What Real Estate Educational Expenses & Classes Can I Write-off My Taxes?


(light crescendoing tones) – [Toby] I joined an investor class. I paid $30,000. Up to today, I haven’t
started an LLC or C Corp. How should I report this education expense for taxes purposes? Can I report it on my personal taxes? You want to jump on this one
or you want me to whack at it? – [Jeff] You can whack at it. – [Toby] Okay, so here’s the deal. Investor, that’s a magic word. If you are an investor and
you’re doing education, you don’t get to write off
your education expenses period. In fact, if you are… If you look at some of the
publications out there, your travel and everything
else is specifically excluded if you are an investor. So we don’t want this
on your personal return if that’s what you’re doing. If it’s an investment
expense, don’t want it. The sole kind of exception is if you are already in
the realm of real estate and you already have rental properties, then it’s treated as an expense
that you could write off as long as it’s real estate class. So the real answer is I would not be writing
this on my personal. In fact, there’s a case. It was a gentleman who we ran
into at an event years ago, and he went out and did exactly what you’re talking about doing. And his accountant filed it
out of his personal taxes and he became a tax case
(mumbles quickly) Commissioner? It was exactly what we thought, which is they were going to deny it until you actually had the business. Now if you set up, let’s say a C Corp. It has the ability to do what’s
called a start-up expense and reimburse any expenses
that were associated with the investigation or
start-up of that business. So if your investor class really
had to do with the start-up and investigation of that business, then it would be deductible. The only question is whether
it’s going to be 100% deductible in that first year, or whether
you have to spread it out over a number of years. They allow you to what’s
called amortize it. So, you’re going to get to write it off, the only question is how long. If it’s less than 5000 bucks, you’re going to grab it the first year. If it’s more than $5000, then
you’re going to have a portion that is immediately
deductible up to $5000. You’re going to spread out
the rest over 15 years. You do not report this
on your personal taxes. So, hope that makes sense. Anything you want to add on that one? – [Jeff] No, I mean there
used to be an argument if this was, say an investors
class for securities, instead of property, you used to be able to
deduct that on Schedule A. – [Toby] Never. They actually specifically exclude it now. – [Jeff] Even though you
were already trading and — – [Toby] Yep. You have to qualify as a trader. – [Jeff] Okay. – [Toby] Yeah, investors don’t get it. Kind of stink-olas, and uh — – [Jeff] And there’s no place
to deduct it anyway anymore. – [Toby] No, you’re just toast. But people used to try it and they would say, “Hey,
I’m a trader in security” which means you got to
have a lot of trades, about 700 hundred trades.
– Oh, true, true. – So, I try to avoid that. (bright music with clap-like beats)

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