I'm a physician in a large group practice, and I recently started taking classes towards an MBA. Is the tuition deductible since it "maintains or improves skills needed in my present work" (the business management side of medicine) and I am not using it as a preparation towards "a new trade or business"? (Pub 17)



Can it be reported as a Misc deduction? Should it also be reported on line 4 of form 2106? Is there a limit?

I recommend that you check out IRS Publication 508, Tax Benefits for Work-Related Education, that is available at www.irs.gov. This publication goes in more detail about deduction education expenses.



Whenever an MBA program is involved, the answer to your question is never a simple yes or no. Unlike medical school, dental school, or law school, earning an MBA degree is not a minimum requirement for any profession (that I'm aware of.)



If you determine that you're allowed to deduct the cost of your MBA education, you should claim the tuition, fees and other costs as a miscellaneous itemized deduction. Including those costs on a Form 2106 makes sense as well.



Your deduction will be limited. Remember, miscellaneous itemized deductions are only allowable to the extent that they exceed 2% of your income. And people who claim substantial miscellaneous itemized deductions are often hit with the AMT (Alternative Minimum Tax), which essentially limits the deduction you're allowed to claim.



My final thought is to pay for a portion of the tuition through your "employer-provided educational assistance program" if your group offers such a benefit. This would allow the group to pay up to $5,250 of your tuition on your behalf, and you won't be taxed on this benefit. Keep in mind, however, that the group would have to offer the same benefit to all the employees, which might make it cost prohibitive.

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Replying to:

I'm a physician in a large group practice, and I recently started taking classes towards an MBA. Is the tuition deductible since it "maintains or improves skills needed in my present work" (the business management side of medicine) and I am not using it as a preparation towards "a new trade or business"? (Pub 17)



Can it be reported as a Misc deduction? Should it also be reported on line 4 of form 2106? Is there a limit?

Zip Code: cpa@mdtaxes.com