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Dear Tax Talk,
I am in the process of transitioning from a full-time office position to a ballroom dance teaching job, and I wonder if my training is tax deductible. Currently, I pay about 50 percent of my day-job income toward dance training locally and out of town. Since I passed my first dance-teacher certification last year, I have worked an average of five hours a week as a dance teacher and expect that to grow as I obtain increasing levels of certification. I ultimately plan to quit my day job in about two years. This certification is required by my studio, though not all of my dance training is specifically certification related. Can I write off any of my dance training in federal or Minnesota state taxes this year? What tax variables should I consider as I plan for the future? Thanks for your help.
So you think you can write off your dance classes? Well you don’t want to get in a dance off with the IRS, so tread lightly.
You’re basically looking at two issues: qualifying for a new profession and hobby losses. Generally, education that qualifies you for a new profession is not tax deductible. An exception would be the higher education benefits discussed in IRS Publication 970.
Publication 970 states:
Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. This additional education is qualifying work-related education if all three of the following requirements are met.
- It is required for you to keep your present salary, status or job,
- The requirement serves a business purpose of your employer, and
- The education is not part of a program that will qualify you for a new trade or business.
So based on the foregoing, it certainly sounds like your education expenses would qualify as a tax deduction.
If you do not carry on your ballroom dancing activity to make a profit, you cannot use a loss from the activity to offset other income. Activities you do as a hobby, or mainly for sport or recreation, are often not entered into for profit.
If you’re reporting losses from ballroom dancing for more than two years, the IRS may begin to disallow deductions in excess of income unless you can show that it is not a hobby. Good luck and break a leg — or is that just show-business talk?
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To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.