When Education Expenses Are Deductible for Your Business: A Practical Guide for Solopreneurs & Small Business Owners

As a business owner, continuous learning feels like part of the job—courses, certifications, conferences, coaching… it adds up. But the big question is always the same: Can I deduct this?

Education expenses can be deductible as a business expense, but the IRS rules are specific (and honestly, a little tricky). Below, I break down when education does qualify, when it absolutely doesn’t, and how to apply the rules to your own business without overthinking it. Let’s get educated on education expenses!

1. Where Education Expenses Fit Under the Tax Code (Quick Context)

The starting point is IRC §162(a), which allows deductions for all ordinary and necessary expenses paid or incurred in carrying on a trade or business.

Education expenses are addressed more specifically under:

• Treas. Reg. §1.162-5(a)(1) and (a)(2) – when education is deductible

• Treas. Reg. §1.162-5(b)(2) and (b)(3) – when education is not deductible (the two major limitations)

If you are feeling up to putting your tax lawyer hat on, you can check out the actual regulation here. If not, put simply:

Your education is deductible only if it meets certain tests AND doesn’t fall into the “no-go” categories.

2. When Education Can Be Deductible (The Two Qualification Tests)

A. It Maintains or Improves Skills You Already Need in Your Business

(Treas. Reg. §1.162-5(a)(1))

This is the most common path to deductibility.

To qualify, the education must:

• Relate directly to your existing trade or business

• Improve or maintain skills you already use

• Have a clear connection to how you earn money today
  

Examples that usually qualify:

• A freelance designer taking a typography workshop

• A small-firm accountant doing a tax update course

• A personal trainer taking continuing certification classes

• A consultant taking a project management update course
  

The key phrase:
It needs to be tied to what you do right now—not what you “might” do someday.

B. It Is Required to Keep Your Current Position, License, or Status

(Treas. Reg. §1.162-5(a)(2))

This applies if:

• A regulatory body requires ongoing education (ex. CE requirements)

• Your professional license requires renewal training

• Your client contracts or industry standards require updated education
  

For employees, it can include education an employer explicitly requires as a condition of keeping your job. For business owners, it generally covers professionally mandated education tied to your trade.

3. When Education Expenses are Not Deductible (Very Important)

These two limitations disallow the deduction, even if the education is helpful or even necessary to advance your career.

❌ A. Minimum Education Requirements

(Treas. Reg. §1.162-5(b)(2))

If the education is needed to meet the minimum requirements to enter your field, it’s not deductible.

Examples:

• Education needed to initially qualify as a CPA, therapist, realtor, lawyer, teacher, etc.

• Coursework required to meet state licensing requirements before you’re legally able to perform the work
  

Even if you’re already doing similar work without the credential, the IRS rule still applies:
If the education qualifies you for the minimum standard to enter the field, it’s not deductible.

❌ B. Qualifying You for a New Trade or Business

(Treas. Reg. §1.162-5(b)(3))

If the education could qualify you for any new trade or business—even if you don’t plan to switch—it's not deductible.

Examples:

• A bookkeeper pursuing a CPA license

• A personal trainer going back to school for physical therapy

• A marketing consultant earning a degree in finance

• A designer taking UX courses that lead to a new specialization
  

Important nuance:
If your role changes but stays within the same general line of work, that’s not considered a new trade or business. For example, a marketer taking a leadership course to move from strategist to manager is generally still in the same trade.

4. How You Apply This as a Solopreneur or Small-Business Owner

Here’s a simple framework to help you determine if an education expense fits:

Step 1 — Ask: Does this relate to what I already do?

If yes → good start.
If no → likely not deductible.

Step 2 — Does it help me maintain or improve current skills?

If you can draw a straight line between the education and your current offerings, services, or responsibilities, you’re still on track.

Step 3 — Does this qualify me for something entirely new?

If the training opens the door to a new credential, industry, or career, it’s likely disqualified—no matter how relevant you believe it is.

Step 4 — Is this required to keep my license or credentials active?

If yes → relatively straightforward deduction.

Step 5 — Could I defend this choice in an audit?

If you can’t clearly explain how it supports your current business, reconsider taking the deduction.

5. Important Caveats, Grey Areas & Common Audit Triggers

Education deductions are one of the IRS’s favorite audit topics—for a reason. Here’s where things get murky:

⚠️ Courses that seem “self-development” focused

Examples:

• Leadership workshops

• Mindset coaching

• General business strategy events

These often get challenged unless the connection to your business is very specific.

⚠️ Bigger, pricier programs

High-ticket mentorships, bootcamps, degrees, or “business accelerators” can be red flags if:

• They cover broad skill-building rather than a skill tied to your trade

• The program marketing language is vague (“personal transformation,” “expand your potential,” etc.)

That doesn’t necessarily mean you can’t deduct bigger expenses, but you should carefully review to consider if it qualifies, because the IRS would love to disallow the expense if it is questionable.

⚠️ Education that looks like a pivot into a new field

Even if you think it’s “adjacent,” the IRS may view it as a new trade.

⚠️ “Future benefit” language

If an expense is justified on the basis of future opportunities, that often indicates nondeductible education.

⚠️ Industry matters

A solopreneur hairstylist taking a social media class may qualify.
A solopreneur graphic designer taking a real estate course… likely won’t.

⚠️ Documentation is everything

Keep:

• Course descriptions

• Receipts

• Notes tying the education to your current work
  

A clean paper trail often makes or breaks these deductions.

6. Final Thoughts

The IRS rules around education expenses have nuance—but once you know the framework, the yes/no becomes easier to navigate. Ultimately, education is deductible only when it supports the trade or business you’re already in, not the one you hope to enter next.

Don’t forget, the IRS will always expect you to be able to conclusively and definitively show an education expense as a business expense lines up with their regulations. This is an area prone to abuse, so don’t expect the IRS to sleep or take a lax approach in qualifying education expenses here. This is where reviewing historic court cases could help guide you further on how the IRS approaches similar cases if you aren’t confident.

If you’re still unsure whether something qualifies—or want help strategizing for year-end deductions—this is exactly what I help clients with.

👉 Book a 1:1 consult with Akouson Financial
We’ll walk through your situation, your industry, and your education choices to determine what’s safe, what’s smart, and what’s deductible.

Disclaimer:

The information provided in this blog is for general educational purposes only and should not be construed as tax, legal, or financial advice. Every individual’s situation is unique, and you should consult a qualified tax professional or financial advisor before making decisions based on this content. Akouson Financial and its representatives are not responsible for any actions taken based on the information provided herein.