Learning Other Languages: Personal or Business Expense
If you are thinking about learning another language and hoping to deduct it as business expense, this post will help determine if you can.
The defining feature of a business expense is that it's ordinary and necessary for business, and not personal. The first step in deciding if this is a business expense is looking at the reason you want to learn the language, and if there is also a personal motivation behind it.
Business expense
An expense can be deducted for business if it is both ordinary and necessary for business. The IRS says:
"To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary." link: https://www.irs.gov/publications/p334
If you are learning a language because you need to in order to conduct business and communicate with colleagues, clients, patients or customers, that might potentially be a business expenses. If you are in business already and don't know that other language, one of two situations may be occuring:
- You operate your business in an environment that increasingly requires you to learn another language in order to effectively communicate with colleagues, clients, patients or customers, or.
- You want to expand your business in a way that will require you to learn another language in order to effectively communicate with colleagues, clients, patients or customers.
If either of this are true, you should then be able to demonstrate/document that the environment you operate in or a portion of the population you work with speaks that particular language. There is likely to be information in your marketing materials or on your website that shows your business caters to populations that speak that language. In this type of situation it's very possible that you can deduct the cost of learning that language.
If you have no documentation to show these situations are true, it's questionable whether you would want to be deducting the cost of learning another language.
Personal expense
If you have a personal motivation to learn a language that could overshadow the deductibility of the cost to learn it. A personal motivation could be the desire to speak to family or friends who speak the other language, a desire to move to a location where that language is spoken, or a desire to travel to countries where that is the predominant language. The IRS says:
If you have an expense that is partly for business and partly personal, separate the personal part from the business part. The personal part is not deductible. link: https://www.irs.gov/publications/p334
Many people learn languages for strictly personal reasons. Be honest with yourself if your motivations are mainly personal, and don't attempt to stretch something to be a business expense if there is a very small or no reason to learn it for business.
The bottom line
If you very clearly have a business reason to learn another language and no personal motivation, then it would be fine to deduct it. If you have a strong personal motivation and no clear business reason, then do not deduct the cost. However, there are times where there are reasons on both sides.
The IRS states you can partly deduct an expense that is partly business, however, with learning another language it may be challenging to determine what portion was for business vs. for personal. When you purchase a computer that you will use for business and personal purposes, you can track the time you use it for each to determine what portion to deduct. There may not be a clear way to track how much you will use another language for business vs. personal. You will then need to use your best judgement on whether to deduct all, some or none of the expense.
If you would like to discuss this personal situation, go to the main website page and either join the Simple Guide or the low cost membership to get help with your decision. See these resources as well:
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