IRS Rules Grad School is Deductible


A Maryland woman, Lori Singleton-Clarke, has won a three-year battle with the IRS, successfully convincing the tax collectors to allow her to deduct the cost of her 2006 MBA. The decision could have vast repercussions for other current and recent graduate students.

The Wall Street Journal reports, “Her odyssey began in 2006, when she filed her 2005 return. It showed just over $50,000 of income, several smaller deductions, and one large one—for $14,787 of expenses for an M.B.A. from the University of Phoenix, an online school. Ms. Singleton-Clarke deducted the tuition because her tax preparer told her she met the law's narrow definitions. When the IRS audited the return in late 2006, she conceded all the IRS's challenges to her deductions but one. She dug in her heels on the tuition deduction because, after looking at a complex diagram in IRS Publication 970, she believed she qualified for it.”

The IRS isn’t commenting on the matter though another WSJ article speculated that the ruling may apply to degrees other than MBAs. “The so-called Clarke decision strengthens the case for those who are getting an M.B.A. to improve existing skills. It may also apply to students studying journalism who have previously worked as journalists.”


Check out our ongoing Tax Tips series to see what else you can deduct!

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