Is an MBA Deductible?

You can deduct as an "employee business expense"business even though he had previously been
the cost of education that is (1) expressly requiredperforming essentially the same tasks, an MBA does
by an employer, by law, or by governmentnot qualify one for a professional certification or
regulation, or (2) maintains or improves skills requiredlicense.The cost of the MBA degree was
in your current trade or business.Education is notdeductible.NO:A taxpayer had been employed by
deductible if it (1) is the minimum requirement for aseveral financial firms as a "financial analyst". In the
trade or business, or (2) prepares one for a newinvestment banking industry a financial analyst is a
trade or business, even if the taxpayer does nottemporary position which usually does not last more
intend to enter that trade or business.Deductiblethan 2 or 3 years. An MBA degree is a requirement
expenses include-* tuition, textbooks, registrationfor an "associate", which is a permanent position. The
fees, and supplies,* round-trip transportation to thetaxpayer received a Master of Management degree,
education,* meals (at 50%) and lodging while awaythe equivalent of an MBA, and obtained a position in
from home,* lab fees, student cards, insurance andthe general management program of a management
degree costs, and* writing expenses for term papersfirm.The Tax Court, in Will M. McEuen III wt. ux. v.
and dissertations (i.e. research and typing).Are theCommissioner, T.C. Summary Opinion 2004-107, found
costs of obtaining a Masters in Businessthat-* The taxpayer enrolled in the degree program
Administration (MBA) or equivalent degree deductibleto meet the minimum education requirement for an
as a business expense? According to the Tax Court -associate in the investment banking industry; and*
Yes and No.YES:A taxpayer was employed to sellThe degree qualified for a new trade or business
sports-related products because of his priorbecause the education allowed the taxpayer to
experience in sports medicine. In the course of hisperform significantly different tasks than those
job he performed management, marketing andperformed prior to enrollment in the program.The
financial tasks. Encouraged by his employer, hecost of the degree was not deductible.As is often
enrolled in an MBA program in the hopes of "movingthe case in tax law, the "deductibility" of an MBA
up the ladder". As a result of his studies he wasdegree depends on the "facts and circumstances" of
promoted.The Tax Court, in D.R. Allemeier Jr, T.C.the individual situation.If you cannot deduct the cost
Memo 2005-207, found that-* Encouraging theof acquiring an MBA as a business expense, all is not
taxpayer to obtain an MBA degree as a means oflost. You may be able to claim a deduction or credit
advancing through the company did not amount to afor a part of the tuition and fees elsewhere on the
"minimum requirement" for promotion, and neither didreturn. But that is the topic for another article.Robert
the fact that the taxpayer actually advanced as aFlach is a tax professional with 34 tax seasons of
result of the MBA program;* The MBA degree didexperience preparing 1040s for individuals in all walks
not prepare the taxpayer for a new trade orof life. He writes THE WANDERING TAX PRO
business, as he was already performing managerialweblog ( the NJ TAX PRACTICE BLOG ( and the tax
and financial tasks before enrolling in the program,planning and preparation website which provides a
and, while he was promoted as a result of the MBAwealth of tax advice and information. He also writes
studies, he did not change the basic nature of hisand publishes THE FLACH REPORT, a quarterly tax
duties; and* While a degree that qualifies a taxpayernewsletter. The above article is from the Winter
for a professional certification or license, such as a2005 issue of THE FLACH REPORT.
law degree, may prepare him for a new trade or