Deductions of work-related books are among the most overlooked tax deductions for professionals and small businesses, according to Stephen Fishman at Nolo Press. Doctors, lawyers, accountants and other professions require expensive reference materials as well as annual updates to provide the best service for their clients. Even as an employee, you can take a deduction for professional books required to do your job, as long as your employer does not provide the resources or reimburse you.
Which Books Qualify
If you need the books in the course of your business and wouldn't buy them otherwise, they qualify for the deduction, such as reference materials for doctors, engineers, writers or accountants. Work-related courses may qualify for an education deduction which does not cover books, so if you take a course for business, write off the required books separately as a business expense. While the IRS doesn’t require an itemized list, you'll need to justify the rationale if you're ever audited, so keep the receipts.
Typically, your employer should reimburse you for books needed to do your job, though they may become the property of your company. If you choose to purchase your own books, take the deduction as unreimbursed business expenses when you itemize your deductions, but you'll need to exceed the 2 percent of adjusted gross income threshold. If you only take the standard deduction, you won't be able to get this particular deduction.
Self-Employed and Small Business
If you run your own business, you have several possible avenues for the deduction. Most books can be written off in the year you purchase them as an expense. However for doctors, lawyers or any professional requiring large expensive sets of reference materials which you'll use for several years, you can choose to depreciate the books over the life of the item, or use Section 179 to write them off in the year purchased. For new businesses, you can opt to amortize the cost of the books as start-up costs over the standard 180-month period. Choose the option that makes the most sense for your business and best reduces your tax burden.
Which Forms to File
For employees, claim your unreimbursed business expenses on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. When writing off annual expenses: sole proprietors deduct these expenses in the "Expenses" section of Schedule C; partnerships use the "Deductions" section of Form 1065; and corporations will show the expenses in the "Deductions" section of Form 1120. To depreciate or amortize the costs, all business structures should use Form 4562 .
- Internal Revenue Service Publication 535: Business Expenses
- Internal Revenue Service Publication 529: Miscellaneous Deductions
- Forbes.com: Top Ten Tax Deductions For Professionals
- Internal Revenue Service Instructions for Schedule C
- Internal Revenue Service Instructions for Form 1065 (U.S. Return of Partnership Income)
- Internal Revenue Service Instructions for Form 1120 (U.S. Corporation Income Tax Return)
Naomi Smith has been writing full-time since 2009, following a career in finance. Her fiction has been published by Loose Id and Dreamspinner Press, among others. She holds a Master of Science in financial economics from the London School of Economics and a Bachelor of Arts in political economy from the University of California, Berkeley.