Deducting Business Expenses(p196)

Self-employed persons and employees report business expenses differently.

The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense.

If you are self-employed, report the cost of your qualifying work-related education on the appropriate form used to report your business income and expenses (generally Schedule C, C-EZ, or F). If your educational expenses include expenses for a car or truck, travel, or meals, report those expenses the same way you report other business expenses for those items. See the instructions for the form you file for information on how to complete it.

If you are an employee, you can deduct the cost of qualifying work-related education only if you:

1. Did not receive (and were not entitled to receive) any reimbursement from your employer,
2. Were reimbursed under a nonaccountable plan (amount is included in box 1 of Form W-2), or
3. Received reimbursement under an accountable plan, but the amount received was less than your expenses for which you claimed reimbursement.

If either (1) or (2) applies, you can deduct the total qualifying cost. If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement.

In order to deduct the cost of your qualifying work-related education as a business expense, include the amount with your deduction for any other employee business expenses on Schedule A (Form 1040), line 21. (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later.)

This deduction (except for impairment-related work expenses of disabled individuals) is subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. See chapter 28.

To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or Form 2106-EZ.

Do not complete either Form 2106 or Form 2106-EZ if:

• If amounts included in box 1 of your Form W-2, are not considered reimbursements, and
• You are not claiming travel, transportation, meal, or entertainment expenses.

If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 21. (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later.)

This form is shorter and easier to use than Form 2106. Generally, you can use this form if:

• All reimbursements, if any, are included in box 1 of your Form W-2, and
• You are using the standard mileage rate if you are claiming vehicle expenses.

If you do not meet both of these requirements, use Form 2106.

If you are a qualified performing artist, or a state (or local) government official who is paid in whole or in part on a fee basis, you can deduct the cost of your qualifying work-related education as an adjustment to gross income rather than as an itemized deduction.

Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24. You do not have to itemize your deductions on Schedule A (Form 1040), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income limit. You must complete Form 2106 or 2106-EZ to figure your deduction, even if you meet the requirements described earlier under Form not required.

For more information on qualified performing artists, see chapter 6 of Publication 463.

If you are disabled and have impairment-related work expenses that are necessary for you to be able to get qualifying work-related education, you can deduct these expenses on Schedule A (Form 1040), line 28. They are not subject to the 2%-of-adjusted-gross-income limit. To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required.

For more information on impairment-related work expenses, see chapter 6 of Publication 463.