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Tax Court grounds business education deductions

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Are you thinking of going “back to school” this fall? Generally, you can deduct the costs of attending classes as miscellaneous expenses (subject to the 2%-of-AGI limit) if the education maintains or improves your job skills or meets the employer’s expressed requirements. However, if the education qualifies you for a new trade or business, you can’t write it off.

It’s often difficult to distinguish between education that can improve your skills in an existing job, and courses that will qualify you for a new line of work.

New case: An aeronautical engineer enrolled in training courses that enabled him to obtain a commercial pilot’s license. Even though the education related to his same general line of work, the Tax Court said the license would qualify the taxpayer for a new trade or business. Result: The court disallowed the deductions. (Thompson, TC Memo 2007-174)

Tip: At least the taxpayer avoided accuracy-related penalties by making a reasonable attempt to comply with the laws.

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