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Need Training or Work-Related Education to Run Your Business? Financial Incentives Sweeten the Deal

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Need Training or Work-Related Education to Run Your Business? Financial Incentives Sweeten the Deal

By NicoleD
Published: November 17, 2010

If you are self employed, you know first-hand how much research and focus it takes to get your business up and running. The list of topics you must familiarize yourself with including tax laws, government regulations, selling to customers- is long and varied. Chances are, you are;t an expert at it all, but tha-s ok. There are plenty of free and low-cost training opportunities available to you.

Taking Tax Deductions for Training

If you are self employed, you can deduct some education expenses, according to the Internal Revenue Service (IRS)*. Self-employed individuals deduct expenses for qualifying work-related education directly from your self-employment income. This reduces the amount of your income subject to both income tax and self-employment tax.

Check with your accountant for details because the IRS has strict guidelines for deducting expenses. If you need assistance in determining if your education qualifies under IRS rules, use their Business Deduction for Work-Related Education guide as a reference. Generally, qualifying work-related education must meet at least one of the following two tests:

1. The education is required by the law to keep your present salary, status, or job.

2. The education maintains or improves skills needed in your present work.

However, even if your education meets one or both of the above tests, it is not qualifying as-work-related educatio' if it is needed to meet the minimum educational requirements of your present trade or business, or if it is part of a program of study that will qualify you for a new trade or business.

For example, if you are a home-care nurse, you may not be able to deduct the expenses associated with your initial board certification training. However, after you are certified, if the state requirements change resulting in your need for additional training, you may be able to deduct the expenses incurred from your new training. Additionally, you may not be able to deduct expenses from a class on exporting goods, as that is not related to your trade as a nurse

If you want to get more training or education than what is required by the law, it may qualify as'work-related educatio' only if it maintains or improves skills required in your present work. See the IRS guide on Education To Maintain or Improve Skills for details.

Taking Additional Deductions

Additionally, you may be able to deduct education-related business expenses such as travel to-and-from a training or subscriptions to industry periodicals. Learn more about deducting business expenses in the Small Business Tax guide.

Employers can generally deduct employee educational expenses if the training maintains or improves job-related skills, or if employees are required to obtain the education as a part of their current job. According to the IRS, if you pay or reimburse education expenses for an employee, you can deduct the payments if they are part of a qualified educational assistance program. Deduct them on the'Employee benefit program' or other appropriate line of your tax return. For information on educational assistance programs, see Educational Assistance in section 2 of IRS Publication 15-B.

Getting Financial Assistance

Though the federal government does not provide grants to businesses for training or education, it does allocate funds to states and local work-force boards, which decide what industries and areas to support.

Different states have different requirements for supporting training, including which industries are eligible and yearly stipend limits. To learn more about programs in your state and whether your business may qualify, contact your local One-Stop Career Center, or inquire about your stat's workforce training program (the name may vary depending on your state).

You can also contact your stat's economic development agency, which may offer training assistance, grants, and additional tax credits to eligible businesses. Locate your state economic development agency at Business.gov.

Finding Free and Low-Cost Training
Remember that several free counseling and training programs are available to help you start and expand your small business. These services cover all aspects of managing a business, from getting a loan to developing business plans and marketing strategies.

For more free and low-cost training opportunities, including online resources and in-person services near you, read the Business Training and Assistance Guide at Business.gov.

Related Resources

*This information is current as of 2009 returns. Please refer to IRS guidance for the most up-to-date information.

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