HELP ME! Follow up question: tax deductions for educational expenses. Are these expenses deductible?
I asked the following question a few days ago:
"I’m a graduate student, but I also work part-time.
For my dissertation research, I’ve received 3 grants. Grant A is from a government agency — they gave the money to my university, which buys the stuff I need for me. I’m not going to declare this grant as income, and I’m not going to deduct any of the expenses. Grant B is the same, only it’s from a private foundation.
Grant C is from another private organization. Unlike the other two, they’re giving the money directly to me. They asked for my info to fill out a 1099 form. Does this mean that I have to include this grant as personal income?
When I use the grant for dissertation-related expenses (travel to collect data, lab supplies, publishing charges), can I deduct these when I prepare my taxes? I know that you can deduct business-related expenses if your employer doesn’t reimburse you, but does this count as a job? And I know that, as a student, you can deduct education-related expenses like tuition and activity fees, but this doesn’t seem to be in the same category."
The one answer I got said that no, I couldn’t deduct them. I didn’t like that (who likes paying taxes?), so I looked at the IRS website.
I found the IRA guidelines for deducting education expenses:
"You can deduct the costs of qualifying work-related education as business expenses. This is education that meets at least one of the following two tests.
The education is required by your employer or the law to keep your present salary, status, or job. The required education must serve a bona fide business purpose of your employer.
The education maintains or improves skills needed in your present work.
However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it:
Is needed to meet the minimum educational requirements of your present trade or business, or
Is part of a program of study that will qualify you for a new trade or business.
You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree."
Here is my situation: I am a full time graduate student in anthropology. I teach anatomy part time at a different university. Obviously, I don’t need the PhD to teach, since I’m teaching now, but most of the other teachers have Ph.D.’s in anthropology or another field. My original career goal was to become a researcher. Now, I think I’ll stick with teaching. My dissertations doesn’t directly impact by ability as an anatomy teacher, but I think I’ll have more job opportunities with a Ph.D. (in any field) than I would if I didn’t finish my dissertation.
Do you think I can deduct my expenses as work-related educational expenses?
V.B., I’m not trying to twist the tax law … I was just trying to see if there was a way to save money since I’m going to have to pay taxes on thousands of dollars that are basically going to go straight to my advisor’s lab.
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Tags: business expenses, business purpose, dissertation research, education expenses, educational requirements, few days, fide business, government agency, graduate student, grants, ira, irs website, job, part time, paying taxes, personal income, private foundation, private organization, related education, salary
June 5th, 2010 at 7:04 am
1. Being a graduate student does not count as a job. You cannot deduct dissertation-related expenses as an expense of the "job" of being a graduate student. Only paying jobs qualify for that deduction.
2. That you are teaching part-time now does not mean that you "meet the minimum educational requirements" of being a teacher. The requirements are the requirements for either a tenured position, a position where years of service count towards tenure, a position as a voting member of the faculty, etc. See the long discussion of "Requirements for Teachers" in Publication 970 for more detail. As you noted, education "is not qualifying work-related education if it: Is needed to meet the minimum educational requirements of your present trade or business," which is teaching at a university. Because the minimum educational requirements for that position include a PhD, you cannot deduct the cost of obtaining a PhD.
3. Publication 970 states that "All teaching and related duties are considered the same general kind of work. A change in duties in any of the following ways is not considered a change to a new business … Teacher of one subject, such as biology, to teacher of another subject, such as art." For example, as an anatomy teacher taking course to qualify you to teach anthropology, you are not subject to the "part of a program of study that will qualify you for a new trade or business" exclusion. Therefore, if you did meet the "minimum educational requirements" to teach anatomy at the university level (which you do not), then you would be able to deduct your costs for becoming qualified to teach anthropology.
If your undergraduate degree (or M.S. degree) is in biology or anatomy, and you can obtain a job teaching that subject in a high school, junior high school, or middle school, then you would be able to deduct your expenses for becoming qualified to teach anthropology in that school (a PhD is not part of the minimum educational requirements for K-12 teaching), but not the cost of your dissertation (which is not needed for K-12 anthropology teaching).
June 5th, 2010 at 7:04 am
No. No. No.
You are full time graduate student. Teaching part-time does not make that your full-time career, so you CANNOT claim these expenses as a business expense. You were not even teaching full time and then returning to school part time so this is not an argument you can make. The fact that you *think* you might like to teach instead of research does not change this.
Stop trying to twist the tax law to your benefit. The tax law clearly states that your tuition is deductable. Nothing more. Your research expenses, your travel, your lab expenses, etc are NOT items you can deduct.
By the way, the IRS routinely questions any education expense listed on the schedule A. The IRS will also see your 1098 for tuition showing that you were a registered student. The IRS will also be able to see that you haven’t had that part time job very long–all of which means you would lose on audit.
June 5th, 2010 at 7:04 am
Your payments from Grant C are not work-related educational expenses for the anatomy teaching job.
If Grant C is not paid for services rendered, then I would enter it on Line 21 of Form 1040 as "equipment grant" or something like that. You would not be subject to self-employment tax that way.
June 5th, 2010 at 7:04 am
You answered your own question when you said that your PhD will give you more opportunities. And which of the two tests did you think you meet? You say that the PhD isn’t a requirement for your job, and also say that it doesn’t impact your ability as an anatomy teacher.
No, you can’t deduct the expenses.