Taxes Made Simple

A reader asks: For 2008, we're in the 25% tax bracket. We paid $535 for a Java programming class that my husband took. He works as a web designer, and he does freelance work on the side. What's the best way to deduct this? Do I want to take a tuition and fees deduction? Use the Lifetime Learning Credit? Or should we deduct it as a business expense related to his freelance work?

My answer:  If you meet the requirements (discussed below) the best option is certainly to deduct it as a business expense. This way it would save you money on both income tax and Self-Employment Tax for a grand total tax savings of roughly 40%.

By way of comparison, taking the Tuition and Fees Deduction would save you 25%, and taking the Lifetime Learning Credit would save you 20%.

In order to be able to deduct the class as a business expense, it must "maintain or improve a skill needed in your present work." Given that your husband is already a web designer, it sounds to me like he meets this requirement.

However, the class also must not:

Want to learn more about freelance deductions? Take a look at my related book: Surprisingly Simple: Independent Contractor, Sole Proprietor, and LLC Taxes Explained in 100 Pages or Less.