Income Tax return for MBA Tuition fee

60 posts in this topic

And please don't believe what the salesperson for that MBA told you, please read the threads linked from my first answer to you in order to get real-life feedback from people on just how useless an MBA is for expats in Germany.

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Hi PandaMunich,

 

I have one more question: what kind of proof do I need for the tax declaration? Does my bank statement and the proof that I am part of the MBA suffice? I am asking because they will not be able to provide me an invoice for the payment I do this year, so I need to know if any other kind of statement would be enough.

 

Thanks,

Andrei

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Won't you sign a contract?

A copy of that would do.

 

If you don't have a contract ask them if they would issue you a signed letter on their letterhead confirming that you paid x GBP towards their MBA program on ??. December 2016.

If they won't even do that then I wouldn't bother with them. 

 

How good do you think their expensive MBA program is if they can't even manage a simple thing like that?

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I have an unconditional confirmation from their side, where the amounts are mentioned. I will ask them about the signed letter, that should be doable quite easy.

They are trying to help me, that's why they asked what do I need. As the program starts in March, they can't issue an invoice just yet (fiscal year in UK doesn't end in December), but they want to help, as it is in their interest to get the money, of course.

 

Thanks again for all the help, you are awesome as always!

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Thank you Panda for all your great advice!

Even though I use a German Steuerberater / tax consultant, reading your answers (and the questions of the TTers) inspired me to ask him the right questions myself! :)

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Dear friends, I read through the topic and also spoke to tax professionals and a question arose:

 

- Imagine there is a situation when you take out a loan from the bank to pay for the MBA degree. The bank transfers the funds directly to university in year 2000 when you start your program. Then you repay the loan to the bank over several years following the graduation, starting in 2001.

- Tax professionals say that because you paid (i.e. the money flow occurred) for education in 2000, you can only claim the amount in the year when you paid, that is, in 2000, or at the maximum in 2001 given some one-year claw-back provision. Their view is that the very fact of payment means that you paid for your MBA and it doesn't matter whether in fact it was you who paid, or the bank from which you took out a loan.

- One view expressed on this forum was that because initially it was the bank and not you who paid to the university, you still stand to deduct your loan payments to the bank from the taxable income in as many years as you make them.

 

(I am not asking about deduction of interest on a loan in this case, becasue interest deduction is quite straightforward.)

 

As such, in one view you can only deduct the tuition payment in the year when it was made, while in another you can deduct loan payments in every year you make them.

 

Can someone who had gone through this share some light which view is correct?

 

Thank you!

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1 hour ago, JohnDe said:

The bank transfers the funds directly to university in year 2000 when you start your program. Then you repay the loan to the bank over several years following the graduation, starting in 2001.

- Tax professionals say that because you paid (i.e. the money flow occurred) for education in 2000, you can only claim the amount in the year when you paid, that is, in 2000, or at the maximum in 2001 given some one-year claw-back provision.

 

hmmm...

 

I don't know why someone located in the UK would join an ex-pat site in Germany to ask such questions when HMRC would seem to be the logical source of accurate answers. 

 

However, since today's a national holiday in Germany (Tag der Deutsche Einheit) it may be tomorrow before anyone with the time for your hypotheticalese responds.

 

Hope this helps for today...

 

http://tinyurl.com/tuitionfee-tax4uk

 

Happy Unity Day to Brexitoryland. :D

 


2B

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9 hours ago, 2B_orNot2B said:

I don't know why someone located in the UK would join an ex-pat site in Germany to ask such questions when HMRC would seem to be the logical source of accurate answers. 

Moving to Germany post-MBA to join a local firm and becoming a tax resident in Germany. Thanks.

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2 hours ago, JohnDe said:

Moving to Germany post-MBA to join a local firm and becoming a tax resident in Germany. Thanks.

 

Ah, then that makes sense of your OP.

 

As you mentioned finding a differing opinion on this forum here's an insider tip which might help you.

 

If you read any opinion on German (or bilateral) income tax matters posted on TT by  @PandaMunich you can bet with 99.9% certainty it will have been accurate and correct.

 

2B

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20 hours ago, JohnDe said:

Dear friends, I read through the topic and also spoke to tax professionals and a question arose:

 

- Imagine there is a situation when you take out a loan from the bank to pay for the MBA degree. The bank transfers the funds directly to university in year 2000 when you start your program. Then you repay the loan to the bank over several years following the graduation, starting in 2001.

- Tax professionals say that because you paid (i.e. the money flow occurred) for education in 2000, you can only claim the amount in the year when you paid, that is, in 2000, or at the maximum in 2001 given some one-year claw-back provision. Their view is that the very fact of payment means that you paid for your MBA and it doesn't matter whether in fact it was you who paid, or the bank from which you took out a loan.

- One view expressed on this forum was that because initially it was the bank and not you who paid to the university, you still stand to deduct your loan payments to the bank from the taxable income in as many years as you make them.

 

(I am not asking about deduction of interest on a loan in this case, becasue interest deduction is quite straightforward.)

 

As such, in one view you can only deduct the tuition payment in the year when it was made, while in another you can deduct loan payments in every year you make them.

 

Can someone who had gone through this share some light which view is correct?

 

Thank you!

 

Hi,

 

Long story short:

- Panda Munich is always right

- You get money back only for what was paid towards the school, as that is what goes for the education, what you pay the bank, or whomever you got the money from will not go into the same category

- You can get multiple payments deducted, if and only if you structure your payment towards the school in more installments over more years, then you maximizer the amount you get back as each installment will be calculated for different fiscal years

- As far as I know, you have to have paid taxes here for the year you want to deduct money from, so if you really paid your studies in 2001, and are only now coming to DE, you won't get money back. If that was hypothetical, and you're looking at 2019 let's say, you need to work in DE in '19, in order to get money from it in' 20

 

Best,

Andrei

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3 hours ago, andreiD said:

- You can get multiple payments deducted, if and only if you structure your payment towards the school in more installments over more years, then you maximizer the amount you get back as each installment will be calculated for different fiscal years

Thank you for your response!

 

So is my understanding correct that if the bank paid the tuition fees to the university, and then I am repaying this loan not to the university but to the bank, then I cannot claim deductions in every year that I am repaying the loan to the bank (can only do it in the year of payment and have to be a resident of Germany in that year)?

 

But in case if I were paying back directly to the university in the same loan-structured way over several years but without any third-party like a bank, then I would be able to claim deductions? 

 

(2000 is a hypothetical year. We can liken it to 2019).

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Hi,

 

That is correct. You need to prove every year that what you pay is for "furthering your education" (the category from which you can take money back), so you need proof from the university of the payment, to avoid double deduction (once from what the bank paid the university for you and second from what you paid the bank).

Regarding when and what you get your money back for: every year, you can deduct money for a previous year, based on what you paid that specific year, so it's always (at least) one year in retrospective. You also will not get your full amount back, unless your salary is very impressive (and by that I mean six figures), otherwise there is a cap for what you get back on taxes.

I'll give you an example, to make it easier to follow the process: you recently moved to Germany (2019) and want to do a 1 year MBA. You start working somewhere in February, let's say and you start studying in fall, let's say September. In 2020, you fill in your taxes declaration for year 2019 (earnings, spending for the MBA tuition) somewhere in March and sometime in August you get an answer of the amount you would get back and in about 2 weeks, you get the money as well. You keep working in 2020 and you finish the MBA somewhere in June, so you pay at least another rate in 2020. In 2021, again, you file in your declaration for 2020, and you get some money back from the taxes you paid in 2020.

So, the best would be to do a long-distance MBA (that one is already structured on 2-3 years), so you can work and pay taxes, and to stretch your payments the most possible: in my case, I started in 2017 a 2 year MBA, so I structured my payments as follows: I mad an advanced payment in December 2016 (typically you know a few months ahead if you got in), accumulated payments in 2017, accumulated payments in 2018 and I stretched my last payment for 2019. That way, I am maximizing the amount I am getting back. In total, I should get back about 60% of the amount I paid (my MBA was quite expensive, so I reached my cap every year on the available amount back, with a cheaper MBA you could get even more back). 

 

Let me know if you have any other questions.

 

Best,

Andrei

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Thank you for a very detailed response and an example, Andrei, things are much clearer now!

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Glad to have been of help. If/When you have a more concrete situation in mind, let me know and I can tell you if it's worth it (investment/return), I've looked at all MBA possibilities (top 20) before choosing mine, so I have a pretty good idea about what would bring value and what is just marketing.

 

Best,

Andrei

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That also depends on what you class as value. If you’re talking about simply an increase in salary, you’re in the wrong country. There are so many variables and they are different for different people.

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17 minutes ago, evildudette said:

That also depends on what you class as value. If you’re talking about simply an increase in salary, you’re in the wrong country. There are so many variables and they are different for different people.

I was talking about the value the MBA would bring in terms of the content you pay for, quality of the teaching, the network you gain access to. A lot of the top MBAs are just marketing enterprises, when you understand how these rankings work, you see through a lot of their selling slogans. There are a few that bring real value and are worth paying for that, it depends on what exactly one is looking for. However this is a different topic, so I'll stop here, we can open a different topic on it,or we can pm on it.

 

Best,

Andrei

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Hello all,

I live and work in Berlin and next year I will be getting my masters from an university in Spain. I understand I can deduct the tuition fees from my income taxes. Can I also deduct the costs for the flights ( I will be flying back and forth every week)? What about costs for meal and for the small studio I am planning to rent there for the duration of the program?

thanks

Andre

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7 hours ago, exiladus said:

Hello all,

I live and work in Berlin and next year I will be getting my masters from an university in Spain. I understand I can deduct the tuition fees from my income taxes. Can I also deduct the costs for the flights ( I will be flying back and forth every week)? What about costs for meal and for the small studio I am planning to rent there for the duration of the program?

thanks

Andre

Hi,

 

You will be able to deduct flights and accommodation, not sure about meals. The bigger constraint is not on what, but on how much (depending on your salary the previous year), usually if you pay a significant fee for your masters, there's not that much room left for other costs.

 

Best,

Andrei

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