Deduct graduate school expenses from your taxes

We are coming up on the end of the year and its time to get your taxes ready.  Getting your taxes ready when you are a graduate or professional student can be a major pain in the ass… not to mention doing actually doing the taxes.  Having gone through this a few times I have a few suggestions.


  1.  If you are working on a PhD, you are in luck.  I believe that if you are completing a degree you may deduct reasonable expenses.  (please email me if you know the exact tax code citation so I can add it here).  The key word is reasonable.  Whats reasonable?  Computer – yes.  Internet connection to teach and access the library – yes.  Portion of rent for your office – yes.  Conference fees – yes.  Basically, its up to you to decide what is reasonable… but don’t abuse the law and if you have any questions be sure to contact the IRS.  Keeping this in mind, move to #3.
  2. Organize your physical expenses. Graduate school, like other jobs, requires a variety of office expenses.  In graduate school these are often required for completion of your degree:  office, internet, online backup service, website and hosting, etc. Put some good thought into what you use, make a list, and plan a breakdown of your expenses.  Remember, reasonable expenses are okay.
  3. Organize your equipment, software, and other academic receipts.  I do this a couple of ways.  First, I keep a file where I throw all of my paper receipts.  I don’t have many, but I do put them in one place and look them over when the year passes.  Second, I have a smart google folder that scans for several keywords, including receipt, membership, bill, hotel, confirmation, conference, etc.  When I order something the electronic receipt automatically goes to that folder.  Third, I use two wonderful sites that organize and clean receipts:  Slice and OneReceipt.   Basically, each site scans your email account and looks for the word receipt and then you have the option to organize and sort as needed.
  4. Collect your assorted income forms. Your sources of income should send you a tax form depending on the type of source (W2, 1099 Misc, etc.).  You may also get a notice from your university regarding your scholarships and fellowships. These are taxable income, so you want to report these.
  5. Have a professional do your taxes.  I mean a real tax professional, not the H and R Block down the street.  When you are a graduate or professional student your income comes from many confusing sources – grants, scholarships, work, side income, speaker honorariums, etc – and know what is taxable and what is not can get confusing.  Find a good professional by asking them if they work in the academic areas and stick with them.
Lately, I’ve also been wondering how I can better manage and track my expenses and reimbursements next year.  I use a Mac (and boot in PC for some software) and have been rather unhappy with the software out there.  I use Mint, an incredibly useful web application, but want to have the ability to track side income, grants, and reimbursements as well.  Quickbooks looks promising but does not sync with ING Direct (why I have no idea).   Hopefully, a work around will come soon.
What tips do you have for preparing your scholarly taxes?UPDATE: A reader asked me to explain #1 in greater detail. As I mentioned in #5, I have an accountant do my taxes so be sure to ask your own tax professional before making any decision.  That said, as I understand it, reasonable expenses may be deducted if required for completion of the degree.  In the tax code for education expenses I found these statements (the second one is the main one):

164.6 Doctorat degree; college professor.
Educational expenses incurred by a college professor in securing a doctoral degree in order to be retained on the eligibility list for appointment as president of a junior college are deductible busi- ness expenses. §1.162–5. (Sec. 162, ’86 Code.)  Rev. Rul. 68–580, 1968-2 C.B. 72.

164.22 Research and typing doctoral dissertation. Where the cost of the related educational courses qualify as deductible business expenses, reasonable expenses for research and typing incurred in the preparation of a dissertation to obtain a graduate doctoral degree are also deductible business expenses. §1.162–5. (Sec.
162, ’86 Code.) Rev. Rul. 67-421, 1967–2 C.B. 84.

The key part is reasonable.  In 164.22, the cost for typing the dissertation are deductible as typing expenses.  Now you certainly want to be reasonable. So, if you use the internet and computer to type your dissertation I would guess you can deduct the portion of internet costs and computer needed to type the dissertation.

Regarding rent, I believe if you have a home office that you use exclusively for your employment, you can deduct the rent you pay for that space.

When I next talk to my accountant in early April I’ll ask what forms are used and post an update.