Nurse Wins Against IRS over Education Tax Deduction

By Tanya Roth, Esq. on March 10, 2010 | Last updated on March 21, 2019

Did you know that you could deduct your higher education expenses as "business expenses," under certain circumstances?

A nurse won against the IRS for higher education tax deductions she took in her income tax returns. Here's the surprising part -- she went head-to-head with the IRS on her own, without hiring an attorney.

What's even more surprising is that this woman's case could be a small landmark case in the tax laws dealing with higher education tax deductions. Lori Singleton-Clarke, a Maryland nurse, took a $15,000 deduction for her MBA tuition and was denied the higher education tax deduction.

According to income tax rules, a taxpayer may take an education tax deduction under the same rule that allows "ordinary and necessary business expenses" if:

The education "maintains or improves skills required by the
individual in his employment or other trade or business," or
The education "meets the express requirements of the individual's employer, or the requirements of applicable law or regulations, imposed as a condition to the retention by the individual of an established employment relationship, status, or rate of
compensation."

What that means is that unless the education was "ordinary and necessary" for her current profession, Ms. Singleton-Clarke would not have been able to deduct the expenses.

Interestingly, education that qualifies the taxpayer for a new profession is not deductible. This, for example, is true for law school expenses which the Tax Court has denied deductions for, stating that it qualifies the taxpayer for a new profession.

For Singleton-Clarke, the Tax Court found that her MBA didn't qualify her for a new trade or profession. Furthermore, the Tax Court found that it enhanced and improved her preexisting skill set. As a result, she won her case and was allowed to deduct the education expenses as ordinary and necessary business expenses.