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Deduct education cost for child/employee

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in Small Business Tax

Q: I was interested in your special report on business education. (7/11/05 issue) Both of my kids work for me as employees and also attend college. I found a course on family business dynamics at a different college that I'd like my kids to take. If I pay for the course, can I deduct the cost? A.C.

A: Based on your information, those costs would be deductible if they clearly improve the skills necessary for your children's current jobs or, if you simply treat the company-paid costs as additional compensation paid to your kids. If you're personally paying the fees as a parent, you can't take the deduction. That's why it's best to have the company pay the course expenses, assuming they can be written off as a legitimate business expense (which appears to be the case in your situation). If you meet the requirements spelled out in our special report, you can deduct the cost as a business expense whether you reimburse the employees or pay the school directly.

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