It's that time of the year again where you'll soon be thinking about W2s, 1099s, or 1040s. It doesn't have to be a chore! Keep a game plan of getting your taxes in on time.
And paying less. You can pay less because there's a lot of deductions and tax credits you can qualify for. And these are legitimate means.
For starters any tax breaks or tax deduction is any dollar amount the IRS lets each taxpayer deduct from their taxable income.
If you are a W2 employee, your work-related expenses or standard deductions depends on your income. If you plan on taking more than the standard deduction (because you spent more money), you'll need to itemize these and make IRS a list.
But if you are a freelance or self-employed, you can deduct work expenses from your total income. This reduces the your total taxable amount. You can deduct the expenses you have from any work-related education (like a Qpractice course!) DIRECTLY from your self-employment income.
You heard us, you can deduct educational expenses if the course maintains or improves your skills in your current job. Something to smile about 🙂
This reduces your income subject to income tax and self-employment tax.
Your work-related education may also qualify for other tax benefits like tuition and fees deduction, and the Lifetime Learning Credit. Talk to your accountant about this one, because if you take this you cannot use it as a Schedule C or itemized deduction.
To claim tax breaks for work-related education:
- Be working.
- Itemize your deductions on Schedule A (Form 1040 or 1040NR) if you are an employee.
- File Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040) if you are self-employed.
- Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education. Skills courses, personal development courses, and even certain activities not involving formal instruction may be considered education.
So, education expenses + other job + miscellaneous expenses = Deduction > 2% of your adjusted gross income
To be sure you qualify, your education must meet at least one of the following:
- This education is required by law or your employer to keep your present role and salary. And this must serve your employer's business purpose.
- This education must maintain or improve your skills needed in this job role.
You do NOT qualify if:
- You need this education to meet the minimum educational requirements in the business.
- Or if this course is for a new trade or industry.
If your Qpractice NCIDQ course or any other online class helps upgrade your skills in your present job or your own business, then you can use it as a tax deduction. So talk to your accountant about which scenario is best for your financial situation.
You can finally have a break with tax breaks 🙂