Taxing Issues: Are MBA Expenses
Tax Deductible?
by Lewis A. Weinstein
Founder and CEO of GenerationTax

Deductible Requirements:
Deducting MBA expenses can provide you with significant tax savings. First, the education must be related to a trade or business which you are “carrying on.” Secondly, the education must not be a minimum educational requirement for qualification in your trade or business, nor can it qualify you for a new trade or business. Finally, the education must maintain or improve skills required in your profession.

The Gray Areas:
Concern 1: Am I “carrying on” (required answer: yes)? Attending graduate school full time generally precludes being actively involved in a trade or business. However, this is not, in and of itself, fatal. Assuming that you were engaged in a trade or business before coming to school (nowhere explicitly defined by the IRS, but significant work experience like that of most MBAs would generally qualify), a temporary leave of absence or other suspension of involvement in a trade or business is allowable. The IRS defines “temporary” as less than one year, but the courts have allowed for substantially longer absences (up to several years.)

 

About Us
Services
Locations
Tax Links
Tax Tips
Contact Us
 
   

Concern 2: Is an MBA a minimum educational requirement for my trade or business (required answer: no)? This disallowance criteria is generally not applicable to most MBAs pursuing graduate study in business, since their undergraduate degree will usually satisfy minimum entry requirements in most firms.

Concern 3: Is the education part of a study program that can qualify you in a new trade or business (required answer: no)? You are generally a good candidate to deduct your MBA expenses if you had strong business skills prior to business school. It’s acceptable to change industries and employers when you graduate. However, you must be able to demonstrate that your MBA maintained & improved your business skills and you’ll continue to use them in the position you take when you matriculate. Furthermore, many MBA classes are general in nature and are applicable to a wide range of management tasks and problems. Even more specialized classes i.e. a corporate tax class, should be valuable to most managers, but without qualifying them for a new trade or business. However, the language in the regulation and case law with respect to this limitation is so vague that it would be possible for the IRS to make such an assertion and very difficult for an individual to prove otherwise.

Concern 4: Does an MBA maintain or improve skills required doing your present work (required answer: yes)? The case law on this issue varies, but it is clear that the more business-like your old career and duties, the more likely you will be considered to be maintaining or improving skills.

The proper application of the above rules for deducting MBA expenses is frequently uncertain. Each person must analyze their specific circumstances in evaluating whether or not they qualify to take a tax deduction for graduate school. If you have questions with respect to your personal situation, I would strongly recommend that you utilize the services of a qualified tax preparation firm.

 


IRS Rules for Determining Eligibility

   
   

 

Deductible Educational Expenses

Qualified education expenses paid in the tax year are deductible to the extent they exceed 2% of your adjusted gross income and you are itemizing your deductions. You can take out loans to pay for tuition expenses and deduct it in the year the funds are credited to the University (not when the loans are later repaid to the lender). Deductible education expenses include:

  • Tuition & Fees
  • Case Materials and Books
  • Computers & Peripherals (if required by curriculum)
  • Miscellaneous Supplies

It does matter when you pay your tuition. You can only deduct MBA tuition expenses in the year paid. If you are a first year MBA, it may make sense to prepay a portion of your second semester tuition in the year you start business school to off-set your higher income. However, be aware of the dreaded Alternative Minimum Tax.

Note: If your employer reimburses you for MBA tuition expenses that qualify for a deduction, the reimbursement is a tax free working condition fringe benefit.

 
   

 


The Upside & Downside to Deducting MBA Expenses

 

We stand by every return
with FREE audit and examination assistance.

 

 
   
Save up to $15,000 in Taxes!

“Mr. Weinstein’s expertise enabled me to determine that my MBA was tax deductible, resulting in significant tax savings.”

Andrew F. Eggert,
MBA 2014
Harvard Business School

“I found the service to be high quality, hassle-free, and reasonably priced.”

Lana V. Cohen,
MBA 2014
MIT Sloan Business School

“Mr. Weinstein gave my tax situation the personal attention seldom found in big tax preparation franchises.”

James R. Finnigan,
MBA 2011
Stanford School of Business

Is your MBA expense
tax deductible?

Unmatched Experience & Expertise!
Lewis Weinstein, the founder of GenerationTax, has been helping MBA’s deduct their qualified MBA expenses since 1979. He is a frequent lecturer at HBS and has written many published articles on deducting education expenses. Unlike large, impersonal tax preparation franchises, Mr. Weinstein will PERSONALLY prepare your tax returns. He works with all levels of tax complexities including: the tuition tax deduction, multi-state returns, K-1’s, IRA distributions, foreign income, Roth conversions, international tax returns, and more.

Free Audit Assistance
We stand by every return with Free Audit & Examination Assistance and an Unconditional Money Back Satisfaction Guarantee.

Proactive Tax Planning
We take a proactive approach to helping you reduce your taxes over the 3 calendar years of your MBA and beyond. You’ll receive tax planning advice on prepaying or deferring tuition payments, taking penalty free withdrawals from retirement funds, converting your 401K into a tax free Roth IRA, and more!

Free Phone Consultation
Lewis Weinstein will help you determine if you are eligible to deduct your MBA expenses and entitled to significant tax savings. You may also qualify for the Lifetime Learning Credit.

Unconditional Money Back Guarantee
We stand by our expert service. We will refund your payment in full if you are not completely satisfied with our services.


Email or Call Lewis Today
for Your Free Consultation.
800-640-9797

 

The information contained in this Site is for general tax guidance. The application and impact of tax laws can vary widely based on the specific facts involved. As such, this Site should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. Before making any decision or taking any action, you should consult with a qualified professional.

 

   
© 2000-2014 GenerationTax Corporation. All rights reserved.