<I can't tell whether or not we would qualify to deduct our [education] expenses under the definition of "maintaining and improving skills." Any suggestions? >



Some background that your question shows you know already (but others may not): Treasury Regulation 1.162-5 "Expenses for Education" (paraphrasing): Expenditures made by an individual for education that are NOT 1) expenses to acquire education required to meet the minimum educational requirements for qualification in the individual's trade or business, or 2) expenses to acquire education that is part of a program of study that will qualify the individual in a new trade or business, are deductible if 1) the education "maintains or improves skills required by the individual in his employment or other trade or business," or 2) the education is required by the individual's employer.

It looks like you and your wife can deduct the expenses incurred in getting your degrees (because the "maintains or improves skills" language is broad enough to encompass this situatiuon) unless the degree would qualify you for a new trade or business.

I don't think that either of the degrees qualify either of you for a new trade or business. Usually only degrees that are closely related to a trade or business (like an M.D. or J.D.) meet that requirement (where "usually" means "almost all the time but I don't want to commit to such a strong position").

An example given in the Reg: "C, while engaged in the private practice of psychiatry, undertakes a program of study and training at an accredited psychoanalytic institute which will lead to qualifying him to practice psychoanalysis. C's expenditures for such study and training are deductible because the study and training maintains or improves skills required by him in his trade or business and does not qualify him for a new trade or business." The situations of both you and your wife sound remarkably similar to our friend C.

Happy deducting!!