Many professionals, whether lawyers, accountants or physicians, experience and endure difficult economic times before finally earning their graduate degree. On one hand, the high cost of tuition must be paid, which requires either a significant student loan or form of employment. Yet, graduate school leaves little or no time for anything other than study. After such an economically, physically, and mentally draining ordeal, is there a way to recoup some of the blood, sweat and cash exchanged for a graduate degree? Is tuition for law or graduate school a deductible educational expense?
Taxpayers may deduct the costs of qualifying work-related education as a business expense, even if the education may lead to a degree, if at least one of the following two tests is met:
- The education is required by an employer or by law to maintain present salary, status or employment. The required education must serve a bona fide business purpose of a taxpayer’s employer.
- The education maintains or improves skills needed in the taxpayer’s present job.
However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it:
- Is needed to meet the minimum educational requirements of a worker’s present trade or business or
- Is part of a program of study that will qualify the worker for a new trade or business.
Section 1.162-5(b)(1), Income Tax Regs., for an example, provides: “A, a self-employed individual practicing a profession other than law, for example, engineering, accounting, etc., attends law school at night and after completing his law school studies receives a bachelor of laws degree. The expenditures made by A in attending law school are nondeductible because this course of study qualifies him for a new trade or business.” Id. subdiv. (ii), Example (1).
Thus, courts have held that a law degree qualifies a law student for a new trade or business and that the cost of a law degree is a nondeductible educational expense.
If you are currently enrolled in college and have questions about education credits and deductions, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation, call 212-490-0704. 
