Despite Its High Cost, This Education Is Deductible

Question

We run an S corporation and specialize in flipping houses. We have been doing well over the years. Now, my spouse and I want to attend a $35,000 per head, three-day in-person training event that can help us perform well in our business. Though the cost is high, the outfits for this program are not accredited, as in the case of Harvard University (example).

Our tax preparer worries that the training program’s high cost could trigger an audit. He recommends that we amortize the cost over the expected period of benefit instead of extending it as education.

Answer

The S corporation’s $70,000 payment qualifies as a tax-deductible fringe benefit since the training is to improve your skills for use in your business. Though you and your husband are employee shareholders of the S corporation, this does not prevent the deduction. As for the IRS audit, your S corporation revenues and expenses indicate that the $70,000 expenditure would not stand out excessively.

But if you are to be audited, then the examiner might take a closer look at this big expense. Yet there is no need to worry. Secure the promotional material, notes, and handouts you received from the class to prove the course is relevant to the S corporation business.

Hope this resolves your issue.