ROBERT L. SOMMERS
Note: This exercise is for educational purposes only and is not intended to be legal or tax advice. Your particular facts and circumstances must be considered when applying the U.S. tax law. You should always consult with a competent tax professional with respect to your particular situation.
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Under these standards, you must show the expenses were not incurred for minimum educational requirements of your employment (the "entry-level" test) and not to qualify you for new employment (the "upward-bound" test).
The skill-maintenance standard encompasses refresher courses, seminars and other brief programs covering current developments in your field. But general programs of study may not be deducted unless they directly benefit your current position. For example, pursuing college studies in English usage, public speaking and psychology may be only tenuously related to skills required as a police officer, thus precluding a deduction for such studies. However, a minister might deduct such expenses if sufficiently related to serving his congregation. The skill-maintenance standard is based on each particular case. For teachers, expenses of education which directly maintains or improves skills in a variety of classroom subjects are usually deductible.
The employer-mandate standard may permit deductions if the educational requirements are imposed for a bona fide business purpose. However, you can deduct only the minimum education necessary to retain your established employment relationship, status, or rate of compensation. Expenses beyond this minimum (even if required by the employer) may be deducted only if they meet the skill-maintenance standard. The employer-mandate standard is applicable to public school teachers, who are often required by state statutes or regulations to take additional courses to preserve their accreditation. This standard is also satisfied by continuing education classes required by local law for self-employed persons, such as lawyers and doctors, to continue in practice.
You cannot deduct your expenditures for education if they violate either the entry-level or the upward-bound test. Under the entry-level test, you cannot deduct expenses for education needed to enter your chosen occupation or required to preserve your status as a temporary employee or provisional appointee, or to obtain full status. However, once you enter the occupation, you may deduct expenses to satisfy a subsequent increase in entry level standards. A school teacher, in the absence of normal requirements specifying the required minimum level of education required for a position, is regarded as having met the requirements on becoming "a member of the faculty" under the institution's particular practices.
The upward-bound test means that even though certain courses would be helpful in your current job and even if your employer requires you take courses to improve your performance, if your education's true purpose is to qualify you for a new trade or business, it is not deductible. Fittingly, many IRS agents who elect to attend law school at night to improve their job performance are victims of this disqualification.
Thus, education that qualifies you for a new trade or business is not deductible, but if it trains you for new duties involving the same general work, the expenses are deductible. For instance, shifts by classroom teachers from one subject to another or to another assignment as guidance counselor or principal is not considered a new trade or business. Likewise, from psychiatry to psychoanalysis is not seen as a shift in trade or business, but law is a new occupation to an engineer, accountant or IRS agent. Also considered separate trades or businesses: licensed public accountant and certified public accountant, intern pharmacist and registered pharmacist, and college teacher of mathematics and college teacher of law.
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**NOTE: The information contained at this site is for educational purposes only and is not intended for any particular person or circumstance. A competent tax professional should always be consulted before utilizing any of the information contained at this site.**