How To Get Massive Education Expenses As Deductions

As a small business owner, the government happily gives you tax deductions for increasing your education. That’s because they know you’re likely to earn higher income and end up with a higher tax bill each year. Here’s what you should know about what you can write off for education expenses.

Education expenses can be formal and informal.

The education deduction covers more than just a degree program. You can deduct education expenses that maintain or improves your skills. This includes coaches, tutors, conventions and business seminars. In addition, the IRS knows that you need to become a jack-of-all-trades in order to run your business. So, they also allow you to deduct the cost of learning new skills that will help you in your business. For example, this would include software skills, writing skills, selling skills, planning skills, advertising skills and negotiating skills. Furthermore, if you’re in an industry that has changing education requirements, you can deduct the cost of getting the necessary education. So, remember to include in your annual budget a line item that gives you the ability to improve your education each year.

What if I need to leave work to go to school?

There are rules that make it tricky. And, you’re best to “color within the lines” on this one. If you are already in business and need to take a sabbatical, the IRS only allows you a temporary time before they no longer consider you still in business. So, if you’re planning to step away from your business and go to school for 2 years, you might run into this “temporary window” problem.  If there is a suspension of your business activities for a year or less, the IRS will consider it a “temporary leave”.  This is because most education needed to improve or maintain your skills, for which you are already in business, takes less than 12 months to complete. If you would like to change your profession, you cannot deduct your educational expenses.

There is a lot to navigate through with the IRS when it comes to your education expenses. So, don’t do it alone. At Paragon Accounting & Tax Solutions, we specialize in Woodstock tax preparation for small businesses. We remove the hassle of monthly accounting, bookkeeping, payroll and tax preparation so you can focus on your business.