This week, I have been rushing to get my taxes done so that I can complete my FAFSA and meet deadlines for scholarship consideration. I finally got all my corresponding tax documents in order and headed off to an accountant for help. When we got to the subject of my impending move to NYC and entering Columbia’s MBA program, he mentioned the MBA Tax Deduction. He explained that if I will be performing similar functions between my old job and my new job and my class schedule confirms that, that there is a possibility that I may be eligible for this deduction in the future. Ever since, I have been doing some Googling to learn more.
Here is what I learned (DISCLOSURE: I am not an accountant or any type of expert – all this info is taken from other sources on the internet and the direct sources are linked within):
The MBA Tax Deduction came out of a big case where a nurse represented herself in tax court and made a really good case for why her MBA degree met the standards for a business deduction. This was in late 2009 and was big news at the time for two reasons 1.) Because she represented HERSELF, without an attorney, and WON (which almost never happens) and 2.) because, according to the article, it provided a “road map others can use, especially MBA students”.
Excerpts from a 2011 Forbes.com article below give a good overview of what would qualify someone to be successful with deducting their educational expenses (the full article is worth a read).
1. You can’t deduct courses your employer paid for.
- If you can get your employer to pay, you don’t need to deduct it…
2. Educational expenses qualify in two ways…
- It maintains or improves skills required in your employment or business-but anything that might be helpful is probably ok.
- Your employer or law requires it, like mandatory licensing update courses
3. It can’t qualify you for a new career. ”
From what I have read, it sounds like a lot of people get audited when they try to use this type of deduction. In fact, a CBS presentation I found online has a big red bullet of caution about this deduction. This presentation has some other helpful information about taxes and education and is worth a read.
More recently, there was a notable case where an MBA student lost in US Tax Court. The Bloomberg Business Week article thinks the case could “embolden the IRS to go after more students”.
Poets and Quants also had a good article on whether an MBA is tax deductible (Read it here).
On an unrelated note, if you would like some fun reading on people that were challenged on their strange deductions and won in IRS court, check out this article. My favorite is Ms. Love’s depreciable assets…
