Taxpayer asks:
As a newly minted lawyer that is now doing contract work, I was wondering if Bar exam prep classes are tax deductible? Or any licensing fees, occupation state taxes, or expenses related to GETTING a law license are tax deductible. There is a thread on JDU on this but no one seems to have a clear answer. Thanks!
Taxgirl says:
Ooh, as a newly minted lawyer, you’ll appreciate that my answer is yes – and no.
Easy one first: state and local taxes are deductible if you itemize your deductions. So, include any state occupational taxes on a Schedule A.
Bar exam prep classes are not deductible to an individual taxpayer, nor are expenses relating to get a law license. Some work related education expenses can be deductible if they are required as a condition of continued employment (think CLEs, for example), but you cannot deduct work-related education expenses if they are needed to meet the minimum requirements to qualify you to work or if the expenses will lead to qualifying you in a new occupation. Bar prep fees are not deductible since they’re not required (!) as a condition of your employment. Bar application fees and the like don’t count since they are the minimum requirements to get you started in the profession – you can’t work as a lawyer without being admitted to the bar.
Dues for professional organizations, like bar associations, are deductible as miscellaneous expenses on Schedule A. Subscriptions to law journals and the like are similarly deductible.
Since a few folks raised the LLM as an issue on the thread that you linked to in your question, I’ll address that, too. The cost of an LLM is not automatically deductible: you must still meet certain criteria. For one, the LLM must be serve to maintain or improve skills required in your present work or it must be required by your employer or by law to keep your salary, status, or job. Even if you meet one of those criteria, you cannot deduct the expenses if the education is needed to meet the minimum educational requirements to qualify you in your trade or business (as with your JD), or is part of a program of study that will lead to qualifying you in a new trade or business.
As a tax lawyer, one of my first tax law jobs was contingent on my earning my LLM Taxation: that made my additional degree deductible.
(Editor’s note: see comments below.)
Similarly, if you decide to jump from one area of the law (say, trial work) to another (contract law, for example), you cannot deduct the cost of additional education to make that jump. Your additional educational expenses must be related to your present job in order to qualify, in most instances, as a work-related deduction.
(All of that said, the cost of an LLM may qualify for certain educational tax credits, like the Lifetime Learning Credit.)
So, some yes, some no. I hope that helps clear up the confusion!
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!
In recent weeks, I’ve received a flurry of emails from parents asking about whether band uniforms, soccer cleats and other expenses related to children are deductible. I thought it might be useful to have a checklist of some child-related deductions that you may be overlooking.
1, Child tax credit. If your modified AGI (adjusted gross income) is $75,000 or less for a single person or head of household ($110,000 for married taxpayers) and you have a qualifying child, you may be eligible for the child tax credit of up to $1000.
2, Child care expenses. If you paid qualifying child care expenses, you may be entitled to a tax credit for those expenses. For more details about what constitutes qualifying child care expenses, see my prior post.
3, Hope credit for college expenses. You may be eligible for a tax credit for your dependents who are college students in their first two years of college, provided that you are responsible for paying those expenses. The credit is up to $1,650 on the first $2,200 of college tuition and fees and is available for students engaged in study at least half-time.
4, Lifetime Learning Credit. You may be eligible for a tax credit of up to $2,000 on the first $10,000 of college tuition and fees for your dependents, provided that you are responsible for paying those expenses. This credit is available for students who take at least one course; the students need not be engaged in study at least half-time.
5, Tuition and Fees Deduction. Expenses for tuition, registration fees, and other required fees for your dependents who attend eligible educational institution (for example, most colleges, universities and vocational schools) may qualify for the Tuition and Fees Deduction. The deduction is limited to $4,000 per year. Your modified AGI must be less than $80,000 for a single taxpayer or head of household and $160,000 for married taxpayers.
6, Adoption Credit. If you have out of pocket expenses relating to adopting a child, you may be eligible for a credit of up to $11,650 per eligible child. Out of pocket expenses include adoption fees, legal fees, court fees and travel expenses; you are not eligible to deduct expenses that are reimbursed to you from any organization.
7, Medical and Dental Expenses. If you paid medical or dental expenses for your dependents, you may be able to take a deduction for the expenses that exceed 7.5% of your AGI.
8, Investment Fees and Expenses. To the extent that you pay investment fees, custodial fees, trust administration fees, and other expenses for managing investments that produce taxable income that is reported on your income tax return, those expenses are deductible. This includes fees related to income reported on your income tax return for investments in the names of your dependents.
9, Charitable Donations. While tuition payments for private and parochial schools are not usually deductible, donations of goods and cash may be. In fact, most schools (private, public and parochial) have 501(c)(3) status – if you’re not sure, just ask. If you make a donation of cash and goods that would otherwise qualify for a deduction, and you do not receive a benefit in return, the value of that donation is tax deductible.
Of course, this is just a short list and the expenses and credits listed may be subject to phase outs, eligibility requirements and other limitations. If you’re not sure whether these expenses or credits apply to you, ask your tax professional!
