With tax season coming up, everyone is looking for new ways to save, either to get a larger refund or to afford paying taxes owed. Thanks to a new ruling, some graduate students may find extra breathing room come tax time.

The Wall Street Journal reports that, thanks to the persistence of Lori Singleton-Clarke, a Maryland woman, students pursuing a Masters in Business Administration degrees (MBAs) may now find their tuition is tax deductible.

Several aspects of the case could be important to MBA students and others looking to save money this tax season.

• Know the code. The Internal Revenue Service’s tax code is complex and detailed, so knowing where to look for potential deductions can help. Tax deductions for education can be found in IRS Publication 970 (see below).
• Ask for help. If you aren’t tax-savvy yourself, you may want to enlist the help of a professional tax-preparer or commit to learning how to work at-home tax software like TurboTax.
• Stay organized. The WSJ reports that Singleton-Clarke’s case was successful in part because she kept all her paperwork organized and was able to provide adequate documentation for her claim.
• Be persistent. Singleton-Clarke’s case was not always easy, sources note. But she stuck it out and ended up saving herself some serious money – and potentially paving the way for other graduate students to do the same.

Does Your Education Qualify?

Educational expenses eligible to be considered tax-deductible must meet certain specific criteria, including the following.

• Income limits for single and married individuals affect how much tuition can be deducted.
• Parents may deduct certain expenses for children whose education they fund, but only if the parents claim the children as dependents.
• Certain institutional fees (like health care and books) are not considered part of tuition and so are not eligible for the tax deduction.
• Even a single college- or graduate-level class could qualify you for the tax deduction.

A more detailed review of these regulations is available here, or you can browse this year’s version of Publication 970 (below, as a PDF).

Other Tax Concerns

Whether or not you pursued further education this year, stay alert during tax season. Certain predatory loans in disguise tend to crop around this time of year, including RALs (refund anticipation loans) and RACs (refund anticipation checks).

If you do wind up owing taxes that you can't afford to pay, you can file an extension and possibly work with the IRS to pay your taxes over time. Paying taxes owed is important since they typically cannot be discharged in bankruptcy.

Remember to keep your sensitive information (like bank account numbers and Social Security Number) private!

Additional Resources

IRS Publication 970 (2010)