106-EZ, is shown at the end of this chapter. Back tax filing Reimbursements for nondeductible expenses. Back tax filing   Reimbursements you received for nondeductible expenses are treated as paid under a nonaccountable plan. Back tax filing You must include them in your income. Back tax filing For example, you must include in your income reimbursements your employer gave you for expenses of education that: You need to meet the minimum educational requirements for your job, or Is part of a program of study that can qualify you for a new trade or business. Back tax filing   For more information on accountable and nonaccountable plans, see chapter 6 of Publication 463. Back tax filing Deducting Business Expenses Self-employed persons and employees report their business expenses differently. Back tax filing The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense. Back tax filing Self-Employed Persons 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 (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040)). Back tax filing If your education 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. Back tax filing See the instructions for the form you file for information on how to complete it. Back tax filing Employees If you are an employee, you can deduct the cost of qualifying work-related education only if you: Did not receive (and were not entitled to 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 for which you claimed reimbursement. Back tax filing If either (1) or (2) applies, you can deduct the total qualifying cost. Back tax filing If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement. Back tax filing 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 21, or Schedule A (Form 1040NR), line 7. Back tax filing (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. Back tax filing ) This deduction (except for impairment-related work expenses of disabled individuals) is subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. Back tax filing Form 2106 or 2106-EZ. Back tax filing   To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or 2106-EZ. Back tax filing Form not required. Back tax filing   Do not complete either Form 2106 or 2106-EZ if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are not claiming travel, transportation, meal, or entertainment expenses. Back tax filing   If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. Back tax filing (Special rules for expenses of certain Performing Artists and Fee-Basis Officials and for Impairment-Related Work Expenses are explained later. Back tax filing ) Using Form 2106-EZ. Back tax filing   This form is shorter and easier to use than Form 2106. Back tax filing Generally, you can use this form if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are using the standard mileage rate if you are claiming vehicle expenses. Back tax filing   If you do not meet both of these requirements, use Form 2106. Back tax filing 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. Back tax filing Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24, or Form 1040NR, line 35. Back tax filing You do not have to itemize your deductions on Schedule A (Form 1040 or 1040NR), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income limit. Back tax filing You must complete Form 2106 or 2106-EZ to figure your deduction even if you meet the requirements described earlier under Form not required . Back tax filing For more information on qualified performing artists, see chapter 6 of Publication 463. Back tax filing 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 28, or Schedule A (Form 1040NR), line 14. Back tax filing They are not subject to the 2%-of-adjusted-gross-income limit. Back tax filing To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required . Back tax filing For more information on impairment-related work expenses, see chapter 6 of Publication 463. Back tax filing Recordkeeping You must keep records as proof of any deduction claimed on your tax return. Back tax filing Generally, you should keep your records for 3 years from the date of filing the tax return and claiming the deduction. Back tax filing If you are an employee who is reimbursed for expenses and you give your records and documentation to your employer, you do not have to keep duplicate copies of this information. Back tax filing However, you should keep your records for a 3-year period if: You claim deductions for expenses that are more than your reimbursement, Your employer does not use adequate accounting procedures to verify expense accounts, You are related to your employer, or Your expenses are reimbursed under a nonaccountable plan. Back tax filing Examples of records to keep. Back tax filing   If any of the above cases apply to you, you must be able to prove that your expenses are deductible. Back tax filing You should keep adequate records or have sufficient evidence that will support your expenses. Back tax filing Estimates or approximations do not qualify as proof of an expense. Back tax filing Some examples of what can be used to help prove your expenses are: Documents, such as transcripts, course descriptions, catalogs, etc. Back tax filing , showing periods of enrollment in educational institutions, principal subjects studied, and descriptions of educational activity. Back tax filing Canceled checks and receipts to verify amounts you spent for: Tuition and books, Meals and lodging while away from home overnight for educational purposes, Travel and transportation, and Other education expenses. Back tax filing Statements from your employer explaining whether the education was necessary for you to keep your job, salary, or status; how the education helped maintain or improve skills needed in your job; how much reimbursement you received; and, if you are a teacher, the type of certificate and subjects taught. Back tax filing Complete information about any scholarship or fellowship grants, including amounts you received during the year. Back tax filing Illustrated Example Victor Jones teaches math at a private high school in North Carolina. Back tax filing He was selected to attend a 3-week math seminar at a university in California. Back tax filing The seminar will improve his skills in his current job and is qualifying work-related education. Back tax filing He was reimbursed for his expenses under his employer's nonaccountable plan, so his reimbursement of $2,100 is included in the wages shown in box 1 of his Form W-2. Back tax filing Victor will file Form 1040. Back tax filing His actual expenses for the seminar are as follows:   Lodging   $1,050     Meals   526     Airfare   550     Taxi fares   50     Tuition and books   400     Total Expenses   $2,576   Victor files Form 2106-EZ with his tax return. Back tax filing He shows his expenses for the seminar in Part I of the form. Back tax filing He enters $1,650 ($1,050 + $550 + $50) on line 3 to account for his lodging, airfare, and taxi fares. Back tax filing He enters $400 on line 4 for his tuition and books. Back tax filing On the line provided for total meals and entertainment expenses, Victor enters $526 for meal expenses. Back tax filing He multiplies that amount by 50% and enters the result, $263, on line 5. Back tax filing On line 6, Victor totals the amounts from lines 3 through 5. Back tax filing He carries the total, $2,313, to Schedule A (Form 1040), line 21. Back tax filing Since he does not claim any vehicle expenses, Victor leaves Part II blank. Back tax filing His filled-in form is shown on the next page. Back tax filing This image is too large to be displayed in the current screen. Back tax filing Please click the link to view the image. Back tax filing Form 2106-EZ for V. Back tax filing Jones Prev  Up  Next   Home   More Online Publications