They came to Kellogg and had a presentation. They claim that career switchers can write off the MBA in their taxes and save ~$20k. It sounds shady because I had previously learned that you could only write off your MBA if you went back to your old career. Kellogg let them present, so that makes them seem somewhat legit though. Wondering if anybody has more info or experience with them...
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Caveating the following since I don't know for sure, but I have read up on this a decent amount.
Forbes says "education must be related to a trade or business which you are ‘carrying on’, namely that you have already had several “consistent” years of experience before starting the program, and then plan to return to a career where you will continue to use the improved or enhanced skills in your post-MBA employment position (it is acceptable to change industries and employers but you must demonstrate the above)" although "the education must not...qualify you for a new trade or business." I think it's a gray area and depends on how closely you could relate the two different careers. I think a PR person would have a hard time writing it off if he/she went and became an IB associate after bschool.
I am also a Kellogg student and am considering pursuing the tax deduction. I am especially curious how this works for a first year student, who has not yet selected a full time career path. I was a consultant and then corporate strategist (e.g., internal consultant) who is planning to do a summer internship in consulting (and likely for full time). In theory this should qualify me for the credit as I am going consulting -> consulting, but wonder if the fact that I have not yet actually made this career transition will impact my eligibility.
Anyone have relevant experience to share?
I'm deducting them. Going from one area of finance to another. I'm not sure what there is to lose, honestly. If the IRS decides to look at your case (99% chance they don't), all that will happen is you'll plead your case and be heartfelt. They'll either Grant it or they'll see you didn't mean any harm and just have you pay the delta with likely no penalties (or very small penalties). The expected value is extremely high here, so why not?
You're right it is a no-brainer to try, but since you can claim the deductions retroactively for up to 3 years, I am wondering if it might make more sense to wait until post-grad when I can actually prove that I went from one similar career to another. Obviously I would rather have the $$ today, but not if it lowers my chances of pushing the deduction through.
I deducted my MBA tuition. Unless you're on scholarship it's a huge amount near 100k, so you should definitely look into this.
There are several articles online you can look up which go into the details, but basically its a three part test for deduction eligibility:
1) Must be staying in the same occupation. If you go banking-->MBA-->banking, or consulting-->MBA-->consulting etc. this is clear cut. There is more ambiguity if you somewhat switch careers though, for example it's unclear if you go from banking-->MBA--> corp. fin. at Amazon whether you would qualify. The bigger the career jump the more risky this becomes.
2) Your employer cannot require a MBA for your position. If having a MBA is a prereq for your job, this disqualifies you. This isn't a hurdle for most places though since there are plenty of bankers, consultants, investment analysts, etc. that don't have MBAs. This also creates ambiguity though if you don't know where you will be working postgrad.
3) Employer cannot reimburse your expenses.
See this WSJ article: http://www.wsj.com/articles/good-news-for-m-b-a-students-tuition-is-now…
Finally, you don't need to pay someone to do it. I did the deduction on Turbotax.
We actually have a class on this at Booth - also touched on it in my certification days -
Long story short, it's very much a grey area, the precedent is not strong enough either way, unless you were clearly not in violation of either section. In reality, it's hard for the IRS to prove if you have a good argument. However, the bureau is also full of accountants and attorneys - all people who were NOT allowed to deduct their master's tuition. So you better bet it pisses them off. It's definitely chancing an audit where you'd have to justify. However, it also definitely won't auto trigger said audit.
Suggestion was to work with a real accountant to file that year and get their opinion first, that way you'd have that backstop should the IRS come knocking.
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