Tax Deductions

[Robert Burns]

I've recently had my accountant do my 2008 income taxes and I was surprised that he informed me that I could not take deductions for my real estate investment training that I purchased in 2008. A big one was the Rich Dad REI Coaching Program @ $6,285 and several smaller courses amounting to several hundreds of dollars. I have a full time job and am working on building my REI business albeit I have not done any deals or made any money yet, I believed the training material and other expenses directly related to my part time REI business were legitimate tax deductions. I know people can't respond or "give tax advice" officially but unofficially am I wrong about this and my accountant is right?

[Warren Lance Barber]

Once you have an actively running business, you can deduct education expenses such as these. If they are incurred prior to your start date, you deduct or amortize them as startup expenses. You can deduct up to $5000 in startup expenses (with exceptions if startup expenses exceed $50K) in the year you start your business and amortize the remainder. Since you have not done any deals, your business would not have started yet and you will have to wait on the deduction. However, if for tax purposes you are considered an investor once you do start, you cannot deduct educational expenses at all according to my understanding. Investors (as defined by the IRS) are not considered actively running a business and do not get the same deductions as business owners (as defined by the IRS). Education deductions are just one. Again, you and I may consider ourselves "investors", but we do not want the IRS to classify us as investors. I am no accountant, but I do have a rental business. "Every Landlord's Tax Deduction Guide" gave me an excellent start and understanding of taxes related to real estate. There are other books out there. You may want to read up, even if you have someone do your taxes. It can be enlightening and help you determine the tax consequences of what you do.

Hope this helps!