TAX BENEFITS FOR MBA STUDENTS: 2017 vs. 2018
April 4, 2018
I was asked an interesting question a few weeks ago pertaining to the recently enacted Tax Cuts and Job Act of 2017 (TCJA 2017). The question was this: will students still be able to deduct the cost of MBA tuition, books and class materials going forward in 2018? As you might surmise, the answer is "It depends" but if the scenarios described below potentially pertain to you, seek the advice of an accountant for clarification.
The downside of TCJA 2017 is that the legislation temporarily eliminates the itemized deduction for work-related education for the years 2018-2025. Whether or not it will be reinstated/allowed after 2025 will depend upon whether Congress extends the law or changes it. It is way too early to make a prediction on that outcome.
However, MBA tuition is still potentially fully deductible in 2017 as long as:
- a student worked in a business profession prior to beginning his/her MBA;
- the course of MBA study enhances the skills of the student;
- the student continues using his/her enhanced skills after completion of the MBA; and
- the MBA doesn't qualify the student for a new profession.
Also, if the student has more educational expense than income in 2017 (Net Operating Loss) and is unable to totally utilize the 2017 deduction, this deduction can possibly be carried forward into 2018. Under proper circumstances, it might be permissible to amend up to three previous tax years if you somehow overlooked the MBA tuition deduction in past years and you qualify.
What about 2018? What has changed? For MBA students filing a resident tax return in 2018 and meeting certain income requirements, they can possibly deduct as much as $4,000 of tuition as an "above the line" deduction or take a "learning tax credit" for 20% of their tuition cost. However, this latter deduction maxes out at $2,000 lifetime and certain income maxima must not be exceeded to qualify.
There is considerable good news for self-employed MBA students. While TCJA 2017 eliminated the work related education deduction for employees, the deduction for self-employed individuals remains intact if you properly qualify, i.e., this group can potentially continue to fully deduct MBA tuition, books and class materials against any self- employment income.
TCJA 2017 is new legislation and offers both opportunities and constraints. If what is outlined above seems applicable to your particular situation, consult with an accountant for clarification, i.e., your accountant is the appropriate person to provide you with the proper advice regarding MBA expense deductions under this new legislation.
An MBA has considerably more benefits to your career than just tax benefits. Why don't you make some time on your schedule to attend one of our
MBA Information Sessions and learn more about the many positive attributes of UHD's unique and highly rated MBA program.