Author Topic: Taxes on Education Program  (Read 788 times)

Mustache ride

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Taxes on Education Program
« on: July 19, 2017, 08:25:55 AM »
Is anybody aware of a way to get your taxes back when using it for education? My work pays fully for employees to go back to school, but you are required to pay the taxes on anything over 5500 per year, and it counts as income on my paycheck. The issue with this is its taxed at 25% like a bonus, plus the "earned income" would bring me into the 25% bracket. This makes it still pretty expensive to attend a good program. I've heard from a coworker that their accountant mentioned if you said it was directly related to your job that it can be written off and you get your money back. Is anybody aware of this or another way to get out of paying all these taxes?

Heroes821

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Re: Taxes on Education Program
« Reply #1 on: July 19, 2017, 12:58:11 PM »
https://www.irs.gov/publications/p970/ch06.html

The link above is all that I'm aware of, but I'm not a tax expert.

SeattleCPA

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Re: Taxes on Education Program
« Reply #2 on: July 19, 2017, 09:58:06 PM »
My blog Evergreen Small Business
My free downloadable ebook: Thirteen Word Retirement Plan

Mustache ride

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Re: Taxes on Education Program
« Reply #3 on: July 20, 2017, 08:33:52 AM »
Thanks for the links! If I'm reading both correctly the irs says I can take a deduction up to 4000, and evergreen doesn't have a limit but cites court rulings as evidence.  Not sure if it matters, but I'm looking to get my MBA and work for a fortune 200 company, not a small business.

Heroes821

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Re: Taxes on Education Program
« Reply #4 on: July 20, 2017, 08:47:03 AM »
I think the point being brought up in SeattleCPA's blog post is that if you own a business (selling things on etsy or w/e) you can justify spending money from the business on education to make you better at running the business (MBA) even if you then use that education to go work at a big company. The "expense" of school would be a business expense so you would avoid counting that in the net profit (taxable income) of your business.

The $4k in the IRS link is for paying out of pocket with money that your employer probably already withheld taxes on in your W2.

beltim

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Re: Taxes on Education Program
« Reply #5 on: July 20, 2017, 09:24:47 AM »
I think this is the more relevant link: https://www.irs.gov/publications/p970/ch11.html

SeattleCPA

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Re: Taxes on Education Program
« Reply #6 on: July 20, 2017, 01:59:00 PM »
Sorry let me be clearer...

If you own a business and pay for training that lets you do your job better... or if you work in a business and the business pays for training that lets you do your job better, that training isn't taxable to you. And the cost should be deductible to your employer.

Example 1: You are a small business owner or you work in a small business in management... and getting an MBA will let you do your job better. That should be deductible to business and not income to student.

Example 2: You are a small business owner or you work in a small business in management.  You go back to school and get a degree in nursing... that educational assistance doesn't help you do your job better. and actually prepares you for a new job.. so you can't deduct as training. Your employer may be able to deduct some of the cost as tuition assistance fringe benefit. But those rules are tighter and tougher. That's not what I was talking about.
My blog Evergreen Small Business
My free downloadable ebook: Thirteen Word Retirement Plan

MDM

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Re: Taxes on Education Program
« Reply #7 on: July 20, 2017, 10:38:17 PM »
The issue with this is its taxed at 25% like a bonus, plus the "earned income" would bring me into the 25% bracket.
It may have taxes withheld at a 25% rate, but it is taxed exactly the same as your regular income.  E.g., the amount that brings you to the 25% bracket may be taxed at 15%.

See also Education Credits--AOTC and LLC for your original question.