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MBA
Students

GenerationTax has been the definitive source for MBA tax related issues for more than thirty years. Many states allow you to deduct qualified MBA expenses. For example, states such as California and New York allow you to deduct education expenses, which could result in significant tax savings!​​

Requirements

(1) Your MBA education must be related to a trade or business which you are "carrying on"
(2) The education must not be a minimum educational requirement for qualification in your trade or business
(3) The education cannot qualify you for a new trade or business
(4) Finally, the education must maintain or improve skills needed in your profession

Carrying on a trade or business

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, 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. “Temporary” is defined as less than one year, but the courts have allowed for substantially longer absences (up to several years.)

Minimum educational requirement

The minimum education necessary in your profession must be determined from a consideration of such factors as the requirements of your employer, the applicable law and regulations, and the standards of your profession. This disallowance criteria is generally not applicable to many MBAs pursuing graduate study in business, since their undergraduate degree has typically satisfied the minimum entry requirements in their profession and of their employers.

Qualifying for a new trade or business

The question of whether or not your education expenses can qualify you in a new trade of business requires a commonsense approach. You must analyze your work experience and the skills, tasks and activities you were qualified to perform before the education in comparison to those you were qualified to perform afterward. You will generally meet this criteria if you had substantial work experience and your MBA courses were directly related to, and built upon your skills required in your profession both before and after business school. It is acceptable to change industries and employers when you graduate. However, you must be able to demonstrate that your MBA maintained and improved your skills required in your position prior to business school and that you continued to use those same skills required in the position you took when you matriculated. Furthermore, many MBA classes are general in nature and are applicable to a wide range of business tasks and problems. Even more specialized classes i.e. a corporate tax class, should be valuable to most MBAs, but without qualifying them for a new trade or business.

Maintain or improve skills

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.

Determining your eligibility

MBAELIGIBILITY

The Upside and Downside
to Deducting MBA Expenses

MBAEXPENSES

To learn more about your MBA deduction, please contact us to schedule a consultation.

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