| You can deduct as an "employee business | | | | business even though he had previously been |
| expense" the cost of education that is (1) | | | | performing essentially the same tasks, an MBA |
| expressly required by an employer, by law, or | | | | does not qualify one for a professional |
| by government regulation, or (2) maintains or | | | | certification or license.The cost of the MBA |
| improves skills required in your current | | | | degree was deductible.NO:A taxpayer had been |
| trade or business.Education is not deductible | | | | employed by several financial firms as a |
| if it (1) is the minimum requirement for a | | | | "financial analyst". In the investment |
| trade or business, or (2) prepares one for a | | | | banking industry a financial analyst is a |
| new trade or business, even if the taxpayer | | | | temporary position which usually does not |
| does not intend to enter that trade or | | | | last more than 2 or 3 years. An MBA degree |
| business.Deductible expenses include-* | | | | is a requirement for an "associate", which is |
| tuition, textbooks, registration fees, and | | | | a permanent position. The taxpayer received |
| supplies,* round-trip transportation to the | | | | a Master of Management degree, the equivalent |
| education,* meals (at 50%) and lodging while | | | | of an MBA, and obtained a position in the |
| away from home,* lab fees, student cards, | | | | general management program of a management |
| insurance and degree costs, and* writing | | | | firm.The Tax Court, in Will M. McEuen III wt. |
| expenses for term papers and dissertations | | | | ux. v. Commissioner, T.C. Summary Opinion |
| (i.e. research and typing).Are the costs of | | | | 2004-107, found that-* The taxpayer enrolled |
| obtaining a Masters in Business | | | | in the degree program to meet the minimum |
| Administration (MBA) or equivalent degree | | | | education requirement for an associate in the |
| deductible as a business expense? According | | | | investment banking industry; and* The degree |
| to the Tax Court - Yes and No.YES:A taxpayer | | | | qualified for a new trade or business because |
| was employed to sell sports-related products | | | | the education allowed the taxpayer to perform |
| because of his prior experience in sports | | | | significantly different tasks than those |
| medicine. In the course of his job he | | | | performed prior to enrollment in the |
| performed management, marketing and financial | | | | program.The cost of the degree was not |
| tasks. Encouraged by his employer, he | | | | deductible.As is often the case in tax law, |
| enrolled in an MBA program in the hopes of | | | | the "deductibility" of an MBA degree depends |
| "moving up the ladder". As a result of his | | | | on the "facts and circumstances" of the |
| studies he was promoted.The Tax Court, in | | | | individual situation.If you cannot deduct the |
| D.R. Allemeier Jr, T.C. Memo 2005-207, found | | | | cost of acquiring an MBA as a business |
| that-* Encouraging the taxpayer to obtain an | | | | expense, all is not lost. You may be able to |
| MBA degree as a means of advancing through | | | | claim a deduction or credit for a part of the |
| the company did not amount to a "minimum | | | | tuition and fees elsewhere on the return. |
| requirement" for promotion, and neither did | | | | But that is the topic for another |
| the fact that the taxpayer actually advanced | | | | article.Robert Flach is a tax professional |
| as a result of the MBA program;* The MBA | | | | with 34 tax seasons of experience preparing |
| degree did not prepare the taxpayer for a new | | | | 1040s for individuals in all walks of life. |
| trade or business, as he was already | | | | He writes THE WANDERING TAX PRO weblog ( the |
| performing managerial and financial tasks | | | | NJ TAX PRACTICE BLOG ( and the tax planning |
| before enrolling in the program, and, while | | | | and preparation website which provides a |
| he was promoted as a result of the MBA | | | | wealth of tax advice and information. He |
| studies, he did not change the basic nature | | | | also writes and publishes THE FLACH REPORT, a |
| of his duties; and* While a degree that | | | | quarterly tax newsletter. The above article |
| qualifies a taxpayer for a professional | | | | is from the Winter 2005 issue of THE FLACH |
| certification or license, such as a law | | | | REPORT. |
| degree, may prepare him for a new trade or | | | | |