Um, this is false. I dunno what you are talking about. The IRS provides a flowchart, and I followed it, and I qualify. It can be a degree generating program. It just must be relevant, must not be required, and it must not be to qualify you for a new trade.

This is completely wrong. More than 500 hours is one of many criteria for "material participation." Another is: "You were substantially the only participant in the activity during the tax year." Thus any sole proprietorship consulting business where only the proprietor works qualifies. Like me.

Read this.

False. If the degree maintains or improves skills needed in your present work, and does not qualify you for a new trade or business, then it is deductible as a business expense.

You really overestimate how much the average (even recommended) accountant knows. In my experience (I've been through this cycle a few times now), they will certainly have an answer, but it's more often wrong than right for anything remotely tricky or ambiguous. I highly recommend The Tax Guide for Engineers, which has taken far less of my time and given me far more useful answers than any accountant has. I don't know if it will answer Patri's specific question, but it's worth having on the shelf as a first reference.

I can deduct because I'm self-employed and the education is relevant to my trade. Its neither hope nor lifetime learning. Normal employees can't really do this because there is some tiny cap on what you can deduct (like 2% of AGI), but self-employed people have no limit.

My taxes are generally so simple its not worth an accountant. This is my first schedule C. Plus using Turbotax helps a lot.

Publications 334 (Tax Guide For Small Businesses), 535 (Business Expenses), and 970 (Tax Benefits for Education) are also relevant to this question, and Publications 334 and 535 seems generally very helpful for filing Schedule C. I would download them all and glance over them so you know what questions are answered where. From my reading of Publication 970, your expense may or may not be legitimate, depending on whether it improves your skills in doing your present business, and whether or not it qualifies you for a new trade or business. See pages 53 to 56, especially the flowchart on page 54. As for your original question, this depends on whether you have decided to use a cash or accrual method of accounting for your business. Under the cash method, the expense is deducted in the year it was paid; under the accrual method, the expense is only deducted after the all-events test has been met, and economic performance has occurred. In this case, "economic performance" would be completion of the courses that you have paid for. See pages 4 and 5 of Publication 535 for more details.

Among all the people I've talked taxes with, only Kim Jensen and I seem to have figured out that the U.S. personal income tax system is astoundingly well documented. Virtually any conceivable question is answered in the forms and publications... that's how I figured out, for instance, how to transform an old 403(b)(7) plan with poor investment choices into a Roth IRA. Patri, you can give me a call if you have any questions; I'd be glad to point you in the right direction, with the caveat that I am not a tax professional, and therefore not legally qualified to give tax advice. :)