Taxpayer asks:
Hi,
Is the rule different if the firm pays for the BarBri expenses themselves? Is this repayment taxable as ordinary income? Any tax code references would be appreciated, too (though not by any means necessary).
Gracias,
Taxgirl says:
This is one of those posts that I can already tell that I’m going to get emails about because somebody’s going to say that their employer told them (insert any one of many interesting tidbits here). But I’m writing my opinion anyway…
Reimbursements for nondeductible expenses (and BarBri and other bar related expenses are, as noted in the post linked above, not deductible expenses) are generally taxable and reported as income.
With respect to education related expenses, the IRS has expressly stated that you must include in income reimbursements that “you need to meet the minimum educational requirements for your job or is part of a program of study that can qualify you for a new trade or business.” My take, then, is that bar-related expenses which are reimbursed or paid by your employer are generally taxable (you could likely carve out some exceptions for deductible expenses, as discussed in the prior post).
No tax code references but you can read more about educational expenses in IRS Pub 970 (available here as a pdf).
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
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