School’s Back in Session: Taxes and Adult Education

College Degree Education Tax Expenses
Educational Expenses

Thinking about heading back to school, but worried about the cost of education? As an adult, you might be able to claim the Lifetime Learning Credit equal to 20% of qualified education expenses–up to $10,000. You can also deduct your educational expenses as a job or career expense. Here are a few things you should know about deducting your educational expenses.

You cannot deduct any courses for which your employer paid

Any classes your employer pays for you cannot claim on your tax return. It’s also worth knowing that your employer is able to pay for up to $5,250 a year for your classes before it counts as part of your income.

You can deduct a lot of expenses

For tax purposes, “education” is a pretty broad term, and therefore it’s not necessarily restricted to college courses. For example, personal development courses, courses to enhance or cultivate professional skills, and even certain activities that do not involve formal instruction may all qualify. There are a couple of criteria, though. For starters, the course maintains or improves skills that are required for your job or your current trade. For example, a seminar that teaches skill sets directly pertinent to your job. Your educational expenses will also satisfy the criteria if the course(s) are required for your job, or to retain your job title or rate of pay.

Expenses cannot qualify you for a new trade

Looking to change careers? Any courses you take to move into a new professional field do NOT qualify for a tax deduction. For example, a marketing professional cannot deduct course costs for a law degree. Note that this deduction is not qualified nor disqualified by your intent: so long as the expenses qualify you for a new career, they are automatically disqualified whether or not you intend to change careers.

Thinking about an MBA? Be cautious about a deduction

Although the qualifications for the deduction are largely objective, there are a few subjective elements for each scenario. That being said, MBA candidates had mixed results when trying to claim an educational deduction for an MBA program–many such cases ended in court. So long as you garner evidence that your new degree is not in pursuit of a new career, you might be able to claim the deduction.

Image credit: Sean MacEntee