Expense graduate school tuition for new but related field of practice?

[JamesDe]

This is a little bit of a niche question that I am hoping someone can give some insight into. Facts of situation:

Married filing jointly

Husband files a W-2, Wife runs own acupuncture clinic and we file a Schedule C

My wife is a self-employed acupuncturist. Her practice focuses on mental health, anxiety, etc and utilizes a practice called Hakomi. She has also decided to expand upon her skills and go back to a graduate program to get a degree in Therapy/Counseling.

The question is, can she expense tuition and school related expenses as part of her Schedule C for her business? She will be utilizing the skills that she learns at school even though it's not a direct relation to her current self-employed job. It's a complement to it, and is in the general "field" of what she focuses on now.

This is in a grey area, and just looking for advice on if we can expense these things or not. Thanks!

[Anonymous_]

@Hal_Al may be able to answer your question. Stay tuned.

[Hal_Al · Accepted solution]

As you said, it's a gray area and you're probably not going to get a firm answer. 

The general rule is: Educational expenses to improve your current job skills are deductible. But learning a new job is not. From JK Lasser’s Your Income Tax 2013, pg 580: "For a deduction, the courses must be related to your existing job responsibilities and not lead to qualification for a new business.

Pursuit of an MBA is a much discussed situation and is somewhat similar to yours. The tax court has allowed deductions for MBA expenses where individuals with some managerial or administrative experience took the courses to improve skills needed for their existing jobs." This doesn't come up very often because most people come out better with the Lifetime Learning credit (LLC).  But you can do both if you tuition is more than $10,000. The first $10,000 of expenses qualifies you for the LLC and any excess might qualify as a business expense. http://www.forbes.com/sites/mattsymonds/2014/04/11/the-mba-and-the-taxman-claim-or-not-claim/#4e857f... 

"Many M.B.A. students qualify for a deduction, however, because they have worked before enrolling in a program and are seeking to “maintain or improve” their skills, as the law requires. In addition, the degree doesn’t lead to a license". http://www.wsj.com/articles/good-news-for-m-b-a-students-tuition-is-now-more-deductible-1471013805

[JamesDe]

Thanks for the reply @Hal_Al ! Unfortunately, due to our income it looks like we wont be able to claim any of the LLC ($138,000 or more if you file a joint return). https://www.irs.gov/credits-deductions/individuals/llc

Also, it looks like on the page I linked, it says only a max of $2000 per return (and phases out with more income). So I think I'm pretty out of luck there.

The MBA article does seem to pertain to my wife's situation though. Reading a little more, if she were to get licensed as a Therapist and start practicing as a therapist, then it sounds like it would not be deductible "For example, if an M.B.A. student switches fields after graduation, it is harder to justify a writeoff." 

Thanks again! I think that it's too grey of an area, and sort of leans as to not being allowed probably. Best to not expense it, it seems.