By their very nature, law librarians are intellectually curious. Of course, that’s a good thing as law librarians need to keep abreast of new developments in constantly changing areas of law and the technology that is used to deliver information.
There are opportunities for continuing education at the national, regional, and local levels. At the national level, AALL offers various institutes and webinars in addition to the Annual Meeting. There are from time to time regional law library meetings and conferences. The local chapters also offer meetings and programs that are extremely useful for local resources. But to what extent does the tax law allow for deductions in pursuing these opportunities?
This article first discusses what items can be deducted and then where and how they are deducted on your tax return. Additionally, expenses may be limited by other sections of the Internal Revenue Code. Finally, I will point you to some additional resources.
The Good: What Expenses Can be Deducted
If your employer pays for all your continuing education and professional related expenses, read no further. It is always better to have reimbursement of these expenses as it is a dollar for dollar reimbursement. But if that is not possible, you may take these expenses as a deduction. Note that deductions do not deliver a dollar for dollar benefit and can even be phased out as your income increases.
The following can be deducted:
- Registration fees, tuition, books
- Use of your car to travel to meetings and programs
- Transportation (airfare/train/taxis) to meetings and programs
- Meals (only 50%)
To qualify for a deduction, these expenses must be considered to be “ordinary and necessary” to the law librarian’s profession.
The above list is sometimes referred to as “Qualifying Work Related Education Expenses.” These are typically incurred for one of two reasons: The education is required by your employer or the law to keep your present salary, status, or job
the education maintains or improves skills needed in your present work.
Law librarians are not generally required by law to maintain skills, unlike lawyers, so continuing education for us is to maintain our skills.
You can deduct tuition, books, supplies, lab fees, and similar items, along with certain transportation and travel costs. If you want to drill down on the details, see this section of IRS Publication 970. These expenses must have been incurred and paid for during the year, and must have been “necessary and ordinary” for carrying on our business or trade.
Another category of expenses are “miscellaneous expenses.” Examples of this type of expense include our dues paid to AALL, special interest sections, and our chapter, CALL.
How and where to deduct these expenses
Up to now, you are probably getting pretty excited about the possibility of getting some nice tax deductions, right? But as with most things in life, the IRS giveth and the IRS taketh away!
In order to benefit from these deductions, you first must be a taxpayer who itemizes. That is, one who uses a Form 1040, Schedule A. If you own a home, have a mortgage, and pay real estate taxes, you probably already use a Schedule A. Generally, you first report unreimbursed expenses on IRS Form 2106 or IRS Form 2106-EZ and attach it to Form 1040. Deductible expenses are then reported on IRS Form 1040 Schedule A, as a miscellaneous itemized deduction subject to a rule that limits your employee business expenses deduction to the amount that exceeds 2% of your adjusted gross income (AGI).
The Bad: What does 2% of AGI mean?
For example, your gross income might be $100,000 a year while your AGI is $75,000 a year due to various adjustments on page 1 of Form 1040. $75,000 will be the number at the bottom of your Form 1040 (line 37) and at the top of page 2 of your Form 1040 (line 38). (For purposes of this article I’m only going to refer to the IRS Form 1040.)
Two percent (2%) of $75,000 is $1,500. Your expenses in this category that are above $1,500 are deductible on your Schedule A.
Let me break this down: Let’s assume that you traveled from Los Angeles to the AALL Annual Meeting in Chicago.
|Registration for Annual Meeting
|Hotel and airfare
|Meals @ 50%
In the same tax year, you also have the following additional expenses for which your employer did not pay:
|Special Interest Sections (3 @ $20)
|CALL lunch meetings (4 @ $25)
|Transportation to CALL meetings via taxi
All of these expenses are reportable on Form 2106 (see this example). The number on line 10 of Form 2106 flows over to “Job Expenses and Certain Miscellaneous Deductions” on Schedule A line 21 (see this example). You can see there how the total amount of your deductible professional expenses gets reduced to $185.00 on line 27!
But wait! I don’t have a Schedule A: The Good (Again).
Most law librarians are employees of an institution or law firm. But if you are an independent law librarian, you could claim all of the above on a IRS Form 1040 Schedule C. I am not going to go through an example of that in this article. But in that case all of the above would be business expenses that are not subject to the 2% rule.
If you do not file a Schedule A or a Schedule C, there is still an opportunity to claim some education benefits for qualified courses taken to improve your skills through the Lifetime Learning Credit. The course must be offered by a qualified institution. Programs and meetings offered by AALL or CALL do not qualify.
On the other hand, if you took a course on international bibliography from Harvard, for example, that may qualify. These credits are limited by your income. The amount of the lifetime learning credit is 20% of the first $10,000 of qualified education expenses you paid. The maximum amount of lifetime learning credit you can claim for 2016 is $2,000 (20% × $10,000). However, that amount may be reduced based on your Modified Adjusted Gross Income (MAGI). More on this credit is found in IRS Pub 970. For a list of qualified educational institutions, go here. The good news here is that the MAGI is fairly high, so even if you get phased out of the unreimbursed business expenses, you may still be able to get this credit, or a part of it. IRS Pub 970 has all the details.
The Ugly: The Alternative Minimum Tax (AMT)
You’ve heard of the AMT, right? This alternative tax system is designed to make sure that you always pay some taxes if your income is above a certain threshold. So at the end of the day, you might qualify for a deduction for activities that keep you current, but the AMT may take them away.
Always keep good records! Should you be audited, you will want to produce your receipts or the deduction will be disallowed. I would also keep a copy of the program’s agenda. This would back up you claim that the topics discussed were necessary to keep your knowledge current. Make a copy of and store other receipts that might fade.
As always, you should consult your tax professional. Everyone’s tax situation is unique. This article is for educational purposes and does not constitute tax or legal advice.
As we face the uncertainty of what the new administration might change on tax laws, it is doubly important to stay current on tax legislation!
For those who would prefer to read the original tax code provisions on the above, a good source is the Legal Information Institute’s website . Enter a phrase, such as “miscellaneous deductions,” to retrieve the Code Sections and read: https://www.law.cornell.edu/uscode/text/26/67.
To read the regulations pertaining to the same code section, click on the Tab: Authorities (CFR).
Free IRS Resources
The following free IRS resources may be helpful. Your tax dollars at work. But note that even though these materials are written by IRS employees, they are not primary resources.
- IRS Tax Map is a good place to start. Enter key words in the search box such as “work related deductible expenses” or “work related education expenses” and obtain a list of IRS reference materials.
- Tax Topic 513: Work-Related Education Expenses
- Tax Topic 508: Miscellaneous Expenses
- IRS Publication 17, Your Federal Income Tax For Individuals
- IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses (see Chapter 5 on recordkeeping)
- IRS Publication 529, Miscellaneous Deductions
- IRS Publication 583, Starting a Business and Keeping Records
- IRS Publication 970, Tax Benefits for Education
- IRS Tax Benefits for Education: Information Center
Donna M. Tuke, MLS, JD, EA, has worked both in law libraries and tax firms. She was the founder and publisher of the Legal Information Alert and Business Information Alert (now archived in HeinOnline). She became an Enrolled Agent (see below) as a second act after raising a family but is still active in law libraries. She is the Executive Director of the Illinois Society of Enrolled Agents (ILSEA) and the manager of the Evanston tax site for the Center for Economic Progress (CEP). Donna also consults and is available for temporary library assignments, but not during tax season!
Selecting the right tax professional
Be careful when selecting a company or individual to prepare your tax returns. Choose a certified public accountant, an enrolled agent, or a licensed income tax preparer.
Here’s some advice from Chicago’s Department of Business Affairs and Consumer Protection to consider before you hire a tax professional:
- Check the preparer’s history with the Better Business Bureau.
- Be sure they can prepare your return by the tax deadline.
- For 2017 the deadline for Form 1040 is April 17. No word yet if Illinois will follow the Federal tax deadline.
To find an enrolled agent you can go to this site.
Any tax preparer who is paid for doing returns must have a preparer tax identification number (PTIN) which is included on the return. The IRS has a website listing preparers who hold professional credentials recognized by the IRS.