10 MARCH 2023 WorldWide Drilling Resource® Drilling Into Money Not Boring by Mark E. Battersby Smarter Education Deductions Far too many drilling professionals ignore the impact of education on their business or the operation’s employees - one of the major assets of every business. When it comes to smarter workers, everyone benefits thanks in large part to our tax laws. The drilling operation prospers with smarter, better-trained employees - and a tax deduction when the business foots the bill for employee education or training costs. Those smarter employees, along with the business’s owner(s), can reap tax deductions for the education costs they foot. A drilling operation may deduct the cost of "ordinary and necessary" expenses paid for employee education and training - even amounts paid to others. It may also deduct the cost of education if the education or training "maintains or improves skills required in the trade or business," or the education is required by law or regulations for maintaining a license, status, or job. Educational assistance programs allow employers to provide employees with educational assistance of up to $5250 annually which can be excluded from the employee’s income. And, although the tax law requires an actual “plan,” the rules do not require an employer to actually fund the plan. In fact, most businesses with a plan pay the educational benefits out of the operation’s general fund. Education expenses are legitimate business expenses for most individuals. And, don’t forget, deductible educational expenses include books, tuition, and travel costs to and from school. Of course, expenses incurred to meet the minimum requirements of an individual’s present trade or business, or those which qualify them for a new trade or business, are not deductible. A key question in many businesses is whether the education-related benefits paid by the employer are deductible from the employer's business taxes and, probably even more important, whether the benefits are taxable to the employee. For employers, the amount paid or reimbursed for an employee’s education expenses is a tax-deductible business expense. As an added bonus, employees may be able to exclude the payment or reimbursement from their gross income as a working condition fringe benefit. Regardless of who foots the “bill” for education, the rewards of smarter, better-trained employees are something every drilling operation can reap. What’s more, whether a drilling professional is self-employed, an employee of his or her own business, or simply an employee, tax deductions and unique write-offs abound for anyone willing to look for them - or seek direction from an expert. Mark Mark E. Battersby Contact via e-mail to michele@worldwidedrillingresource.com
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