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Deducting Part-time MBA expenses
Posted on 7/23/15 at 2:22 pm
Posted on 7/23/15 at 2:22 pm
I've started researching this and it looks to be a bit of a grey area. I am looking at programs that are Top 20 and almost all are ~$100-120K.
Deducting such a large amount of educations expenses would save a significant amount of money off the tax bill. If it saves ~$25K, then it nets the cost of the MBA down to ~$75K (100-25).
I know this is subject to a 2% AGI haircut.
Call outs, watch outs, advice appreciated. Seems like a topic worth hiring a tax attorney for when the time comes if I were to decide to go ahead with it.
Deducting such a large amount of educations expenses would save a significant amount of money off the tax bill. If it saves ~$25K, then it nets the cost of the MBA down to ~$75K (100-25).
I know this is subject to a 2% AGI haircut.
Call outs, watch outs, advice appreciated. Seems like a topic worth hiring a tax attorney for when the time comes if I were to decide to go ahead with it.
This post was edited on 7/23/15 at 2:23 pm
2
Posted on 7/23/15 at 4:49 pm to lynxcat
Assuming you are trying to deduct this as an unreimbursed business expense, I remember studying for the CPA exam and Becker specifically stating the costs of these materials are not deductible because its viewed as qualifying you for a new job. I don't see how an MBA is any different.
You'd have a hard time arguing that position in court IMO.
You'd have a hard time arguing that position in court IMO.
Posted on 7/23/15 at 4:51 pm to Jabstep
It wouldn't be a business expense but an education expenses at an accredited university and education expenses are deductible.
Posted on 7/23/15 at 4:53 pm to Jabstep
The law is clear when schooling is required to enter a new profession (law, medical, CPA) but the grey area is around an MBA allowing you to excel in your current role. In essence, it would be acting as continuing education that the company has not reimbursed. That's my 50,000 ft. understanding as it currently stands. 
The actual code reads:
The actual code reads:
quote:
Topic 513 - Educational Expenses
You may be able to deduct work-related educational expenses paid during the year as an itemized deduction on Form 1040, Schedule A (PDF), Itemized Deductions. To be deductible, your expenses must be for education that (1) maintains or improves your job skills or (2) that your employer or a law requires to keep your salary, status or job. However, even if the education meets either of these tests, the education cannot be part of a program that will qualify you for a new trade or business or that you need to meet the minimal educational requirements of your trade or business.
Although the education must relate to your present work, educational expenses incurred during temporary absence from your job may be deductible. After your temporary absence, you must return to the same kind of work. Usually, absence from work for one year or less is considered temporary.
Expenses that you can deduct include:
Tuition, books, supplies, lab fees, and similar items
Certain transportation and travel costs, and
Other educational expenses, such as the cost of research and typing
This post was edited on 7/23/15 at 4:57 pm
Posted on 7/23/15 at 4:54 pm to lynxcat
Make sure that you first avail yourself of any lifetime learning credits, tuition and fees deductions, etc, depending on AGI.
Beyond that... the general rules are that it either must be required by your employer and/or it must be necessary to improve your skills in the line of business in which you have been "carrying on" and intend to return to after you get your degree. It can't be used to bring you into a new career that's not at least related to your current job.
So for example, if you are a mid level manager and your company is requiring you to get an MBA to advance in your company, and you will manage more and more people afterwards... I'd give a hard look at taking a deduction.
On the other hand, if you were a computer programmer, and you wanted to become a doctor, then the costs of med school would not be deductible.
What makes MBA such a gray area... is that most any job can involve business or management and thus could be enhanced by an MBA, while not necessairly changing career paths.
For example... a doctor who wants to get an MBA to become a hospital administrator.
Beyond that... the general rules are that it either must be required by your employer and/or it must be necessary to improve your skills in the line of business in which you have been "carrying on" and intend to return to after you get your degree. It can't be used to bring you into a new career that's not at least related to your current job.
So for example, if you are a mid level manager and your company is requiring you to get an MBA to advance in your company, and you will manage more and more people afterwards... I'd give a hard look at taking a deduction.
On the other hand, if you were a computer programmer, and you wanted to become a doctor, then the costs of med school would not be deductible.
What makes MBA such a gray area... is that most any job can involve business or management and thus could be enhanced by an MBA, while not necessairly changing career paths.
For example... a doctor who wants to get an MBA to become a hospital administrator.
Posted on 7/23/15 at 8:06 pm to lynxcat
I wouldn't take that position simply due to the fact that an MBA would likely qualify you for new positions.
Let us know what you decide to do!
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