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Level 1

How should I deduct MBA tuition expenses in my case that I receive 50% taxable assistance from employer, and I earned a 25% scholarship from the university?

Tuition and Fees = $22,035
Scholarship from Univ = $4702
Taxable Fringe on Employer W2 = $5767

Due to salary, I don't qualify for LLC. The MBA is not required to keep my job.  The MBA will of course improve my skills.

How do I calculate the Education Expenses I would like to claim?
1 Best answer

Accepted Solutions
Level 20

How should I deduct MBA tuition expenses in my case that I receive 50% taxable assistance from employer, and I earned a 25% scholarship from the university?

By law your employer can  give you $5250 maximum, tax free. 

 If you got more than $5250, the amount above $5250 is usually already included in box 1 of  your w-2 and you do not need to enter anything additional on your tax return.  Since you have essentially paid tax on that part, it  is considered your after tax money and that amount can be used  to claim the tuition credit.

The expense you can claim are:

Tuition and Fees                   $22,035
Scholarship from Univ              -4702
Tax free benefits not on W-2    -5250    (I'm assuming you got this, if not don't deduct it)                                                   Deductible Tuition                = 12,083

Educational expenses to improve your current job skills are deductible. But learning a new job is not. From JK Lasser’s Your Income Tax 2013, pg 580: "For a deduction, the courses must be related to your existing job responsibilities and not lead to qualification for a new business. The tax court has allowed deductions for MBA expenses where individuals with some managerial or administrative experience took the courses to improve skills needed for their existing jobs." 

http://www.forbes.com/sites/mattsymonds/2014/04/11/the-mba-and-the-taxman-claim-or-not-claim/#4e857f... Excellent article on deducting MBA

http://www.wsj.com/articles/good-news-for-m-b-a-students-tuition-is-now-more-deductible-1471013805 

It is deducted as a job expense. TurboTax completes form  2106, which  then carries to Misc itemized deductions on Schedule A. The problem with this is that you only get to deduct that portion of  your misc deductions that exceed 2% of your AGI. and then only if your total  itemized deductions exceed the standard deduction.  (2% rule explained: https://ttlc.intuit.com/questions/2902781-what-is-the-2-rule)

 In TurboTax, enter at:

Federal Taxes Tab

Deductions & Credits

-Scroll down to:

-Employment Expenses
-- Job related expenses

View solution in original post

4 Replies
Level 20

How should I deduct MBA tuition expenses in my case that I receive 50% taxable assistance from employer, and I earned a 25% scholarship from the university?

By law your employer can  give you $5250 maximum, tax free. 

 If you got more than $5250, the amount above $5250 is usually already included in box 1 of  your w-2 and you do not need to enter anything additional on your tax return.  Since you have essentially paid tax on that part, it  is considered your after tax money and that amount can be used  to claim the tuition credit.

The expense you can claim are:

Tuition and Fees                   $22,035
Scholarship from Univ              -4702
Tax free benefits not on W-2    -5250    (I'm assuming you got this, if not don't deduct it)                                                   Deductible Tuition                = 12,083

Educational expenses to improve your current job skills are deductible. But learning a new job is not. From JK Lasser’s Your Income Tax 2013, pg 580: "For a deduction, the courses must be related to your existing job responsibilities and not lead to qualification for a new business. The tax court has allowed deductions for MBA expenses where individuals with some managerial or administrative experience took the courses to improve skills needed for their existing jobs." 

http://www.forbes.com/sites/mattsymonds/2014/04/11/the-mba-and-the-taxman-claim-or-not-claim/#4e857f... Excellent article on deducting MBA

http://www.wsj.com/articles/good-news-for-m-b-a-students-tuition-is-now-more-deductible-1471013805 

It is deducted as a job expense. TurboTax completes form  2106, which  then carries to Misc itemized deductions on Schedule A. The problem with this is that you only get to deduct that portion of  your misc deductions that exceed 2% of your AGI. and then only if your total  itemized deductions exceed the standard deduction.  (2% rule explained: https://ttlc.intuit.com/questions/2902781-what-is-the-2-rule)

 In TurboTax, enter at:

Federal Taxes Tab

Deductions & Credits

-Scroll down to:

-Employment Expenses
-- Job related expenses

View solution in original post

Level 1

How should I deduct MBA tuition expenses in my case that I receive 50% taxable assistance from employer, and I earned a 25% scholarship from the university?

Thank you Hal_Al!  This is what I imagined, but wanted some confirmation.  Thank you very much!
Even though its subject to the 2%, every little bit helps!
Level 6

How should I deduct MBA tuition expenses in my case that I receive 50% taxable assistance from employer, and I earned a 25% scholarship from the university?

Hi @Hal_Al

 

May I ask a follow-up question with your response? I am under the impression that the Job-related Expense is suspended by TCJA. Am I wrong or is there another category where MBA tuition can go deducted in 2019? 

 

Thank you!

Level 20

How should I deduct MBA tuition expenses in my case that I receive 50% taxable assistance from employer, and I earned a 25% scholarship from the university?

@moon890203  Despite the displayed June 2019 date on the "original" post, this is actually an old post (pre 2018)

So, you are correct: Job-related Expense is suspended by TCJA. Tuition, as a job expense, is no longer deductible. 

 

MBA tuition is still eligible for the Lifetime Learning Credit