Hypothetical tax question for any CPAs or anyone in the know?

Question

If I start a business doing something I go to school for, can I deduct all of my college tuition as a business expense or just the interest? I figure I wouldn't be able to start a business without the training so I was thinking that all of my tuition would be a valid expense. However, I don't know all of the tax laws in the U.S.

Answer 1

Your tuition would not be a business expense.

However, tuition can be used for one of the following depending on your personal tax situation:
-Hope Credit
-Lifetime Learning Credit
-tuition deduction

(These depend on your year in school and income level)

The interest on your student loans is deductible in the year you repay the interest. Accrued interest is not deductible.

Answer 2

uh... no, not all of it. Let's say you start a business... most likely it will be an S-corp which is basically taxed as if you were an individual.

However, The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. This deduction is taken as an adjustment to income. This deduction may be beneficial to you if you cannot take either the Hope or lifetime learning credit because your income is too high.

Generally, you can claim the tuition and fees deduction if all three of the following requirements are met.

1. You pay qualified education expenses of higher education.
2. You pay the education expenses for an eligible student.
3. The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption on your tax return.

To learn more about claiming Tuition and Fees on your 2006 Income Taxes visit the IRS website at: http://www.irs.gov/publications/p970/ch06.html

Answer 3

No, your education to enable you to start this business is not a valid business expense. But interest on student loans is usually deductible, although there are some limits on it.