Can I deduct my new hire training expenses?

By Jason Watson

Can I deduct my new hire training expenses?

Yes, if they are a condition of your employment. Note this subtle difference- a condition of your employment versus making yourself more marketable (think Southwest). Here is another snippet from Tax Court Opinion 2002-44 involving a new-hire pilot for Continental Express:

Generally, a taxpayer is entitled to deduct from gross income ordinary and necessary business expenses that are directly connected with or pertain to the taxpayer’s trade or business. Sec. 1.162-1(a), Income Tax Regs. An individual may engage in the trade or business of being an employee. Gapikia v. Commissioner, T.C. Memo. 2001-83. Trade or business expense deductions are allowed for those taxpayers who are not reimbursed for expenses incurred because of their employment. Primuth v. Commissioner, 54 T.C. 374, 377 (1970). If, as a condition of employment, an employee is required to incur unreimbursed expenses, the employee is entitled to a deduction for those expenses. Fountain v. Commissioner, 59 T.C. 696, 708 (1973); Spielbauer v. Commissioner, T.C. Memo. 1998-80; Scalley v. Commissioner, T.C. Memo. 1992-123.

During 1996, and upon commencing training, petitioner was an employee of CE. CE required petitioner, as well as all other newly hired pilots as a condition of employment to attend and pay for new-hire training. CE had two purposes for its new-hire training, to ensure that the new pilots were proficient with its aircraft, and to ensure the safety of its passengers. The evidence in the record clearly establishes that petitioner incurred unreimbursed expenses as a requirement of his employment as a pilot with CE.