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a
Alex
Apr 4, 2008 - 2:54PM
Tax issue: Business Deduction for work related education expenses

Hi all:
I am a doctoral student in school to obtain my Psy.D. and I am currently practicing as a School Psychologist. I was wondering if you could give me some guidance about a tax deduction I would like to take on my Schedule A. I have done my research and from what I have gathered I can deduct all of my education expenses because they are work-related to maintain or improve skills and they are also expenses for education credits that increase my salary as a School Psychologist. The two rules are they can be deducted if:
1) the education maintains or improves a skill REQUIRED in the taxpayer's employment or other trade or business or 2) meets the express requirements of the taxpayer's employer, laws or regulations imposed as a condition to the taxpayer's retention of an established employment relationship, status or rate of compensation. These expenses are $19,000 which I have paid for by a loan and exceed 2% of adjusted gross income. Can you please, please tell me if I can deduct these expenses.. and if so, can you direct me to some literature including court cases or specificied examples for PsyD students. I do not want to be penalized by the IRS but want a fair chance at getting my maximum deduction possible.

Thanks!

Zip Code: 07620

a
Andrew Schwartz CPA
Apr 4, 2008 - 8:43PM
Re: Tax issue: Business Deduction for work related education expenses

I would say the question is whether the doctoral program will qualify you for a new trade or business.

If completing the Psy.D. program allows you to do things that you couldn't do without that designation, I'm afraid the cost of obtaining a Psy.D. wouldn't be tax deductible.

On the other hand, if you can provide similar services without the Psy.D. designation, but you can do your job better with a Psy.D., then you could argue that it would be tax deductible since it's improving your skills in your current trade or business.

I have never seen this rule applied to Psychologists. I have seen that the IRS has ruled that a practicing dentist is allowed to deduct the cost of a speciality program, and a psychiatrist in training is allowed to deduct the cost of psychotherapy that is a required part of his or her training.

I hope this sheds some light on this matter for you. I'm sorry I can't give you a more exact answer.

Zip Code: 01801

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