Tax Court approves tuition deduction for MBA

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in Leaders & Managers,Management Training,Small Business Tax,Small Business Tax Deduction Strategies

A taxpayer who represented herself in a Tax Court tussle with the IRS has prevailed in a surprising new decision. (Singleton-Clarke, TC Summary Opinion 2009-182) The court allowed the taxpayer to deduct almost $15,000 of tuition incurred to attain a master’s degree in business administration (MBA).

Alert: The new case may open the door to deductions in similar situations. In the past, the Tax Court generally has interpreted the complicated rules on business education in favor of the IRS.

For example, if you take additional courses to better yourself at work, you may now qualify for big deductions—even if the education leads to a new degree.

Here’s the whole story: You can deduct the cost of education as a business expense only if you pass one of these two tests:

  1. The education is required by your employer or by law to keep your current job.
  2. The education maintains or improves skills needed in your present work.

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