Tax write-off for a company that helps pay the tuition for an MBA

[The-Mister-K]

Hi -

I wonder if the company I work for can give me money to pay for my tuition (I'm pursuing an MBA) ? If so, how much can the company claim as a write off  ? and what is the process to follow for  the company ?

Also, as an individual, can I claim the tuition and/or the loan interests on my tax return for next year ?

I've also read about Business Deduction for Work-Related Education but I'm not sure how this would apply ?

Thank you for your help.

[The-Mister-K]

Hi SweetieJean - Thanks for your help. What I'm trying to get my head around are all the forms of deductions I could get. Do you think I could claim all of the below on my tax return ? - Educational assistance from employer (tax free) - Business Deduction for Work-Related Education (I'd be eligible based on these criteria but is there an approval process to start with the IRS ? ) - Lifetime learning Credit - Tuition and Fees deduction Best,

[Hal_Al · Accepted solution]

Yes, all of the above.

Your employer is allowed to reimburse you (or directly pay) up to $5250 of tuition tax free. Any additional reimbursement is required to be treated as taxable income on your W-2.

Any tuition you pay out of pocket (or with taxable reimbursement) is eligible for the  Lifetime learning Credit (LLC) or Tuition and Fees deduction, but not both. The LLC is usually best for most people. It takes $10,000 of paid tuition to get the maximum LLC.

If you pay more than $15,250 of tuition in a year, the excess MAY be eligible for the Business Deduction for Work-Related Education. The general rule is: Educational expenses to improve your current job skills are deductible. But learning a new job is not.  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. But, it is only an itemized deduction subject to the 2% of AGI Threshold. 

[SweetieJean]

But, as my deleted comment said, you cannot double or triple dip.

[SweetieJean]

Do you meet this if it's not reimbursed by the company?

Work-Related Education

You can deduct expenses you have for education, even if the education may lead to a degree, if the education meets at least one of the following two tests. (1) It maintains or improves  skills required in your present work.   (2) It is required by your employer or the law to keep your salary, status, or job, and the requirement serves a business purpose of your employer. 

https://www.irs.gov/pub/irs-pdf/p529.pdf 

Also see:

http://www.forbes.com/sites/mattsymonds/2014/04/11/the-mba-and-the-taxman-claim-or-not-claim/#7b854a... 

Your employer should check with their accountant re their ability to deduct.