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J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line by Barbara Weltman

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Educational Expenses

If you take educational courses, you may be able deduct their cost as a business expense (or you may qualify for new tax credits, explained later under personal education incentives). The tax law clearly states what types of educational courses are deductible and what types are not.

You can deduct education courses that are primarily undertaken to:

  • Maintain or improve skills required in your employment or in your business. If you have been away from the job market for some time, you may no longer be considered in a business (the business of being an employee). In this case, education costs are not deductible.
  • Meet the requirements of an employer or applicable law or regulations imposed as a condition of retaining your salary, status, or employment. For example, continuing professional education courses are deductible as business expenses.

You cannot deduct education courses designed to:

  • Meet minimum educational requirements. This precludes you from deducting the cost of obtaining any professional degree in law, accounting, medicine, or dentistry. The fact that you may already be performing service in an employment status within the profession does not necessarily mean that you have met the minimum education requirements. For example, if a second-year law student is hired to do research, the cost of the third year of law school is not a deductible education expense since the student has not yet met the minimum education requirements to practice law (3 years ...

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