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What is the tax benefit of taking a business deduc- tion for work-related education? If you are self-em- ployed, you deduct your expenses for qualifying work-re- lated education directly from your self-employment income. This reduces the amount of your income subject to both income tax and self-employment tax. If you are an Armed Forces reservist, qualified perform- ing artist, or a fee-based state or local government official, you deduct your expenses for qualifying work-related edu- cation directly from your income as you figure your adjus- ted gross income. If you are an individual with a disability and can itemize your deductions, you deduct your impairment-related edu- cation expenses as an itemized deduction. An itemized deduction reduces the amount of your income subject to tax. Your work-related education expenses may also qualify you for other tax benefits, such as the American opportu- nity (see chapter 2) and lifetime learning (see chapter 3) credits. You may qualify for these other benefits even if you don't meet the requirements listed above. Also, your work-related education expenses may qual- ify you to claim more than one tax benefit. Generally, you may claim any number of benefits as long as you use dif- ferent expenses to figure each one. Qualifying Work-Related Education As discussed earlier, self-employed individuals, Armed Forces reservists, certain artists, and certain government officials can deduct the costs of qualifying work-related education as business expenses. Individuals with a disa- bility can deduct impairment expenses related to this edu- cation as an itemized deduction. This is education that meets at least one of the following two tests. • The education is required by your employer or the law to keep your present salary, status, or job. The re- quired education must serve a bona fide business pur- pose of your employer. • The education maintains or improves skills needed in your present work. However, even if the education meets one or both of the above tests, it isn't qualifying work-related education if it: • Is needed to meet the minimum educational require- ments of your present trade or business, or • Is part of a program of study that will qualify you for a new trade or business. You can deduct the costs of qualifying work-related ed- ucation as a business expense even if the education could lead to a degree. Use Figure 11-1 as a quick check to see if your educa- tion qualifies. Education Required by Employer or by Law Once you have met the minimum educational require- ments for your job, your employer or the law may require you to get more education. This additional education is qualifying work-related education if all three of the follow- ing requirements are met. • It is required for you to keep your present salary, sta- tus, or job. • The requirement serves a bona fide business purpose of your employer. • The education isn't part of a program that will qualify you for a new trade or business. When you get more education than your employer or the law requires, the additional education can be qualify- ing work-related education only if it maintains or improves skills required in your present work. See Education To Maintain or Improve Skills, later. Example. You are a teacher who has satisfied the minimum requirements for teaching. Your employer re- quires you to take an additional college course each year to keep your teaching job. If the courses won't qualify you for a new trade or business, they are qualifying work-rela- ted education even if you eventually receive a master's degree and an increase in salary because of this extra ed- ucation. Education To Maintain or Improve Skills If your education isn't required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. This could include refresher courses, courses on current developments, and academic or vocational courses. Example. You repair televisions, radios, and stereo systems for XYZ Store. To keep up with the latest changes, you take special courses in radio and stereo service. These courses maintain and improve skills re- quired in your work. Maintaining skills vs. qualifying for new job. Educa- tion to maintain or improve skills needed in your present work isn't qualifying education if it will also qualify you for a new trade or business. Education during temporary absence. If you stop working for a year or less in order to get education to maintain or improve skills needed in your present work and then return to the same general type of work, your ab- sence is considered temporary. Education that you get during a temporary absence is qualifying work-related ed- ucation if it maintains or improves skills needed in your present work. Example. You quit your biology research job to be- come a full-time biology graduate student for 1 year. If you Chapter 11 Business Deduction for Work-Related Education Page 59