I just asked for a EIN number from the IRS as a sole proprietor. They tell me that I cannot deduct education expenses as defined by the IRS. Is this right? I had some major expenses last year as I was studying to start my business. Also paid for some mentorship. Sounds like I need to be a LLC and have gotten some feedback on using the Nevada LLC to structure it. Any comments? Especially about the education deduction. I actually started my education last year before I got my EIN sole proprietorship no.
Thanks,
Bonnie
an LLC does not change anything in terms of what can be deducted since most LLCs operate as a disregarded tax entity. furthermore, setup a Nevada LLC will likely only creat even more work as you will have to turn around and file as a foreign entity in your home state.
in terms of education expense, you do not say how you want to take it as a deduction. if you are attempting to take it as a business expense, then NO, you can not. This is very clear and well established as a business expense must be an “ordinary and necessary” expense. Your cost for seminars, boot camps, and other training does not pass this test. Your only possibility is to take it as an “investment expense” on Sch A,but that deduction may be limited.
I’m not sure what you were trying accomplish by getting a sole propertiorship EIN. All it does is allow you not to have to give out your SSN. It has absolutely zero impact on taxes becuase by definition a sole propertiorship is YOU.
I would recommend you sit down with a CPA (or other tax professional) for an hour and get this kind of stuff settled so you can focus on RE investment.