Tuesday, September 13, 2011

Education Expense Tax Deduction

For Education Deduction, Neither of these things can be true in order to get the deduction:


  1. Cannot violate the entry level test OR
    1. Education cannot meet the minimal entry level requirements in starting a new business or position. 
    2. Also applies if you are temporary employee trying to make your position permanent
      1. What is a temporary employee? 
      2. Regulations say if you have tenure or tenure track and the institution is contributing to the retirement plan, then you are permanent employee. 
  2. Upward Bound Test – New Type of Position
    1. Does the education do anything to qualify you for a new trade or business or big promotion?  
      1. The regulations give examples: Very blurry lines
      2. Elementary school teacher who becomes secondary teacher is not new business New teacher in new subject is not a new business. Classroom teacher to guidance counselor is not a new trade or business.
Regulations emphasize idea that the education must be within the taxpayer’s already established field, and not in new field. Definition of taxpayer’s field has major tax consequences. Primary Purpose tests are subjective. These could be bought tests to meet in order for a taxpayer to get an education expense deduction.

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