61 Calif. L. Rev. 1 (1973)
Tax Policy and Tuition Credit Legislation: Federal Income Tax Allowances for Personal Costs of Higher Education

handle is hein.journals/calr61 and id is 25 raw text is: California Law Review
VOL. 61                         JANUARY 1973                            No. 1
Tax Policy and Tuition Credit Legislation:
Federal Income Tax Allowances for
Personal Costs of Higher Education
John K. McNulty*
The federal income tax law does not give an allowance for per-
sonal costs of ordinary higher eduction.1 College and university tui-
tion, fees and other costs usually cannot be deducted or otherwise used
* Professor of Law, University of California, Berkeley. A.B., Swarthmore
College, 1956; LL.B., Yale University, 1959.
1. The federal income tax does allow a deduction for some expenditures for
supplementary, continuation, or refresher courses as trade or business expenses or costs
of producing income. See Treas. Reg. § 1.162-5 (T.D. 6291, amended by T.D. 6918,
1967) Expenses for Education. See also Coughlin v. Commissioner, 203 F.2d 307
(2d Cir. 1953). However, most expenditures for higher education-tuition and other
costs for graduate as well as undergraduate students-are treated as nondeductible
personal, living, or family expenses under Int. Rev. Code of 1954, § 262 and accord-
ingly cannot be deducted. Nor can they be added to the basis of an asset to create a
tax loss or to reduce taxable gain upon eventual sale of the asset or to give rise to
depreciation or amortization deductions.
For a review of the tax treatment of personal educational expenditures, see
Goode, Educational Expenditures and the Income Tax in EcoNoMIcs OF HIGHER
EDUCATION 282-84 (Mushkin ed. 1962). See also Heckerling, The Federal Taxation
of Legal Education: Past, Present, and Proposed, 27 OHIo ST. L.J. 117 (1966); Wolf-
man, The Cost of Education and the Federal Income Tax (Proceedings of the Twenty-
Ninth Annual Judicial Conference, Third Judicial Circuit of the United States), 42
F.R.D. 535 (1966) [hereinafter cited as Wolfman]. See generally CHOMMm, FEDiERAL
INCOME TAXATION 79-83 (1968); Chonmie, Federal Income Taxation: Transactions
in Aid of Education, 58 DIcK. L. REv. 93, 189, 291 (1954); Note, Federal Tax Incen-
tives for Higher Education, 76 HARv. L. Rzv. 369, 382 (1962) [hereinafter cited as
Federal Tax Incentives]. Of course, the taxpayer's personal costs of higher education
may be lessened by federal income tax allowances available to institutions of higher
learning in such forms as exemption from tax on their income, charitable contribution
deductions allowed to benefactors of such institutions, or by the exclusion from the
student's income of qualified scholarships.

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