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Deductibility of Educational and Related Expenses

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By C. Anthony Phillips, CPA
Member of the GRI State Faculty 

Deductibility of Educational Expenses
Deductibility of Related Educational Expenses


Deductibility of Educational Expenses

Educational expenses are generally deductible if the education is to maintain or improve a skill required in the individual's trade or business or is required of the individual by law or regulation to maintain their license to continue in the individual's trade or business.  

The cost of obtaining a GRI designation is generally deductible as Schedule C costs on Form 1040 U.S. Individual Income Tax Return and Form 540 California Income Tax Return if the individual is already licensed by the Department of Real Estate.  The expenses are deductible since the individual is maintaining or improving a skill that is required in their current trade or business and is not meeting the qualifications to obtain their first real estate license.  Also the California Bureau of Real Estate requires licensees to obtain 45 hours of continuing education every four years and the GRI courses fulfill these requirements.  

Deductions on Schedule C are particularly desirable because not only are they a deduction in the computation of taxable income, they are also deductible in computing the self-employment tax.


Deductibility of Related Educational Expenses

Transportation   Hotel   Meals   Other

Expenses incurred that are necessary to obtain education at a remote location may be deductible.  If a particular GRI class you wish to take is not available in your immediate area, you may have to travel to another location to take that GRI class.  If you plan ahead and schedule a mini vacation with your family or significant other around taking a GRI class you can deduct a significant portion of your transportation and hotel costs.  As always, you have to keep detailed records in case the Internal Revenue Service audits you.  The deduction for the costs of meals and hotels is limited to amounts that are not lavish or extravagant under the circumstances.

Transportation


If you drive and take someone with you, you can take a full deduction for your expenses, including gas, parking and tolls, because driving would cost the same if you were alone.  

If you fly, the price of your family members' plane tickets isn't deductible, but you can deduct the full cost of your air fare.  If the GRI course is on a Thursday or Friday, you can still write off the cost of your air fare even if you spend Saturday and Sunday at recreational or cultural sites.


Hotel


You can deduct the amount that a room would have cost if you had traveled alone.  Assume that a single room is $95 and the double room you stay in with your family costs $110.  You can deduct $95, rather than half of the higher rate.  You should ask the hotel for a room rate schedule showing the single rates for the days you will be there.  

You also may be able to take advantage of the "Saturday night stay-over" rule if your trip ends or begins before the weekend.  Under this rule, the Internal Revenue Service considers weekend days if the cost was less than the air fare savings commonly extended if you stay over a Saturday night.


Meals

Food and beverage costs while "away from home" for educational reasons are 50% deductible.   The portion of a travel meal that is lavish and extravagant must first be subtracted from the meal cost before the 50% reduction is applied.

Other

You may also deduct a reasonable amount for ground transportation, tips, baggage, telephone and fax services.  





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