Final answer:
Under IRC § 162, deductible education expenses may include tuition, books, supplies, transportation, and lodging meals if they are ordinary, necessary, and directly related to the taxpayer's trade or business. Personal expenses or aid such as supplementing teacher salaries and tuition rebates for elementary or secondary schools are typically not deductible, while aid for buildings at colleges and grants for nondenominational textbooks may represent acceptable forms of federal aid.
Step-by-step explanation:
If education expenses qualify pursuant to IRC § 162, they must be ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including the trade or business of being an employee. Under IRC § 162, deductible education expenses may include tuition, books, and supplies that are directly related to the taxpayer's business, trade, or profession. However, costs such as transportation and lodging meals may also be deductible if they are directly related to the taxpayer's education and meet certain conditions.
It is important to note that personal expenses, even if essential to pursuing an education (like tuition payments for elementary or secondary schools), generally are not deductible if they are not directly related to maintaining or improving skills required in one's trade or business. However, aid for buildings at colleges & universities, free bus transportation (if provided equally to public and private school students), and nondenominational textbooks are examples of acceptable forms of federal aid that do not typically constitute deductible education expenses.
Additionally, while the IRC does not allow deductions for supplementing teacher salaries, taxpayers may be eligible for other types of education credits or deductions, such as the American Opportunity Tax Credit or the Lifetime Learning Credit, which are not part of IRC § 162 but can provide tax relief for qualified education expenses.