“It’s a toad, dude , a toad ! ”
(Slightly stoned Alaskan fishing guide as I landed a huge silver salmon)
I was recently fortunate enough to be invited by a friend to stay at his cabin in Alaska and fish for silver and sockeye salmon. It was a great trip and we caught a lot of fish. It was nice to get away from the heat and office work and chill out for a while.
When I came home to El Paso, I read two disheartening articles:
– El Paso Electric announced its 2nd quarter profits soared to $36 million. You will remember that EP Electric is in the middle of a request for yet another large rate increase after already getting a substantial rate increase last year.
– El Paso City and County are both attempting to adopt another large property tax increase. A friend of mine recently told me he was placing his house for sale because he could no longer afford the property taxes.
I struggle to understand all of this. How is it possible for a community as poor as ours to be paying such high electric rates to a company that make huge profits and demands more? How is it that El Paso City Council and County simply cannot say no to never ending requests for additional funds? I think former city manager Joyce Wilson said it best when she described her job as addressing “infinite needs with finite funds”. In other words, she was unable to establish finite needs. Perhaps this is a failure by city and county leadership and predatory behavior by a company that has an uaccountable monopoly on electric services. We need and deserve a REDUCTION in property taxes and electric rates.
When I came home I learned that the City and the County were significantly increasing our property taxes yet again. I also learned that El Paso Electric was also significantly increasing our electric rates yet again, in spite of record profits from last year’s big rate increase.
What to do ? It seems to me we can do two things: elect better community leaders to stop this madness. We can also raise our income levels by becoming more educated and thereby improve our employment skills.
So today I’m going to talk about how the Internal Revenue Code may allow us to deduct our educational expenses that may improve our careers and perhaps our understanding of the world around us.
- Tax Code
The Internal Revenue Code allows us to deduct education expenses which “maintain or improve skills required by the individual in his employment or his trade or business… “.
So if you are an employee you can deduct educational expenses that help you in the performance of your duties, including expenses which help you improve your skills in that same employment. For example, if you are a plumber or a welder or carpenter and you go to training seminars that teach you how to improve or expand your skills, those expenses may be deductible expenses may be deducted on your tax return.
The Internal Revenue Service has created a distinction here. It argues by regulation that expenses to establish a new business or a new career are not deductible. For example if you are a carpenter and you want to become a doctor, those expenses of becoming a doctor would not be related to your old business or employee status and thus not deductible.
- Court Cases
However, the question arises when someone is engaged in a field of work and seeks additional education in order to advance in that field. For example, if you were a respiratory therapist and you wanted to become a physician, would that be improving your skills or pursuing a different career? Both are related to the field of medicine . The IRS has by regulation provided the example that a classroom teacher can seek additional education to become a principal and that is not considered entering a new field and thus the expenses may be deductible.
Likewise the Tax Court has ruled that a sales person selling dental equipment could deduct expenses to obtain an MBA. The MBA would help him advance within the company. This degree would be a significant benefit to that worker and a real incentive to undertake the advanced education.
- Tax Credits
There are also a number of possible tax credits (not deductions) for qualifying tuition and related expenses for yourself and for dependents. These will be addressed in another article.
So here’s the deal. This is a complex area of federal tax law that depends on the facts and circumstances of each case. If you have an interest in undertaking additional education to improve your job skills or to advance within your field of employment, there may be substantial tax benefits available to you if properly structured. Get with your accountant and improve yourself.
And as for our community, perhaps we need to elect better leaders who have better skills and can work towards ending this madness.
David Leeper is a Board Certified federal tax attorney with 38 years of experience. He can be reached at 915-581-8748, by email at email@example.com, or visit leepertaxlaw.com