Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15. See below for how to submit a question.
My employer is reimbursing me 100 percent for the tuition cost of my MBA program. Is the amount I am reimbursed for graduate classes taxable? If so, is there anything I can claim?
Payments received by an employee for tuition, fees, books supplies etc., under an employer's educational assistance program may be excluded from gross income up to $5,520. However, this exclusion applies only to undergraduate courses beginning before June 1, 2000. It does not apply to graduate courses, such as an MBA program. The payments for education can still be excluded if they meet the working condition fringe benefits requirements, which could be met if the educational payments would be deductible by the employee if paid by the employee. You should discuss this further with your employer and/or tax adviser.
Aside from the employer reimbursement issue, you may be able to deduct the various costs associated with your MBA courses, if the courses you are taking meet one of two criteria: 1) they are required by your employer as a condition of your employment; or, 2) they help to maintain or improve skills required in your job. Generally, you deduct qualified unreimbursed educational costs on Schedule A. For information about what deductions and/or tax credits you may take for educational costs, see the following IRS publications: 508, Education Expenses; 970, Tax Benefits for Higher Education; 3064 IRS Notice 7-60, Education Tax Incentives.
Daniel F. McGuire, CPA, Arthur Andersen
The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.
To ask a tax question, call Sundial, The Sun's telephone information service, at 410-783-1800. Call 410-268-7736 in Anne Arundel County, 410-836-5028 in Harford County, 410-848-0338 in Carroll County. Using a Touch-Tone phone, punch in the four-digit code 6225 after the greeting. To submit questions by e-mail and access an online tax guide, go to The Sun's Web site at www.sunspot.net/tax.
Selected questions will be answered in the Business section. No questions will be answered personally.
Pub Date: 3/25/99