| Topic Name: |
Is my MBA Tax Deductible |
| Message Name: |
Ok... |
| Date Posted: |
05/07/2000 |
| In Reply To: |
First, for anyone interested in this topic, there's a great book, "Tax Strategies for MBAs" at www.mbataxbook.com. It's $20 and will answer all your questions and then some. I found it to be well worth the investment.
Second, (for Joe) it is possible for MBAs to claim education costs as an unreimbursed business expense under Reg. Section 1.162-5, assuming you can meet the requirements. There are four specific tests, and the most difficult for an MBA is whether the business school education qualifies him or her for a new trade or business. If these tests can be met, the expenses are likely deductible as miscellaneous deductions on Schedule A (sorry Joe, you don't need to have a business). For the court cases, the most relevant is Sherman v. Comr. (36 TCM 1191), a 1977 Tax Court case where a Harvard MBA was able to deduct all of his business school costs. Check it out - it's a good read and provides a basis for full-time MBAs to claim a business expense deduction even though they aren't working during school.
Billy B. |
| Message: |
First of all, there are a lot of BAD tax books out there that tells its readers they can cheat the IRS and get away with it. Do NOT believe them all.
You stated:
"If these tests can be met, the expenses are LIKELY deductible as miscellaneous deductions on Schedule A (sorry Joe, you don't need to have a business)."
The keyword is LIKELY, which tells me the author is not even sure if he is right. And neither should YOU.
Let me get down to tax basics here. Tax deductions exist because 1)govt wants to you invest in certain things (IE housing, retirement plans) and 2)to spread the tax burden as equitably as possible (but this is reserved for those who are wretchedly poor).
The question is are educational expenses an investment? They are NOT an investment from a finance point of view (which is the definition accounting and tax code goes by), and are NOT deductible. They are not an investment because educational expenses are generally counted as a personal expense that are not directly related to improving a business. In other words, it is a PERSONAL investment geared towards self-improvement and not a business improvement.
Educational expenses are deductible ONLY as a business expense if the employee's education will enahance the knowledge and skills of that business and, presumably, will improve that business. This IS an investment from a finance perspective. Therefore, it is deductible ONLY by that business.
Joe
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