If you are an employee or self-employed person who works in the same field in which the master’s degree is sought, then the tuition and related expenses may be deductible as business expenses (see excerpt below).
Pursuant to Treasury Regulation
1.162-5, education expenses are deductible if they are made to maintain or improve skills required in your trade or business or field of employment or to meet the express requirements of your employer, the law or regulations imposed on you as a condition to retaining your salary or status of employment.
However, education expenses are not deductible if they are needed to meet the minimum requirements for your present or intended field of employment, trade, business, or profession, nor are business deductions allowed for expenses incurred to fulfill general education aspirations. Also, a business deduction cannot be claimed if the education is part of a program that will lead to you entering in a new trade or business.
If you are an employee and are able to deduct the tuition, then you should claim it as an itemized deduction on Schedule A of your federal tax return and on Form 2106. You may also need to fill out Form 6251 to determine if you are subject to the Alternative Minimum Tax.
If you are self-employed and are able to deduct the tuition as a business expense, you should deduct it on Schedule C.
Alternatively, it may be better to claim the "lifetime learning credit" which can be used to reduce your personal federal income tax by up to $2,000. To determine which way is best, you may want to seek the advice of a CPA.
For more information, download a copy of IRS Publication 970 at http://www.irs.gov/pub/irs-pdf/p970.pdf
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Answer By: James M. Brower Jr., CPA, is a partner with MDG, LLC in Jenkintown. This question was reviewed in November 2014.