How to Successfully Deduct Your MBA Expenses

October 13, 2011 · Leave a Comment 

Tax deductions are often best left to the professionals, as the work usually involves battling the convoluted and cryptic jungle of tax rules and policies. However, for the many poor wanderers who are doing it themselves, and are wondering whether or not your MBA’s expenses qualifies you for a deduction, here are a couple things to keep in mind.

What You Can Deduct

If your employer is paying for the MBA or any educational expenses, you can’t deduct it. However, this is ultimately far better for you as you can get your education paid for – and never have to worry about dealing with the IRS.

For the IRS an “educational deduction” only allows deductions for degrees that create or improve skills that are required for your field. You also can get a deduction if the skills you acquire are only helpful in your field. This doesn’t go for everything – but it is a pretty good bet. To get a picture of these kind of skills, a few examples would be negotiation skills or positive thinking seminars.

Also if your job or state law requires that you learn a skill set, then it is also deductible. Some courses that fall under this category are things like mandatory licensing updates or certain certifications.

What You Can’t Deduct

However, the one thing that you should keep in mind, which will keep the IRS hounds at bay, is that you are not qualified for an educational expense deduction if it will qualify you for, or help you go into, a new career. For example, if you are in business management and want to go into nursing, the government won’t help pay for a CCRN.

However, there are a lot of gray areas in this arena, and one good example of someone who successfully deducted their educational expenses, against the opposition of the IRS, is the case of Lori Singleton-Clarke.

A Successful Case

Singleton-Clarke had a degree in nursing although she worked for many years as a medical administrator. She ended up enrolling in the University of Phoenix, an online college, in business administration and deducted almost 15000 in educational expenses from her taxes. However, she actually ended up leaving the health-care industry for business. The IRS then saw the degree as an attempt to qualify for this new field and rejected her, and she brought them to court.

She argued, successfully, that the when she went for the degree it was to help her in her current job as a medical administrator. She also proved that the new job she got in general business had been offered regardless of her new degree. She managed to win the case, and keep the deduction.

So – the moral of the story seems to be that, by all means, if there is an opportunity to deduct your educational expenses, go for it. However, make sure that it is a legitimate claim and you have all your documents in order to prove it.

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