A new Tax Court ruling (T.C. Summary Opinion 2009-182, 12/2/09) upheld a tuition deduction for a nurse who got an MBA with a specialization in health care management. By following the reasoning of this decision, you can determine whether the money you spend on furthering your education will be tax-deductible.
First, of course, you can’t be reimbursed for your outlays. Unreimbursed education expenses such as tuition, fees, and books may be deductible in some circumstances.
What you can’t deduct: Education that qualifies you for a new line of work.
What you can deduct: Education that improves the skills you use in your present career. In this case, the nurse was a veteran who had moved into management. She was a quality control coordinator with responsibility for "measuring and improving outcomes for patients, physicians, and employees," as the Tax Court put it. Thus, her MBA with a specialization in health care management enhanced her skills in her current career, rather than preparing her for a new one, so her tax deduction was upheld.
The same rules apply to all education, not just MBA courses. However, these deductions are miscellaneous itemized deductions, deductible only to the extent they exceed 2 percent of your income. If you’re subject to the alternative minimum tax, you won’t be able to take these deductions.
