Law School: Not a Business Expense

June:

Thank you for your email and the list of business expenses.

I am looking forward to getting your book, Self-employed Tax Solutions. I have a question below -- but if it is already on your website please just direct me there. I can't seem to find the answer anywhere. It's a deduction question. I want to find a way to deduct my law school educational expenses from my new real estate business. I have a law degree without a license to practice law (yet), and I don't know if I will sit for the bar exam again. So, I am not a lawyer, but I can do my own formation and corporate formalities paperwork, maneuver in the court system, and facilitate my own land sale contracting. My education helps me to understand judicial foreclosure process and land sale contracting. I can do my own title searches too. So, can I find a way to pay for my law school expenses (now in loan repayment mode) under the IRC education expense section, or under "reasonable and necessary"?

Entity situation: I will probably choose an LLC-C for the entity because of the "Dealer" issue, and also the additional benefits available to me and my family if I hire my husband and 3 kids to help me. My husband works full time and supports our family. The business functions will include judicial foreclosures, tax lien certificates, and probate property wholesaling. I would like to gradually weave in some income upstreaming from diverted services rendered to a second LLC created for real estate investment (holding rentals) in which this LLC-C business would be the managing member.

Thanks.
Dawnelle


Hi Dawnelle,

You are welcome.

The way I understand your question: You attended law school and want to know if you can deduct as a business expense your student loan payments. No, you cannot. My book has a complete chapter on education expenses. In case I misunderstood your question, read that chapter and see if your situation fits the deductibility requirements.

If by LLC-C you mean an LLC [Limited Liability Company] formed as a corporation. That's overkill. If you must be a corporation for liability purposes you don't need to also be an LLC.

You do not need to be a corporation to hire your spouse and children as employees.

Best,
June