Taxpayer asks:
Hi Kelly,
I had a tax question about unpaid internships and being able to deduct the expenses of that internship on your taxes. From all of the research I did I was unable to find anything that would allow for such a thing. It seems that without a 1099 or w-2 from the company the person doing the internship is inelgible for any type of tax break for the cost she spent to participate in this unpaid internship. A client of mine recently moved for a few months to work on an unpaid internship, and she has to pay to live while doing this intern.. She was wondering if any of those expenses are deductible.
Taxgirl says:
This is a great question. I had to think about it for a bit. Here’s what I think (I think).
The best chance for your client to claim a deduction would be as an educational expense. To be deductible as an educational expense, the expense must be for (1) education that maintains or improves job performance or (2) serves the purpose of the employer and is required by the employer or by law to keep salary, status or job, and (3) the education is not part of a program that will qualify for a new trade or business.
If your clients meet that criteria, then she can deduct tuition, books, supplies, lab fees, and similar items; certain transportation and travel costs; and other education expenses. Moving expenses, however, would not be included.
In fact, even if the client wasn’t a student and could prove that she qualified as an employee, a seasonal internship (paid or unpaid) wouldn’t qualify for a moving expense deduction because it would not satisfy the “time test” requirement piece of the moving expenses criteria.
If the internship was paid, the intern could claim certain expenses on a Schedule C or Schedule A. I don’t think there’s any good argument for claiming expenses against zero income in this case on a Schedule C (unless one of my colleagues wants to make it for me). But I do think you might have a decent case for itemizing some expenses on a Schedule A, Miscellaneous Deductions as unreimbursed job expenses. I think you can make an argument that an intern could be considered an employee despite the lack of compensation.
Of course, the icky part of the Schedule A deductions is that you have to itemize to claim them. I’m guessing that an unpaid intern is also not a homeowner and likely doesn’t have enough deductions to itemize. But if, if, if the intern is itemizing, I think a deduction under Schedule A, Miscellaneous Deductions would work.
To qualify as an unreimbursed employee expense, the expense must be:
- Paid or incurred during your tax year;
- For carrying on your trade or business of being an acquired in your trade or business; and
- Ordinary and necessary.
This was my best guess on this one – it’s a tricky question for sure. I’d be interested to hear what my colleagues think…
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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It’s the first day of school here in Philadelphia. My oldest daughter was rushing around this morning, gathering school supplies and fretting about her hair (apparently, it is not long enough). The morning was, well, you know, a blur:
As things are settling down in my house (well, that’s relative), things are heating up at taxgirl. It’s Back to School Week here as well! Stay tuned all week for answers to your school related questions (you can ask the taxgirl), check out tax-saving school strategies and look out for great giveaways. What a great way to start the new season!
Taxpayer asks:
My husband and I have a 4 yr old daughter diagnosed with autism (higher functioning). We are considering enrolling her in a private preschool that has a program specifically designed to help children with autism, something the public school system cannot offer. The yearly tuition is $22,000. Can any of this be tax deductible?
Taxgirl says:
This is one of those questions that feels like it should be easy but it’s not. There are a couple of options and a few restrictions. So let’s take it in pieces…
Private school tuition is generally not deductible. However, private school tuition for grades below kindergarten (i.e. preschool and daycare) is deductible if it would otherwise qualify as childcare. So to the extent that the program would qualify as childcare, the preschool tuition would be deductible until she enters kindergarten.
For grades kindergarten and above, the tuition would be deductible to the extent that you could separate the education piece from the childcare piece. This would apply if you enroll her in a full day program (usually including before or after care), for example, when the educational component stops midday.
All of that said, you may be able to take a deduction for tuition as a medical expense, assuming that you itemize. I say may because there are restrictions. The IRS allows a deduction for medical expenses for “payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatment affecting any structure or function of the body.” In some cases, this may include tuition for special schools for children with special needs if the primary reason for the school is related to the medical condition. In other words, it can’t just be that the school would be a “better” school for your child or that the school offered an extra program or certain atmosphere that you thought would be beneficial. Additionally, a doctor must recommend that your child attend the school (be prepared to back this up).
So who qualifies? The IRS has traditionally allowed tuition as a medical deduction for children who are deaf, blind or have learning disabilities. In recent years, the IRS has also allowed medical deductions for educational programs for children suffering from depression, ADD and severe effects of substance abuse. The key is whether there’s an actual medical need by the child for the specific program.
Aides and tutors hired to assist special needs children may also be claimed as medical expenses (assuming, again, that they are medically necessary).
Keep in mind that to the extent that your insurance company covers the costs of any of these treatments, you may not deduct the portion which is covered or reimbursed to you.
I hope that helps!
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.
Have a question? Ask the taxgirl! – Now on Facebook!
