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I'm planning on going back to school for a graduate degree. Looking at the different tax breaks I could find related to education:

The American Opportunity tax credit: This is not an undergraduate degree, so this tax break does not qualify.

The Lifetime Learning Credit: My AGI is way above $52,000; so this break is out too.

The Tuition and Fees Deduction: My AGI is above $80,000 too; so I don't qualify for this either.

Student Loan Interest Deduction: If I were to take out a loan, I wouldn't even qualify for this either since my AGI is above $80,000.

So, is that the end of the road? Is there anything else I qualify for that I'm not aware of?

  • You could get married. Will your MAGI be as high as it is now throughout grad school? – Hart CO Oct 17 '18 at 14:41
  • Get married? Um, no. lol. I'm going to school part-time, so through those years I'll still be making the same as a full time employee. – AxiomaticNexus Oct 17 '18 at 15:21
  • See, marriage sounds even better in your scenario. How long do you anticipate being in school? Also, is your MAGI very far above 80k? – Hart CO Oct 17 '18 at 15:27
  • My MAGI is too far from the $80k mark that marriage would not help either; we both would make too much still when filing jointly. To be honest, I could afford to pay for my education completely out-of-pocket, but being raised in poverty has made me an incredibly stingy person. I will still take whatever financial incentive I can get. – AxiomaticNexus Oct 17 '18 at 15:40
  • That's not stingy, it's prudent. Joking about marriage of course, but people have married for tax benefits, doesn't work if you'd be marrying a high-earner. Sounds like you're out of luck, a 529 plan doesn't make sense if planning to go back immediately, and if you can't max out 401k contributions to drop MAGI below $80k then no tax breaks. – Hart CO Oct 17 '18 at 15:43
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The Lifetime Learning Credit is $57k - $67k, single and $114k - $134k, married filing jointly. Are you married by any chance? I'm assuming, no or you would have mentioned that. Just making sure.

Best Solution (taxes be dammed) - Ask your employer to help cover some of the costs. We are at record unemployment and if you're in a field that has good job prospects you should be able to negotiate. Every company I have worked for over the past 13-years has offered at least $5,250 in tuition assistance per calendar year. This is a very common benefit at companies.

"Under section 127 of the tax code, the IRS allows your employer to deduct the expense, and the benefit is not taxable to you as an employee."

The limit is $5,250. I would ask for this over a bonus unless they plus-up the bonus to cover your tax portion. Even then, they are losing out on the deduction by giving you a bonus.

Spread it out over three calendar years and you're getting a large portion of that tuition paid for.

Example:

  • Fall Semester, year 1
  • All year, year 2
  • Spring semester, year 3

This way it's closer to 2-years of real time versus 3, full years. FYSA - Some (most) employers require you to stay for one year after the end of your last course.

If not, and you're not super set on staying at that employer, leave. Then you can look for companies that offer that benefit and/or negotiate tuition assistance (or a sign-on bonus) to help cover the costs of tuition.

Other than that, yeah, welcome to higher paid employment.

  • My last employer offered the benefit you mention. $12,000 a year if I stay with them for another year. Because of taxes, it translated to something like $9,500 because I have to pay self-employment taxes, on top of regular income taxes on the amount in excess of the $5,250. My new employer offers the same benefit, but in the amount of $3,000, but they also increased my regular salary by $7,000; so it turns out to be almost a wash. In either case, those benefits don't even put a dent on the $100,000 tuition costs (before financial aid) of your typical MBA program. – AxiomaticNexus Oct 17 '18 at 15:30
  • @AxiomaticNexus Most of the education tax benefits are pretty paltry compared to a $100k tuition bill. For what it's worth, that sounds pretty high end, there are definitely good MBA programs for half that, so maybe you can find something agreeable for less than initially planned. – Hart CO Oct 17 '18 at 15:48
  • @HartCO Is $100,000 really on the high end? Out of all the schools in my area, I have only found one program that was half that. I was shocked when I found it. – AxiomaticNexus Oct 17 '18 at 15:53
  • @AxiomaticNexus Well, there are much more expensive ones as well, but the bulk seem to be in the $40k-80k range, that's based on my research last year which was not exhaustive. I checked my alma mater and their online MBA is ~$50k. – Hart CO Oct 17 '18 at 15:57
  • Huh. My research gave me the impression that $100,000 was the norm. I need to look more into that. Thanks. – AxiomaticNexus Oct 17 '18 at 16:06

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