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Did you know that you could deduct your higher education expenses as "business expenses," under certain circumstances?
A nurse won against the IRS for higher education tax deductions she took in her income tax returns. Here's the surprising part -- she went head-to-head with the IRS on her own, without hiring an attorney.
What's even more surprising is that this woman's case could be a small landmark case in the tax laws dealing with higher education tax deductions. Lori Singleton-Clarke, a Maryland nurse, took a $15,000 deduction for her MBA tuition and was denied the higher education tax deduction.
According to income tax rules, a taxpayer may take an education tax deduction under the same rule that allows "ordinary and necessary business expenses" if:
What that means is that unless the education was "ordinary and necessary" for her current profession, Ms. Singleton-Clarke would not have been able to deduct the expenses.
Interestingly, education that qualifies the taxpayer for a new profession is not deductible. This, for example, is true for law school expenses which the Tax Court has denied deductions for, stating that it qualifies the taxpayer for a new profession.
For Singleton-Clarke, the Tax Court found that her MBA didn't qualify her for a new trade or profession. Furthermore, the Tax Court found that it enhanced and improved her preexisting skill set. As a result, she won her case and was allowed to deduct the education expenses as ordinary and necessary business expenses.
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