Deducting the Cost of Your MBA

A ruling handed down in U.S. tax court last month could help tens of thousands of students deduct the cost of an MBA degree on their taxes, according to a story covered in the Wall Street Journal on Saturday.

Lori Singleton-Clarke, a Maryland nurse who in 2006 deducted nearly $15,000 in expenses for an online MBA from the University of Phoenix, went through an onerous audit that included several rounds of confusing and intimidating IRS correspondence.

The IRS’s rules on deducting work-related tuition are immensely complicated, ultimately preventing most students from deducting their tuition. But Singleton-Clarke held fast, believing after looking  at a complex diagram in IRS Publication 970 that she had met the law’s narrow definitions.

Singleton-Clarke tells WSJ that throughout the ordeal, she drew on skills she developed as a nurse responsible for dealing with doctors who may have infringed hospital rules. That was why she studied for her MBA, saying: “I didn’t want to feel outmatched by surgeons who didn’t want to talk to me.”

Thanks to the tenacity of Singleton-Clarke, this case clarifies the rules and will likely lead to more taxpayers taking the deduction, tax experts believe. “This case definitely provides a road map others can use, especially MBA students,” says Melissa Labant, a tax expert with the American Institute of CPAs.

Bottom line: You should absolutely discuss the idea of deducting the cost of your MBA, or Stacy Blackman’s consulting services, with your tax professional.

(image courtesy of Flickr user Josh Thompson, CC 2.0)

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