Can an MCA student do an MBA

MBA - the tax office supports

An MBA degree is associated with high costs, especially abroad. If no employer is available or the employer is not prepared to cover the costs of an MBA program in full or at least in part, the question of the tax deductibility of these costs in Germany arises for MBA students.

The positive news is that the tax office or the state is basically promoting an MBA degree through tax breaks. According to German tax law, professional costs and thus also the costs of an MBA course are tax-deductible without restriction. This applies at least when the MBA course is not the first completed training, as is usually the case. As always in German tax law, the devil is in the details. It does not matter whether the training measure is completed in whole or in part abroad. In this respect, it is only important that after completing the MBA, you are planning to take up a job in Germany and thus taxable income can be expected in Germany. This is not a problem if you actually start a job in Germany after completing your MBA. Whether you already worked in Germany before studying for the MBA or are a German citizen usually only plays a subordinate role in assessing the deductibility of costs. In this respect, foreign MBA graduates can also benefit from the tax deductibility options.

In this respect, only the so-called causal connection between the costs incurred for the MBA program and the subsequent income in Germany is decisive. The MBA course is professionally motivated if it has a sufficiently concrete, objectively ascertainable connection with later taxable income from the intended professional activity. This will regularly be the case with an MBA degree.


MBA costs - what can I claim?

The financial burden of an MBA degree can be significantly reduced through tax savings. Depending on how high the personal income and thus the personal tax rate are, the tax office contributes indirectly to the costs of the MBA course by reducing the tax by up to 50%. The tax office indirectly supports an MBA degree. The costs of the MBA course not only include the pure tuition fees and specialist literature. Study materials, examination fees, course fees, course participation fees, application costs, travel expenses, etc. are also deductible.

The costs of a training loan can also be claimed for tax purposes. However, the deductibility is limited to the interest on the loan. The pure repayment of the loan (e.g. BAföG, KfW student loan) is not deductible. If necessary, additional expenses for running a double household (e.g. accommodation, meals, flights and trips home) are deductible, provided that you maintain your own place of residence in Germany during the MBA course. Parental residence is usually not sufficient for this, but it can be in individual cases. It is worthwhile to seek tax advice here. The costs of the compulsory internships provided for in the MBA course are also deductible and should not be forgotten.

No income - no tax savings?

In order to receive tax breaks, taxes must of course also have been paid. Even if there is no income in the years of the MBA course due to lack of professional activity, the costs of the MBA course can still have a tax effect. In this respect, it is often overlooked that even if the MBA course is not carried out part-time and no taxes are paid on income, the costs of the MBA course can be claimed. In this case, the advertising costs incurred can be carried back by one calendar year by means of a so-called loss assessment (so-called loss carry-back) or carried forward over several calendar years (so-called loss carry-forward).

In this case, the tax office fakes regardless of the payment date that the costs were incurred in the previous year or the following year, so that the losses can have a tax effect. The determined losses are then offset against the income of the previous year or future income and lead to immediate tax refunds. This can reduce the tax burden of the previous year or future years. TIP: A similar effect can possibly be achieved if the often existing flexible payment dates for the tuition fees are used in a targeted, tax-optimized manner. Here it is worthwhile to seek tax advice before paying the first tuition fees.

Forgot to file a tax return? Is it all too late now?

No. In principle, an income tax return can be submitted within four years of the end of the tax year without any problems in order to claim the income-related expenses for the MBA course (i.e. declarations for the year 2011 can still be submitted until December 31, 2015). If no tax return has yet been submitted for older years of study, MBA costs can be claimed retrospectively for up to 7 years as part of the loss assessment. An application for the year 2008 is still possible until the end of 2015.

How can your employer promote your MBA in a tax-efficient way?

The employer can of course support the MBA course. This can be done, for example, by taking time off from work or paying all or part of the tuition fees. The employer can regularly reimburse the costs of the MBA course free of social security and tax if the MBA course is in the employer's "predominant business interest". This is regularly the case if the acquired knowledge can be used by the employer. Contrary to what might be expected, however, the knowledge does not have to be directly related to the previous activity. They can also aim to strengthen the company's future operational capabilities and performance. A “predominantly operational interest” is regularly assessed by the tax office on the basis of indications. It should not be the case if the training had already started before the employer accepted the costs. This must therefore always be obtained before the start of the course. The full or partial crediting of the study time against the working time should in principle speak in favor of such an overriding interest on the part of the employer.

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Text source: Dr. Andreas Schönhöft, specialist lawyer for tax law, Hamburg

Image source: Pixabay