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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 13335
Experience:  15years with H & R Block. Divisional leader, Instructor
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I'd like to know the best tax result for tuition expense. I

Customer Question

Hi! I'd like to know the best tax result for tuition expense. I can pay $21,614 in tuition up front and hopefully claim it as an employee expense or pay the tuition over 4 years and take a small deduction in each year. The degree is an Ed.D. in Educational Leadership. I work as a research analyst at a university. The degree will allow me to move into management.
JA: The Accountant will know how to help. Is there anything else the Accountant should be aware of?
Customer: I earn just under 80K a year. The part that confuses me is whether or not the Ed.D. might be considered to prepare me for a different job.
Submitted: 4 months ago.
Category: Tax
Customer: replied 4 months ago.
I currently do not itemize since I don't have a mortgage.
Expert:  Robin D. replied 4 months ago.

Hello

That is a rule (prepare for a new job). The real issue though is that it does not appear to fit into either of the 2 below.

You can deduct the costs of qualifying work-related education as business expenses. This is education that meets at least one of the following two tests.

  • The education is required by your employer or the law to keep your present salary, status, or job. The required education must serve a bona fide business purpose of your employer.

  • The education maintains or improves skills needed in your present work.

It does not matter that you will be getting a degree but you did not say if either of the 2 above fits. Does your employer require it or is it needed in your present position?

At this point I would say pay over 4 years and use the lifetime credit for education.

Customer: replied 4 months ago.
My employer does not require the degree. However, the degree does improve skills used in my current job and allows me to progress into a different classification. For example, I work as a research analyst in assessment for a university. The Ed.D. program would develop my skill set in analysis and leadership allowing me to be more effective in certain aspects of my job such as running research groups and collaborating with faculty. It would also allow me to take a position as Director of Assessment. Does that change anything?
Expert:  Robin D. replied 4 months ago.

As an employee, a change of duties that involves the same general kind of work isn't a new trade or business.

If director is just a step up in responsibility in the same area then no.

But education that is part of a program of study that will qualify you for a new trade or business isn't qualifying work-related education. This is true even if you don't plan to enter that trade or business. You could change form research to instructor with the degree.

My interpretation would not change.

The use as a deduction under itemizing would not be allowed. Education credit would be.

Please do not forget or ignore to give a positive rating (look for the STARS or SMILEY FACES). It adds nothing to your costs but it assists me.

Customer: replied 4 months ago.
I'm already qualified to be an instructor with the MA I hold now. Obtaining an Ed.D. does not impact that.
Customer: replied 4 months ago.
A quick check in IRS appears that the Lifetime Learning Credit has an income cap that I exceed.
Expert:  Robin D. replied 4 months ago.

Well then. You could claim the employee deduction on Schedule A.

You said you do not itemize usually so make sure you add all of the other items for Schedule A you can.

Keep track of charitable gifts and you can also use state taxes (if you pay those).

Expert:  Robin D. replied 4 months ago.

I was not aware your filing status when first speaking about the credit.

Customer: replied 4 months ago.
My earnings were stated... I won't take up more of your time as I have some discomfort with this transaction. I don't have a lot of confidence that I have the correct advice. But thank you for your time.
Expert:  Robin D. replied 4 months ago.

I wish I could change your opinion.

Married filing joint has a larger cap and we were still discussing the employee deduction and had not gotten into the specifics of the credit itself.

You are most welcome.