Discussion:Established career vs new career
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Discussion Forum Index --> Tax Questions --> Established career vs new career
| 4 April 2007 | |
| Client has an established careeras an IT guy. In 2006, client wanted to be a real estate broker and a mortgage broker. So he took the classes and has some expenses. However, he hasn't made any income in 2006. In 2007 he has made income. After reading the information, I don't believe he can take the classes as deductions. But I think he can still take the other expenses.
What are your thoguhts? | |
| 5 April 2007 | |
| Are the classes "education"? Are they required in order to qualify one to be a RE or mortgage broker? If yes, most of us are wrong. (I don't recall voting in that poll). If you can be a mortage or RE broker without the classes, then they might be start-up costs, deductible when the new TorB is established.
1.162-5(b(3) Qualification for new trade or business. (i) The second category of nondeductible educational expenses within the scope of subparagraph (1) of this paragraph are expenditures made by an individual for education which is part of a program of study being pursued by him which will lead to qualifying him in a new trade or business. In the case of an employee, a change of duties does not constitute a new trade or business if the new duties involve the same general type of work as is involved in the individual's present employment. For this purpose, all teaching and related duties shall be considered to involve the same general type of work. | |
| 5 April 2007 | |
| These education classes were taken to be certified to be a RE and a mortgage broker. Which would qualify as a new trade or business. So, would you take them as start up costs. This person is filing a Schedule C. | |
| 5 April 2007 | |
| I believe they are nondeductible under the reg cited above. No startup cost deduction, no operating expense deduction. Maybe I'm in the minority but I don't know how you get around the reg. | |
| 5 April 2007 | |
| Agree w/ Jd. Don't think the expenditures for classes can be deducted as educational expenses or start up costs since taxpayer was an IT guy (and was not already qualified to be a real estate broker). I suspect the other expenses (don't know what they were for, but maybe realtor dues, etc.) may be deductible even though there was no income in 2006. | |
| April 5, 2007 | |
| Fascinating. The last time this came up, I said no, technically, they're not deductible, and was roundly chastised for it and finally came to the conclusion that most folks did deduct them. Chastised twice now. | |
Death&Taxes (talk|edits) said: | 5 April 2007 |
| Lifetime learning credit or is income too high? | |
| 5 April 2007 | |
| No. It's not a business expense. It's an expense to learn a new profession. The classes are not deductible, unless there's some other provision that I can't think of. | |
| 16 May 2008 | |
| Interesting takes on this issue. I have a client who started as a trader in 2007. For part of the year, he "practiced" without actually investing and made money. Towards the end of the year he started trading with real money. During the year, he paid about 20K on education related expenses. At tax return time he says "My friend's CPA (don't you love it when people start sentences this way?) let him deduct all his education."
In talking with the other CPA, he didn't provide a basis for deducting the education. He said that he was given these expenses listed out as seminars and deducted them as a normal business expense. My options: 1. Amortize as start up expenses 2. Deduct 3. Non-deductible since it is a new trade or business Does the fact that he started with practice money change this it all? | |
