Taxpayer asks:
Wow, your website is really helpful!
I have some Independent Contractor/Schedule C questions:
Is it possible to deduct “professional development” costs? i.e. things I did or classes that I took that make me better at doing what I do as an individual in my very small business. My father thought it would be deductible, but he was not sure what line. He did think that course work required for the job was not deductible. i.e. the education class that I took in order to keep my certification. However, he thought the non-required course work was deductible. Is this true?
If so, on what line can I deduct it on Schedule C?
Can I deduct the required graduate course on the 1040 form on line 50 “education credits” ?
Thank you so much.
Taxgirl says:
Thanks for the nice words!
Someday, I plan to do a long post all about who qualifies as an independent contractor. Just because.
But for now, I’ll just answer your questions…
You can indeed deduct expenses incurred in maintaining your current employment, but I’m afraid your father seems to have it a little backward. Continuing education requirements, such as lawyers who are required to take annual CLEs (certified legal education credits) or certified public accountants who are required to take similar credits, in order to maintain a professional license, are deductible. Similarly, refresher courses, courses on current developments, and academic or vocational courses are deductible. For most folks, these would be considered unreimbursed job expenses and would most likely be listed on Schedule A; you will be subject to the normal limits for itemized deductions. In contrast, for those persons who are self-employed, like you, most of these expenses will be listed on Schedule C.
You cannot, however, deduct expenses that you have simply to meet the minimum requirements of your present trade or business. I couldn’t deduct the cost of my undergraduate education or my JD (law school) degree. And you can’t deduct expenses in order to start a new trade or business – those pottery classes that I want to take, for example, aren’t deductible even if I’m convinced that pottery is my new calling.
However, you can deduct the costs of “qualifying work-related education”. It qualifies if the education is required by your employer or the law to keep your present salary, status, or job and the education maintains or improves skills needed in your present work. And yes, you can deduct these expenses even if the end result is a degree.
Let’s use me as an example. The costs to earn my Bachelors and my JD are clearly not deductible expenses (though the interest that I pay each month for what feels like the rest of my life to pay my student loans might be, assuming that I qualify under the income and other requirements). But my LLM in Taxation (Masters of Laws) is a little different. My employer at the time required me to complete my LLM. It was related to my job as a tax attorney. Therefore, it met the requirements of the law for deductibility even though at the end, I received a degree.
So, what exactly can you claim if you qualify? Well, mileage for one, which is interesting since commuting expenses for work are not deductible. But, you can claim a business deduction for travel to and from work-related education to the tune of 44½ cents a mile for 2006. And in a nod to the fact that not everyone drives everywhere all the time, you can also deduct transportation expenses including the actual costs of bus, subway, cab, or other fares. If there are meals or lodging involved, you treat those not as transportation expenses but as entertainment/dining/travel expenses subject to the regular limitations.
It’s all-important to remember that if you are self-employed, as opposed to an employee, you will deduct these expenses directly from your self-employment income for purposes of income tax and SE (self-employment) tax. In other words, as noted above, you’ll file these expenses on your Schedule C.
Your work-related education expenses may also qualify you for other tax benefits, such as the tuition and fees deduction and the Hope and Lifetime Learning Credits. And the good news is that you may qualify for these other benefits even if you do not meet the requirements for a “work-related education expense. It’s also possible that you can claim a combination of benefits, depending on your individual circumstances (i.e. Hope Credit and education deduction) – the rule is that you must use different expenses to achieve those benefits.
(NOTE: The TCJA has made changes to employee-related deductions on Schedule A. The TCJA did not affect deductions on Schedule C.)
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.
HI I am puzzeld as I had 600$ non emplyee income and I am not a self employee. It was a one off service I provided and I am regularly employed with a company. It seems thta the only way to report this is to use the 1040 SE form. But as stated I am not a self emplyee, nor I do have my business. What shall I do for a one time profit as this?
Please advise
thanks
Andy Perez
But what line can one deduct education expenses on Sched. C?
But what line can one deduct education expenses on Sched. C, meaning the tuition itself?
You failed to explain how and where to record the education expense in Schedule “C”.
FYI – not only lawyers and CPA’s are rquired to earn CPE credits, IT Auditors do too (see ISACA) and IT Securty Specialists (CISSP) do too.
So, can you tell us:
1. where on Schedule “C” it sould come?
2. If it is a LLC, where would such expense be reported? (Form/Schedule and line, please)
THANKS!
I filed as an Independent Contractor, but beings I was moving I only worked for about 3 months. I didnt make a total of income of 600$.. I made less. So I know I do not have to file them as taxes, but if i do what would be the benefits of that!?
If someone earns income as an independent contractor (reported on 1099-Misc), when they fill out Schedule C, what accounting method should they check and what do you say about starting this business in 2008. In this case, the person worked only in 2008 as an independent contractor, but he didn’t start or acquire the business shown as “business address”–that was the company he worked for.
Almost all independent contractors use the cash accounting method. It’s rare to see accrual.
For business address, if you work for yourself, meaning you make yourself available to different companies and Company A just happened to use your services for the year, your business address is your place of business, not Company A. For most people, this would be their home address (unless you have another office or place of business).
Hi, I have a question about “home office” tax deduction. First, I am not self-employee. I work for a company which use my home address as their US office address. And I have one room (about 15% of the house I own) regularly and exclusively for business use. I do not own the business, as an employee in this case, do I qualify for home office tax deduction? Thanks!
Wow, this is a little bigger answer than in a comment. I’ll address it soon in “ask the taxgirl.”
I am an independent contractor and have paid other people for sub-contracting on some jobs. Where do I put the expense of what I paid
them,
We just hired an independent contractor who lives 100 miles away from our main office. We require her to come to the main office once a week for the first 3 months for training and followup. Can we pay her mileage. Thanks.
hi i was wondering as a self employee, i was wondering does my employer get and deductions from my payroll?
This is a helpful discussion. Our situation is: my wife is a teacher. This summer she was given a stipend of $1500 to attend a summer class (not for a degree, just a single class; not required for her work, but relevant). $1000 of that stipend was for the class tuition. Now, she’s going to get the $1500 reported as income on a 1099.
Question (finally): My wife will have to report the $1500 on a Schedule C, I believe. Can she deduct the $1000 tuition as an “other expense” there, or will it be subject to the 2% overall AGI limit as an itemized general deduction? Thanks!
I was laid off and collecting unemployment, now have accepted a job as an independent contractor and fly once a month round trip to another state for this job. Can I deduct this expense as an independent contractor.
This job is comparable to the job I did for the last 8 years, there was no job available where I live that matches this job. I do permits and inspections for a municipality.
Hi Kelly… I have the same question as Bianca: On what line can one deduct education expenses on Sched. C, meaning the tuition itself?
Hi Kelly again… I am thinking that education expenses go on the “other expenses” line, that is line 27.