Starting Your Business/Keeping Tax Records

What are Business Expenses

Educational Expenses

If you pay or reimburse education expenses for an employee enrolled in a course not required for the job or not otherwise related to the job, deduct the payment as wages. You must include the payment in the employee's wages, and it is subject to FICA and FUTA taxes and income tax withholding. However, if the payment is part of a qualified educational assistance program, these rules may not apply. See chapter 2 of Publication 535 Business Expenses.

If you pay or reimburse education expenses for an employee enrolled in a job-related course, you can deduct the payment as a non-compensatory business expense. Since this expense would be deductible if paid by the employee, it is called a working condition fringe benefit. Do not include a working condition fringe benefit in an employee's wages. Working condition fringe benefits are discussed in more detail in chapter 2 of Publication 535 Business Expenses.

For more information, see Education Expenses, chapter 16.

Examples

Important References

Publication 535 Business Expenses
Publication 508 Tax Benefits for Work-Related Education
Form 1040 Schedule C Profit or Loss from Business