Daughter Going For Graduate Degree

She's doing this with an eye to taking over the successful allied therapy business her mother, a speech therapist, started 34 years ago.

I'm looking for strategies which might reduce our tax burden. Daughter has been an employee of her mother's S-Corp for several years, doing a few hours a week tutoring on Saturdays, all properly reported and handled tax wise. Is it possible that some of her next two year's expenses could be paid by the S-Corp as a training expense to get her the graduate degree necessary to run that business in the future? ========= No. Generally, education which qualifies someone for a different job isn't deductible, even when the education itself is also relevant to one's current job. In most cases, advanced degrees are considered as qualifying for a different job (but there are a handful of exceptions). Therefore, nothing will be deductible under the business education expense rules.

If she didn't avail herself to the various education credits in full, those may be available to offset the expense.

I know it's not deductible for the employee. But it's not deductible for the business that wants to pay to educate the employee for increased responsibility or a change in job title?

Or is it that the business can take the deduction, but it's taxable to the employee?

Is this still the case, or "old news"? Pub 970 covers a lot of tuition deductions situations.

Pub 15b outlines employer's deductions for employees educational assistance, and the tests involved to make it work. And the fact that such assistance in excess of $5250 is taxable.

Much to study up on here - I'd make this your daughter's first educational effort.

One way to reduce your tax burden is to claim her as a dependent on your return, as long as her gross income remains below the exemption amount and you (not the business) provide more than half of her support.

Probably not deductible, but consider the Lifetime Learning credit, I'm pretty sure that would apply.

As previously mentioned, the business could provide tuition assistance to the employee as a fringe benefit. However I'm a little skeptical about paying the tuition directly and calling it a business expense. Is it ordinary and necessary for this type of business to incur this level of training expense (graduate degree) for a part-time employee, or would such a business ordinarily just hire someone who is already qualified?