Tuesday, February 2, 2010

Tax-deductible MBA tuition!

The Wall Street Journal reported last week about a Maryland nurse who won a long battle with the I.R.S. when the United States Tax Court said she had properly deducted nearly $15,000 for the cost of her master’s degree in business. ...

What the court said in this case, following a precedent set in earlier cases, is that an M.B.A. degree is different from other degrees because it’s more general and doesn’t provide the foundation for, and lead to, a specific professional license or certification. ...

It turns out the rules for M.B.A.’s depend on whether individuals can prove that they were already established in a certain trade or business before going to get an M.B.A. and that the degree will help them maintain or improve their skills in that specific trade or business.

If they can demonstrate both, they can deduct [from their taxable income] whatever tuition costs their employer didn’t reimburse or offer to reimburse. And if they can’t — say they are switching careers or didn’t have qualifying work experience before heading to school — they can’t.
--Jennifer Saranow Schultz, NYT, on a reason B-schools should start jacking up tuition. HT: Jimmy Quach

As long as you have established your trade or business before getting the degree — and that the degree will help you further your career in that trade or business — you can deduct the tuition, [tax accountant Saul] Brenner said. “The deductability is not contingent on you doing the degree part time,” he added.
--Jennifer Saranow Schultz on the broadness of the tax break

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