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The Basics of Professional Development Tax Write Off

Learning doesn’t end once you get a job. With increasing competition and ever-changing industries, it is critical for professionals to continue learning and developing their knowledge and skill set.

That’s where professional training courses come in to play. But did you know that as a professional, you can (in some cases) write off tax for work-related professional development?

As an employee, you can claim your work-related training as a miscellaneous, itemized deduction which reduces the amount of your income subjected to tax. As a self-employed, sole proprietor, you can write tax off as a business expense directly from your self-employment income.

Here we outline some of the basics about which professional development opportunities are actually tax deductible:

Professional Development Tax Write-Off

The Two Tests

Work-related professional development will qualify for tax deduction if it passes one of these two tests:

First test - The education maintains or improves skills required in your current employment, business or area of trade but does not qualify you for other roles or careers (i.e. courses that only equip you with skills directly applicable to your current role).

Second test - The education meets the requirements of your employer, applicable law or regulations (e.g. courses required to maintain working licenses).

Training for your current role only

As mentioned above, tax deductible professional development training must equip you with skills necessary for your current role only and cannot qualify you for a new trade or business.

Even if the training qualifies you for a new career but you do not intend to use it, the opportunity is still there and no one can prove what you will do after obtaining the education. Thus, as a blanket rule, these types of educations are non-tax deductible.

Meeting minimum requirements

Professional development that meets the minimum requirements of your current role (or retrospectively qualifies you for it) does not qualify as work-related education unless the requirements have changed since you were initially hired.

If they are the same, one can assume you were qualified upon being hired and any work-related training from then on must be requirements determined by laws and regulation, professional standards or your employer.

Tax write-off for MBAs

In some cases, tax deduction can depend on your situation. Although MBAs do not qualify you for a new career in the same way that a degree does, never assume that an MBA is tax deductible.

You may still need to provide sufficient evidence that it is not being used to start a new career or line of work. In short, there is no yes or no answer and the IRS should be consulted to determine exactly what the possibilities are.

It depends who's paying for it

Who pays for the education will also be a factor in determining whether or not it is tax deductible. Education paid for by your employer cannot have the tax written off. Only those paid for by yourself will have the opportunity to be tax deductible.

Your employer can pay up to $5,250 a year for you to attend professional development courses without it counting as income. However, this opportunity must be formally offered to all employees for this to count.

Still not sure?

IRS has a simple, easy-to-use 'yes or no' graph to help you determine if your work-related training is tax deductible. They also have a whole section of their website dedicated to the rules and regulations around Business Deduction for Work-Related Education.

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Last updated: 01 Mar 2019

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