Is My School Tuition Deductible?

In general, you are allowed a business deduction for education expenses when you satisfy ALL of these requirements:
  1. The education was undertaken to IMPROVE skills or gain knowledge for your current position,
  2. The education was NOT undertaken to acquire the basic skills and knowledge required to qualify for your present job,
  3. The education will not qualify you for a promotion or new position/occupation, even if you choose to remain on your current job,

    AND

  4. The expenses incurred were reasonable for the benefit received.
Expenses connected with seminars about investments or unrelated to your current job are not deductible.

Are costs of obtaining a degree deductible? Except in rare cases, the cost of a degree program would not be deductible. However, the individual courses included in the degree program, which meet the above criteria, could be deductible. (Example: Sally works in retail operations, and is going to school at night to get her college degree. Some of her business-related courses may help her do her present job without qualifying her for a promotion, and could be deductible. However, her liberal arts courses - required for her degree - are unrelated to her current position and would not be deductible.)

The above rules do NOT apply to amounts that are excluded from your wages under an employer's educational reimbursement program which is qualified under Section 127 of the Internal Revenue Code. Only undergrad courses qualify for this exclusion.

NOTE: If your educational expenses DO NOT qualify for a deduction, they still may qualify for one of the new educational credits which started in 1998! See the separate FAQ on that topic.



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