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Turbotax 1040x

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Turbotax 1040x

Turbotax 1040x 3. Turbotax 1040x   Rent Expense Table of Contents Introduction Topics - This chapter discusses: RentConditional sales contract. Turbotax 1040x Leveraged leases. Turbotax 1040x Leveraged leases of limited-use property. Turbotax 1040x Taxes on Leased Property Cost of Getting a Lease Improvements by Lessee Capitalizing Rent Expenses Introduction This chapter discusses the tax treatment of rent or lease payments you make for property you use in your business but do not own. Turbotax 1040x It also discusses how to treat other kinds of payments you make that are related to your use of this property. Turbotax 1040x These include payments you make for taxes on the property. Turbotax 1040x Topics - This chapter discusses: The definition of rent Taxes on leased property The cost of getting a lease Improvements by the lessee Capitalizing rent expenses Rent Rent is any amount you pay for the use of property you do not own. Turbotax 1040x In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. Turbotax 1040x If you have or will receive equity in or title to the property, the rent is not deductible. Turbotax 1040x Unreasonable rent. Turbotax 1040x   You cannot take a rental deduction for unreasonable rent. Turbotax 1040x Ordinarily, the issue of reasonableness arises only if you and the lessor are related. Turbotax 1040x Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. Turbotax 1040x Rent is not unreasonable just because it is figured as a percentage of gross sales. Turbotax 1040x For examples of related persons, see Related persons in chapter 2, Publication 544. Turbotax 1040x Rent on your home. Turbotax 1040x   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. Turbotax 1040x You must meet the requirements for business use of your home. Turbotax 1040x For more information, see Business use of your home in chapter 1. Turbotax 1040x Rent paid in advance. Turbotax 1040x   Generally, rent paid in your trade or business is deductible in the year paid or accrued. Turbotax 1040x If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. Turbotax 1040x You can deduct the rest of your payment only over the period to which it applies. Turbotax 1040x Example 1. Turbotax 1040x You are a calendar year taxpayer and you leased a building for 5 years beginning July 1. Turbotax 1040x Your rent is $12,000 per year. Turbotax 1040x You paid the first year's rent ($12,000) on June 30. Turbotax 1040x You can deduct only $6,000 (6/12 × $12,000) for the rent that applies to the first year. Turbotax 1040x Example 2. Turbotax 1040x You are a calendar year taxpayer. Turbotax 1040x Last January you leased property for 3 years for $6,000 a year. Turbotax 1040x You paid the full $18,000 (3 × $6,000) during the first year of the lease. Turbotax 1040x Each year you can deduct only $6,000, the part of the lease that applies to that year. Turbotax 1040x Canceling a lease. Turbotax 1040x   You generally can deduct as rent an amount you pay to cancel a business lease. Turbotax 1040x Lease or purchase. Turbotax 1040x   There may be instances in which you must determine whether your payments are for rent or for the purchase of the property. Turbotax 1040x You must first determine whether your agreement is a lease or a conditional sales contract. Turbotax 1040x Payments made under a conditional sales contract are not deductible as rent expense. Turbotax 1040x Conditional sales contract. Turbotax 1040x   Whether an agreement is a conditional sales contract depends on the intent of the parties. Turbotax 1040x Determine intent based on the provisions of the agreement and the facts and circumstances that exist when you make the agreement. Turbotax 1040x No single test, or special combination of tests, always applies. Turbotax 1040x However, in general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true. Turbotax 1040x The agreement applies part of each payment toward an equity interest you will receive. Turbotax 1040x You get title to the property after you make a stated amount of required payments. Turbotax 1040x The amount you must pay to use the property for a short time is a large part of the amount you would pay to get title to the property. Turbotax 1040x You pay much more than the current fair rental value of the property. Turbotax 1040x You have an option to buy the property at a nominal price compared to the value of the property when you may exercise the option. Turbotax 1040x Determine this value when you make the agreement. Turbotax 1040x You have an option to buy the property at a nominal price compared to the total amount you have to pay under the agreement. Turbotax 1040x The agreement designates part of the payments as interest, or that part is easy to recognize as interest. Turbotax 1040x Leveraged leases. Turbotax 1040x   Leveraged lease transactions may not be considered leases. Turbotax 1040x Leveraged leases generally involve three parties: a lessor, a lessee, and a lender to the lessor. Turbotax 1040x Usually the lease term covers a large part of the useful life of the leased property, and the lessee's payments to the lessor are enough to cover the lessor's payments to the lender. Turbotax 1040x   If you plan to take part in what appears to be a leveraged lease, you may want to get an advance ruling. Turbotax 1040x Revenue Procedure 2001-28 on page 1156 of Internal Revenue Bulletin 2001-19 contains the guidelines the IRS will use to determine if a leveraged lease is a lease for federal income tax purposes. Turbotax 1040x Revenue Procedure 2001-29 on page 1160 of the same Internal Revenue Bulletin provides the information required to be furnished in a request for an advance ruling on a leveraged lease transaction. Turbotax 1040x Internal Revenue Bulletin 2001-19 is available at www. Turbotax 1040x irs. Turbotax 1040x gov/pub/irs-irbs/irb01-19. Turbotax 1040x pdf. Turbotax 1040x   In general, Revenue Procedure 2001-28 provides that, for advance ruling purposes only, the IRS will consider the lessor in a leveraged lease transaction to be the owner of the property and the transaction to be a valid lease if all the factors in the revenue procedure are met, including the following. Turbotax 1040x The lessor must maintain a minimum unconditional “at risk” equity investment in the property (at least 20% of the cost of the property) during the entire lease term. Turbotax 1040x The lessee may not have a contractual right to buy the property from the lessor at less than fair market value when the right is exercised. Turbotax 1040x The lessee may not invest in the property, except as provided by Revenue Procedure 2001-28. Turbotax 1040x The lessee may not lend any money to the lessor to buy the property or guarantee the loan used by the lessor to buy the property. Turbotax 1040x The lessor must show that it expects to receive a profit apart from the tax deductions, allowances, credits, and other tax attributes. Turbotax 1040x   The IRS may charge you a user fee for issuing a tax ruling. Turbotax 1040x For more information, see Revenue Procedure 2014-1 available at  www. Turbotax 1040x irs. Turbotax 1040x gov/irb/2014-1_IRB/ar05. Turbotax 1040x html. Turbotax 1040x Leveraged leases of limited-use property. Turbotax 1040x   The IRS will not issue advance rulings on leveraged leases of so-called limited-use property. Turbotax 1040x Limited-use property is property not expected to be either useful to or usable by a lessor at the end of the lease term except for continued leasing or transfer to a lessee. Turbotax 1040x See Revenue Procedure 2001-28 for examples of limited-use property and property that is not limited-use property. Turbotax 1040x Leases over $250,000. Turbotax 1040x   Special rules are provided for certain leases of tangible property. Turbotax 1040x The rules apply if the lease calls for total payments of more than $250,000 and any of the following apply. Turbotax 1040x Rents increase during the lease. Turbotax 1040x Rents decrease during the lease. Turbotax 1040x Rents are deferred (rent is payable after the end of the calendar year following the calendar year in which the use occurs and the rent is allocated). Turbotax 1040x Rents are prepaid (rent is payable before the end of the calendar year preceding the calendar year in which the use occurs and the rent is allocated). Turbotax 1040x These rules do not apply if your lease specifies equal amounts of rent for each month in the lease term and all rent payments are due in the calendar year to which the rent relates (or in the preceding or following calendar year). Turbotax 1040x   Generally, if the special rules apply, you must use an accrual method of accounting (and time value of money principles) for your rental expenses, regardless of your overall method of accounting. Turbotax 1040x In addition, in certain cases in which the IRS has determined that a lease was designed to achieve tax avoidance, you must take rent and stated or imputed interest into account under a constant rental accrual method in which the rent is treated as accruing ratably over the entire lease term. Turbotax 1040x For details, see section 467 of the Internal Revenue Code. Turbotax 1040x Taxes on Leased Property If you lease business property, you can deduct as additional rent any taxes you have to pay to or for the lessor. Turbotax 1040x When you can deduct these taxes as additional rent depends on your accounting method. Turbotax 1040x Cash method. Turbotax 1040x   If you use the cash method of accounting, you can deduct the taxes as additional rent only for the tax year in which you pay them. Turbotax 1040x Accrual method. Turbotax 1040x   If you use an accrual method of accounting, you can deduct taxes as additional rent for the tax year in which you can determine all the following. Turbotax 1040x That you have a liability for taxes on the leased property. Turbotax 1040x How much the liability is. Turbotax 1040x That economic performance occurred. Turbotax 1040x   The liability and amount of taxes are determined by state or local law and the lease agreement. Turbotax 1040x Economic performance occurs as you use the property. Turbotax 1040x Example 1. Turbotax 1040x Oak Corporation is a calendar year taxpayer that uses an accrual method of accounting. Turbotax 1040x Oak leases land for use in its business. Turbotax 1040x Under state law, owners of real property become liable (incur a lien on the property) for real estate taxes for the year on January 1 of that year. Turbotax 1040x However, they do not have to pay these taxes until July 1 of the next year (18 months later) when tax bills are issued. Turbotax 1040x Under the terms of the lease, Oak becomes liable for the real estate taxes in the later year when the tax bills are issued. Turbotax 1040x If the lease ends before the tax bill for a year is issued, Oak is not liable for the taxes for that year. Turbotax 1040x Oak cannot deduct the real estate taxes as rent until the tax bill is issued. Turbotax 1040x This is when Oak's liability under the lease becomes fixed. Turbotax 1040x Example 2. Turbotax 1040x The facts are the same as in Example 1 except that, according to the terms of the lease, Oak becomes liable for the real estate taxes when the owner of the property becomes liable for them. Turbotax 1040x As a result, Oak will deduct the real estate taxes as rent on its tax return for the earlier year. Turbotax 1040x This is the year in which Oak's liability under the lease becomes fixed. Turbotax 1040x Cost of Getting a Lease You may either enter into a new lease with the lessor of the property or get an existing lease from another lessee. Turbotax 1040x Very often when you get an existing lease from another lessee, you must pay the previous lessee money to get the lease, besides having to pay the rent on the lease. Turbotax 1040x If you get an existing lease on property or equipment for your business, you generally must amortize any amount you pay to get that lease over the remaining term of the lease. Turbotax 1040x For example, if you pay $10,000 to get a lease and there are 10 years remaining on the lease with no option to renew, you can deduct $1,000 each year. Turbotax 1040x The cost of getting an existing lease of tangible property is not subject to the amortization rules for section 197 intangibles discussed in chapter 8. Turbotax 1040x Option to renew. Turbotax 1040x   The term of the lease for amortization includes all renewal options plus any other period for which you and the lessor reasonably expect the lease to be renewed. Turbotax 1040x However, this applies only if less than 75% of the cost of getting the lease is for the term remaining on the purchase date (not including any period for which you may choose to renew, extend, or continue the lease). Turbotax 1040x Allocate the lease cost to the original term and any option term based on the facts and circumstances. Turbotax 1040x In some cases, it may be appropriate to make the allocation using a present value computation. Turbotax 1040x For more information, see Regulations section 1. Turbotax 1040x 178-1(b)(5). Turbotax 1040x Example 1. Turbotax 1040x You paid $10,000 to get a lease with 20 years remaining on it and two options to renew for 5 years each. Turbotax 1040x Of this cost, you paid $7,000 for the original lease and $3,000 for the renewal options. Turbotax 1040x Because $7,000 is less than 75% of the total $10,000 cost of the lease (or $7,500), you must amortize the $10,000 over 30 years. Turbotax 1040x That is the remaining life of your present lease plus the periods for renewal. Turbotax 1040x Example 2. Turbotax 1040x The facts are the same as in Example 1, except that you paid $8,000 for the original lease and $2,000 for the renewal options. Turbotax 1040x You can amortize the entire $10,000 over the 20-year remaining life of the original lease. Turbotax 1040x The $8,000 cost of getting the original lease was not less than 75% of the total cost of the lease (or $7,500). Turbotax 1040x Cost of a modification agreement. Turbotax 1040x   You may have to pay an additional “rent” amount over part of the lease period to change certain provisions in your lease. Turbotax 1040x You must capitalize these payments and amortize them over the remaining period of the lease. Turbotax 1040x You cannot deduct the payments as additional rent, even if they are described as rent in the agreement. Turbotax 1040x Example. Turbotax 1040x You are a calendar year taxpayer and sign a 20-year lease to rent part of a building starting on January 1. Turbotax 1040x However, before you occupy it, you decide that you really need less space. Turbotax 1040x The lessor agrees to reduce your rent from $7,000 to $6,000 per year and to release the excess space from the original lease. Turbotax 1040x In exchange, you agree to pay an additional rent amount of $3,000, payable in 60 monthly installments of $50 each. Turbotax 1040x   You must capitalize the $3,000 and amortize it over the 20-year term of the lease. Turbotax 1040x Your amortization deduction each year will be $150 ($3,000 ÷ 20). Turbotax 1040x You cannot deduct the $600 (12 × $50) that you will pay during each of the first 5 years as rent. Turbotax 1040x Commissions, bonuses, and fees. Turbotax 1040x   Commissions, bonuses, fees, and other amounts you pay to get a lease on property you use in your business are capital costs. Turbotax 1040x You must amortize these costs over the term of the lease. Turbotax 1040x Loss on merchandise and fixtures. Turbotax 1040x   If you sell at a loss merchandise and fixtures that you bought solely to get a lease, the loss is a cost of getting the lease. Turbotax 1040x You must capitalize the loss and amortize it over the remaining term of the lease. Turbotax 1040x Improvements by Lessee If you add buildings or make other permanent improvements to leased property, depreciate the cost of the improvements using the modified accelerated cost recovery system (MACRS). Turbotax 1040x Depreciate the property over its appropriate recovery period. Turbotax 1040x You cannot amortize the cost over the remaining term of the lease. Turbotax 1040x If you do not keep the improvements when you end the lease, figure your gain or loss based on your adjusted basis in the improvements at that time. Turbotax 1040x For more information, see the discussion of MACRS in Publication 946, How To Depreciate Property. Turbotax 1040x Assignment of a lease. Turbotax 1040x   If a long-term lessee who makes permanent improvements to land later assigns all lease rights to you for money and you pay the rent required by the lease, the amount you pay for the assignment is a capital investment. Turbotax 1040x If the rental value of the leased land increased since the lease began, part of your capital investment is for that increase in the rental value. Turbotax 1040x The rest is for your investment in the permanent improvements. Turbotax 1040x   The part that is for the increased rental value of the land is a cost of getting a lease, and you amortize it over the remaining term of the lease. Turbotax 1040x You can depreciate the part that is for your investment in the improvements over the recovery period of the property as discussed earlier, without regard to the lease term. Turbotax 1040x Capitalizing Rent Expenses Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Turbotax 1040x Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Turbotax 1040x You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Turbotax 1040x Indirect costs include amounts incurred for renting or leasing equipment, facilities, or land. Turbotax 1040x Uniform capitalization rules. Turbotax 1040x   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. Turbotax 1040x Produce real property or tangible personal property. Turbotax 1040x For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Turbotax 1040x Acquire property for resale. Turbotax 1040x However, these rules do not apply to the following property. Turbotax 1040x Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. Turbotax 1040x Property you produce if you meet either of the following conditions. Turbotax 1040x Your indirect costs of producing the property are $200,000 or less. Turbotax 1040x You use the cash method of accounting and do not account for inventories. Turbotax 1040x Example 1. Turbotax 1040x You rent construction equipment to build a storage facility. Turbotax 1040x If you are subject to the uniform capitalization rules, you must capitalize as part of the cost of the building the rent you paid for the equipment. Turbotax 1040x You recover your cost by claiming a deduction for depreciation on the building. Turbotax 1040x Example 2. Turbotax 1040x You rent space in a facility to conduct your business of manufacturing tools. Turbotax 1040x If you are subject to the uniform capitalization rules, you must include the rent you paid to occupy the facility in the cost of the tools you produce. Turbotax 1040x More information. Turbotax 1040x   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. Turbotax 1040x Prev  Up  Next   Home   More Online Publications
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IRS Implements Changes to ITIN Application Requirement

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Effective January 1, 2013, the IRS implemented new procedures for issuing new Individual Taxpayer Identification Numbers (ITINs). Designed specifically for tax-administration purposes, ITINs are only issued to people who are not eligible to obtain a Social Security Number.

Specifically, the new procedures apply to most applicants submitting Forms W-7, Application for IRS Individual Taxpayer Identification Number. ITINs for individuals in these categories generally are issued during the tax filing season with the submission of a Form 1040, U.S. Individual Income Tax Return.

Questions and Answers

Some Applicants Not Impacted By Changes

Some categories of applicants are not impacted by these changes:

  • Military spouses and dependents without an SSN who need an ITIN (Military spouses use box e on Form W-7 and dependents use box d). Exceptions to the new document standards will be made for military family members satisfying the documentation requirements by providing a copy of the spouse or parent’s U.S. military identification, or applying from an overseas APO/FPO address.
  • Nonresident aliens applying for ITINs for the purpose of claiming tax treaty benefits (use boxes a and h on Form W-7). Non-resident alien applicants generally need ITINs for reasons besides filing a U.S. tax return. This is necessary for nonresident aliens who may be subject to third-party withholding for various income, such as certain gambling winnings or pension income, or need an ITIN for information reporting purposes. While existing documentation standards will be maintained only for these applicants, scrutiny of the documents will be heightened. ITIN applications of this category that are accompanied by a U.S. tax return will be subject to the new interim document standards.

The October 2, 2012 procedures put into place for the following groups will remain in effect:

  • Student and Exchange Visitor Program (SEVP) participants. SEVP participants already provide documentation to the Department of Homeland Security under the requirements of that program. Individuals studying under the SEVP will be required to apply through a university, college or other SEVP-approved institution. These are individuals admitted to the U.S. under an F, J or M visa who receive taxable scholarship, fellowship or other grants reportable by the school on Form W-2 or Form 1042-S. These procedures cover applications for the primary applicant, their spouse and dependents.
  • Non-citizens with approved Tax Year 2011 extensions to file their tax returns. These are noncitizens who requested an extension of time to file a 2011 federal income tax return for resident and nonresident aliens and choose to not submit originals documents or copies.
Page Last Reviewed or Updated: 12-Dec-2013

The Turbotax 1040x

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