Tax Research Memorandum

To: Lauren Smith
From:
Date: May 18, 2012
Re: Tax Treatment of MBA education expenses

Facts

You incurred $15,000 in educational expenses in the course of earning a MBA. You want to deduct these expenses as an employee business expense in your tax return since your employer does not have an education expense reimbursement program.

Issue

The issue is (1) whether the education was required to keep your present salary, status or job and/or the education maintains or improves skills needed in your present work, and (2) whether the education was needed to meet the minimum educational requirements of your present trade or business, and (3) whether the education is part of a program of study that will qualify you for a new trade or business.

Rule

It has been established that education expenses can be deducted as business expenses when the education maintains or improves skills needed in your current work but the education was not needed to meet minimum requirements and did not qualify you for a new trade or business. Publication 970 (2011) Tax Benefits for education
Federal Tax Regulations, Regulation, §1.162-5., Internal Revenue Service, Expenses for education
Singleton-Clarke v. Commissioner, T.C. Summary Opinion 2009-182,
Allemeier v. Commissioner, T.C. Memo. 2005-207
Blair v. Commissioner, T.C. Memo. 1980-488
Sherman v. Commissioner, T.C. Memo. 1977-301
Link v. Commissioner, 90 T.C. 460, 463-464 (1988)
Schneider v. Commissioner , T.C. Memo 1983-753,

Analysis

You have worked in administrative field in your current and previous job for couple years. It seems you had already met the minimum educational job requirements in your current and previous job and the MBA just improved your skills for your present work. The question on hand left is if by getting your MBA did you qualified for a new trade or business.