It’s quite possible that MBA programs’ tuition fees will increase a lot very soon, due to a new tax reform bill currently discussed by the American Congress.
This new law has a provision which may get rid of the itemized deduction for education related to work. It allowed MBA students to take away a part of the tuition fee which exceeded 2% of the student’s annual income. Last Friday (11/10/2017) a new bill was proposed by the Senate Finance Committee.
The new bills will eliminate the possibility of deduction for unreimbursed expenses for employees, which will reflect badly on the vast majority of MBA students.
New Bill Might Increase Tuition Fee By Thousands Of Dollars
2017 Tax Cuts and Jobs Act, the new bill proposed last week, may be voted into the American law very soon and go into effect as soon as January. There will be no problem to get President Trump’s signature on it. For those who haven’t obtained their MBA yet, it will be very sad news indeed.
To get a deduction according to the law currently in action, students have to fall under three categories: their education must be required by their company or even by law to keep their position and salary; their education has to have a real business goal for the employing company; or the education must be crucial for skills needed at the student’s current position. Secondly, the education is not needed to meet the lowest requirements for the student’s current position. Thirdly, it mustn’t be qualifying the students for a new business.
Under the new bill, five more reimbursement possibilities are threatened: the Hope credit, Education Assistance Programs, the Tuition and Fees deduction, Qualified Tuition Reduction and Lifetime Learning Credit. Still, the worst consequences will be generated from eliminating deduction for education related to business. For instance, if a sales manager is studying at an EMBA program at one of the best universities and their salary is $100,000, they would have to pay $45,000 annually. However, the deduction reduces the student’s tax liability by $5,894.
How To Keep Your Deduction For The Time Being
There is one way to avoid paying much more for your education: the Opportunity Tax Credit will be expended to allow MBA students to take a tax credit. They will also be eligible for tax-free compensation from their employer if the MBA education passes as such that is absolutely necessary for their job.
Still, the only MBA students who will be able to deduct their taxes (along with meeting all the requirements) are those that stay self-employed after graduation from the university. For most students, it isn’t true, as most of them are aspiring to work for a large business after obtaining their degree.
Consequently, the only way to soften the blow will be to pay most of your tuition fee in advance before the new bill goes into effect next year.
All in all, if the new bill gets the vote, the ultimate cost of an MBA education will be increased significantly.
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