No tax breaks for MBA students

Tax breaks MBA
Students looking for tax benefits from their MBA programs are (mostly) out of luck. / Thinkstock

The U.S. Tax Court has dealt a setback to young MBA students with little work experience who try to claim their tuition costs as a tax-deductible business expense, lawyers and accountants said on Thursday.

In a ruling last week, a Tax Court judge denied Adam Hart of Florida, who was studying for a Master of Business Administration degree in finance, a $17,138 tax deduction he claimed for his tuition costs in 2009. The IRS billed Hart for $2,572 in unpaid taxes.

Hart, now 31, who graduated in 2011 from the Rollins College MBA program in the state, did not have enough consistent work experience prior to starting school to claim the deduction, the judge ruled.

“There is no evidence in the record that (the) petitioner was carrying on a trade or business before he enrolled in the MBA program,” wrote Tax Court Judge Kathleen Kerrigan.

Claiming MBA tuition as an ordinary, cost-of-business deduction is a narrow needle to thread, tax professionals said. The tax break cannot be claimed by law or medical students.

MBA students may be able to convince the IRS their education is an expense if they have years of consistent experience built up before starting a program, and then return to that career after graduation, professionals agreed.

The Tax Court decision will prevent MBA students without an established career path from claiming the tax break, lawyers and accountants said.

“Given where we are economically, it may be more difficult for younger professionals to establish themselves in careers. This in turn could make it more difficult to take advantage of the deduction,” said John DeBoy, a tax lawyer at Covington & Burling LLP.

Tax and accounting expert Robert Willens, who teaches MBA classes at Columbia University, said the tax break accounts for about one-third of the tuition cost a year for the students he knows who have been able to claim it.

Following Hart’s Tax Court loss, “the IRS could decide to read it more broadly than it should be read and begin challenging people,” Willens said.

Josh Nowack, an accountant in California, said he does between 30 and 50 tax returns a year that claim MBA tuition as a business expense. Students in high-tax states like New York and California can save between $5,000 and $10,000 with the MBA tax break.

He said a strong candidate for the tax break is an engineer, for example, who has worked for 15 years then gets an MBA to broaden his or her career opportunities.

But for Hart, who started his MBA program two years after receiving an undergraduate degree, the Tax Court ruling “was not surprising,” Nowack said.

In an interview on Thursday, Hart said he would ask the Tax Court to reconsider his case with new evidence that shows he had more work experience before starting the MBA program.

Hart said he works now for McKesson Corp, a drug wholesaler, as a sales representative. He said he could owe the IRS up to $10,000 if he ultimately loses his case.

“I’m fighting this all the way to the end,” Hart said.


News
Entertainment
Sports
Lifestyle
Local

Two young children killed in deadly Queens fire

Two 4-year-old children died after a blaze at their Far Rockaway home on Saturday night. The Queens fire injured three others, including a third sibling.

National

Florida man charged with murdering son to play…

A Florida man annoyed that his 16-month-old crying son was preventing him from playing video games suffocated the toddler, police said on Friday.

International

Powerful 7.2 magnitude earthquake rattles Mexico

A powerful earthquake struck Mexico Friday, shaking buildings and sending people running into the street, although there were no reports of major damage.

News

OMG! Exercise can make skin (and butt) look…

A moderate exercise regime can turn back time and actually reverse the skin's aging process, according to new research. The study showed that a minimum…

Entertainment

Whoopi Goldberg makes her debut as marijuana columnist

"It helps my head stop hurting, and with glaucoma your eyes ache, and she takes the ache out. It's wonderful," she said.

The Word

Kate Middleton made fun of Prince William's bald…

Kate Middleton and Prince William are in Sydney, Australia, right now, and it sounds like that brash Aussie sense of humor might be rubbing off.

The Word

Is Tom Cruise dating Laura Prepon?

"Mission: Impossible" star Cruise is said to be dating Laura Prepon, star of "Orange is the New Black."

Television

'Scandal' recap: Season 3, Episode 18, 'The Price…

Sally is Jesus, Olivia caused global warming, and Mellie's still drunk. Let's recap the Scandal finale. A church full of Washington insiders is about to…

NBA

Deron Williams leads Nets over Raptors in Game…

The Nets traveled to a raucous Air Canada Centre but came out with an important Game 1 victory over the Raptors.

NBA

Carmelo Anthony agonizing over Knicks future as season…

There’s still the cloud hanging over the franchise’s head as to the pending free-agent status of All-Star forward Carmelo Anthony.

NFL

Jets host players with eye toward NFL Draft

The Jets hosted a number of NFL Draft hopefuls for workouts on Thursday, with an eye toward some under-the-radar players.

NFL

Chris Johnson: I wanted to go to 'a…

Now that Chris Johnson is a Jet, the team has to figure out if one of the most explosive players in the NFL over the last half decade has anything…

Parenting

How to parent without gender stereotypes in a…

Christia Spears Brown, Phd. author of "Parenting beyond Pink & Blue" gives advice on raising kids free of gender stereotypes.

Tech

VIDEO: 'Vein-scanning' may become the future of paying

Designed to make transactions quicker and easier, the technology works by scanning the unique vein patterns in each person's palm.

Tech

#FollowFriday: 10 of the smartest Twitter accounts

Spending lots of time on Twitter? You might as well learn something. Here are some of the smartest accounts to follow.

Style

Light-up nail art syncs with phone

This Japanese technology syncs light-up nail art with your phone.