Bank transactions alone are not enough to provide substantiation of deductible expenses. Taxpayers need to maintain receipts, invoices, etc. that contain details of the deductible expenses. Furthermore, a personal expense paid out of a business account does not make it a business expense. Expenses deducted for a business must fall into the category of "ordinary and necessary." This means the expense is commonly found in the specific business and is helpful and appropriate in running the business. There are specific rules related to the deduction of education expenses for businesses.
If the taxpayer wants to use the 1098-T to claim education credits, this is a personal expense. Qualified education expenses are personal in nature. You cannot deduct them as business expenses and also use them to claim education credits. Qualified education expenses include tuition, fees, and course-related books, supplies or equipment. Room and board is not a qualified education expense and cannot be included in determining education credit amounts.
How do Education Credits Work?
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