Application Fees... A tax writeoff?

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dsprague12

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Do application fees qualify as a tax write off? I spoke with a friend who is an accountant, albeit inexperienced, and he said they would qualify. I did a little searching online and found the following:

"You may deduct up to $3,000 of qualifying higher education tuition and fees as long as your modified adjusted gross income does not exceed $65,000 for a single filer, or $130,000 for a joint filer. However, if your child also qualified for the Lifetime Learning Credit or the Hope Scholarship, you must choose either tuition and fees deduction or the lifetime learning/Hope scholarship deduction."

So obviously applications are "fees" for "higher education." But is it a "qualifying" fee?
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Yes, according to my quite experienced accountant.
 
That would be great! Thanks for posting... it didn't even cross my mind.
 
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bump for extreme relevance
 
how would one go about applying for that?
 
I wish I knew more about taxes. :( how would I do this? is there any reason I wouldn't want to? Would AMCAS and secondary fees count?
 
TheProwler said:
I wish I knew more about taxes. :( how would I do this? is there any reason I wouldn't want to? Would AMCAS and secondary fees count?
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You would want to do this if you itemize your deductions, i.e., you fill out the 1040 form, not the 1040EZ or 1040A form.

This is a great tip, btw! So now I'm wondering, how broadly can "higher education fees" be defined? What about the MCAT fee? What about the transportation and hotel costs of interviewing? Seems clear that AMCAS and secondary fees qualify, but then it gets fuzzy....
 
dsprague12 said:
Do application fees qualify as a tax write off? I spoke with a friend who is an accountant, albeit inexperienced, and he said they would qualify. I did a little searching online and found the following:

"You may deduct up to $3,000 of qualifying higher education tuition and fees as long as your modified adjusted gross income does not exceed $65,000 for a single filer, or $130,000 for a joint filer. However, if your child also qualified for the Lifetime Learning Credit or the Hope Scholarship, you must choose either tuition and fees deduction or the lifetime learning/Hope scholarship deduction."

So obviously applications are "fees" for "higher education." But is it a "qualifying" fee?
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I'm pretty sure it is not deductible/creditable. I think (but wouldn't swear to it without actually looking it up in the Treasury Regs, which I don't have handy, that) the education tax credits you referenced don't likely yet cover graduate professional education (just college -- on the IRS.gov publication cited below it indicates "college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education") and would assume the "fees" you referenced would only be for things associated with enrolled students, such as eg. lab fees, not applications. An IRS publication at the IRS.gov site on the Lifetime Learning and HOPE credits indicates "Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance." Doesn't sound like it would cover applications. Also in other parts of the tax code, while applications and tuition for certain education to improve one's existing skills at his current career might be deductible as a business-like deduction (eg. an "executive MBA", for example), it doesn't work for people embarking on new careers.
For the overview, see http://www.irs.gov/publications/p970/ . Bear in mind that IRS publications, though usually good, are just the agencies summary of the law (and you should never rely on them, or your interpretation of them) -- for the real law you'd need someone to look it up in the Code and regs.
 
Law2Doc said:
I'm pretty sure it is not deductible/creditable. I think (but wouldn't swear to it without actually looking it up in the Treasury Regs, which I don't have handy, that) the education tax credits you referenced don't likely yet cover graduate professional education (just college -- on the IRS.gov publication cited below it indicates "college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education") and would assume the "fees" you referenced would only be for things associated with enrolled students, such as eg. lab fees, not applications. An IRS publication at the IRS.gov site on the Lifetime Learning and HOPE credits indicates "Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance." Doesn't sound like it would cover applications. Also in other parts of the tax code, while applications and tuition for certain education to improve one's existing skills at his current career might be deductible as a business-like deduction (eg. an "executive MBA", for example), it doesn't work for people embarking on new careers.
For the overview, see http://www.irs.gov/publications/p970/ . Bear in mind that IRS publications, though usually good, are just the agencies summary of the law (and you should never rely on them, or your interpretation of them) -- for the real law you'd need someone to look it up in the Code and regs.
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Is that referencing FAFSA? If so wouldn't that count? If not, I have seen that some Residency App expenses can be written off.
 
Megboo said:
My accountant advised me, that because my current career is considered allied health, that the science courses I am taking that fall under pre-reqs as well as upper-level bio are considered to be education to supplement my current profession. In addition, provided I make it to med school and see even a few clients regularly, med school will qualify as well. I have no idea though about students pursuing their first degee as to whether any of it is tax deductible. The best resource is a good accountant.
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I'm not so sure your accountant is correct beyond the certain post-bac courses (i.e. re med school) - I guess it sort of depends on what your current career really is, but suspect that you/he are going out on a limb there. As an example, people who are paralegals and then go to law school are considering starting a new career, not enhancing a prior one (and thus not deductible), notwithstanding that both jobs are within the legal fora -- you can't just claim that it is supplementary -- usually the professional credential is considered the primary. However if you were in "allied health" and took an additional bio class not specific for any particular career other than your current one, and that arguably would assist you in your current job, that could certainly be deductible. I think you are out of luck with the professional school though (as we all are).
 
Law2Doc said:
I'm not so sure your accountant is correct beyond the certain post-bac courses (i.e. re med school) - I guess it sort of depends on what your current career really is, but suspect that you/he are going out on a limb there. As an example, people who are paralegals and then go to law school are considering starting a new career, not enhancing a prior one (and thus not deductible), notwithstanding that both jobs are within the legal fora -- you can't just claim that it is supplementary -- usually the professional credential is considered the primary. However if you were in "allied health" and took an additional bio class not specific for any particular career other than your current one, and that arguably would assist you in your current job, that could certainly be deductible. I think you are out of luck with the professional school though (as we all are).
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I will go even farther. Your accountant is giving you advice that is CLEARLY incorrect according to IRS regulations. Medical school qualifies you for a new profession and thus, your tuition is not tax deductable (as a business deduction for work-related education)

I quote from IRS publication 970:

"Even if the education meets one or both of the above tests, it is not qualifying work-related education if it: ... 2. Is part of a program of study that will qualify you for a new trade or business."

In other words, it does not matter why you go to school, if it qualifies you for a new job (and it's hard to argue that medical school does not), you do not qualify for the business deduction.

There is still a tuition deduction and the lifetime learning credit, but they are much more limited. However, medical school expenses do not meet the definition of "qualified medical expenses".

I'm sorry, but none of the application fees or interviewing expenses are for medical school or residency are deductable either.

Ed
 
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Megboo said:
I'll have to take it up with him. I know that I am able to get continuing education credit by doing extra work (writing papers that pertain to my field and research assistance), so I believe that because it's considered continuing ed I'm able to write it off. It sounds like a stretch, but God love my licensing agency for letting me do this. Otherwise I would have to spend another $1-2K a year in continuing ed.
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Continuing ed is probably considered an "ordinary and necessary business expense", and so it deductible to you, or more often your employer (whoever pays), much as your payment of professional dues might be, or as sending your secretary to a word-processing workshop to enhance her computer skills might be. But that's under a totally different part of the tax code, and not going to really help you for med school. And I see no viable way to get med school application costs or MCAT prep stuff into that deduction.
 
Megboo said:
Again, I'll have to take it up with him. I've been successful at writing off bio/chem courses by writing papers (that ended up being non-peer reviewed journal articles and information sections) on things such as biologic/chemical bases for speech/hearing (including topics such as evolution, development, current trends). So I imagine med school classes would be similar, as long as I receive continuing ed credit. As far as the application fees, etc., I was advised by someone (not my accountant, and I can't remember who), that if you end up with an assistantship, then you can deduct moving/interview expenses because it is for a job.

I trust my accountant very much - he's been in business for 30 years, and came highly recommended by several independent businesses, including my future brother-in-law, who owns a siding business. I am also in a different situation than most pre-meds here, in that I have my own private practice, therefore how I deduct my expenses are different.
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Just bear in mind that some accountants are more aggressive than others, and only a very small percentage of returns ever get audited. "Highly recommended" accountants often means more aggressive accountants, as people tend not to recommend accountants who make them pay a lot in taxes -- frankly, if an accountant is not recommended, I would tend to think s/he is more conservative. Thus an accountant can be taking untenable aggressive positions for many years (eg. perhaps even 30) without any repurcussions, and their clients will love him (I'm certainly not saying your accountant is doing such, but watch yourself -- getting hit with additional taxes plus interest and penalties a few years down the road while you are in school can certainly ruin your day). I don't know what an "assistantship" is, but unless you can legitimately make the argument that you are staying in the same "career" (as the Treasury, not your accountant, would define it), the transition costs you described will not be deductible. And off the top of my head I really can't think of any jobs for which medical school would be an "enhancement" rather than an entirely new career track. Good luck.
 
Law2Doc said:
I don't know what an "assistantship" is, but unless you can legitimately make the argument that you are staying in the same "career" (as the Treasury, not your accountant, would define it), the transition costs you described will not be deductible. And off the top of my head I really can't think of any jobs for which medical school would be an "enhancement" rather than an entirely new career track. Good luck.
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Sorry again, but you are focusing only on the first part of the test. If your training prepares you for a new field, its not deductible -- period. A law firm could tell a paralegal she needed to go to lawschool to keep her job. That's not deductable. Yes, it's necessary to continue in the job, but it fails the second part of the test, because the training in-and-of-itself prepares her for a new job. It's irrelevant whether or not one intends on doing that job. Another example would be an attorney going to med school to do med-mal with no intention of ever practicing as a physician. Once again, since the training prepares the attorney for a new job, its not deductible as a business expense.

To parrot what Law2Doc said, its very hard to tell whether an accountant is giving you good advice. I've had friends told by their accountants that their gym memberships were deductible because they're cops and need to stay in good shape. The tax regs specifically say you can't do this -- even if you're in law enforcement. So these tax advisors are stupid, lazy or unethical and willing to do anything to keep clients. You can't always till which.

Finally Megboo and others, moving expenses are only deductible if you are moving for a job. As for interviews, they are only deductible if you are looking for a job in your present occupation. For some, there may be some wiggle room here, but for traditional med student applicants and residency applicants there's no deduction for this. Sorry.

Ed
 
Before you start writing off application fees, bare in mind that you need documentation. You'll need a form 1098T from the schools to use the 1040's itemized deduction. This topic---using application fees as tax credits---has been discussed on SDN before. To date, I do not know if the process is legal, or if anyone has ever even tried. If you do get away with writing off your fees, let me know. I'll be glad to file an addenum next year to reclaim the money that I spent last summer.
 
deuist said:
Before you writing off application fees, bare in mind that you need documentation. You'll need a form 1098T from the schools to use the 1040's itemized deduction. This topic---using application fees as tax credits---has been discussed on SDN before. To date, I do not know if the process is legal, or if anyone has ever even tried. If you do get away with writing off your fees, let me know. I'll be glad to file an addenum next year to reclaim the money that I spent last summer.
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It's not likely going to be legal, but even if he attempts it, he won't necessarilly know if he "gets away with writing off the fees" for at least three years or more from the following April (plus any extensions taken) -- the time when the returns cease to be "open" years subject to audit. Till then the IRS can always go back and catch him. And the IRS doesn't audit everyone so he could always have been in the 90+% who don't get audited each year, notwithstanding taking a nontenable position. So unless he gets audited and the IRS agrees with his position in a year when your return is still open for amendment and refund, his experience will be of no help to you. :rolleyes:
 
Law2Doc said:
I'm pretty sure it is not deductible/creditable. I think (but wouldn't swear to it without actually looking it up in the Treasury Regs, which I don't have handy, that) the education tax credits you referenced don't likely yet cover graduate professional education (just college -- on the IRS.gov publication cited below it indicates "college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education") and would assume the "fees" you referenced would only be for things associated with enrolled students, such as eg. lab fees, not applications. An IRS publication at the IRS.gov site on the Lifetime Learning and HOPE credits indicates "Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance." Doesn't sound like it would cover applications. Also in other parts of the tax code, while applications and tuition for certain education to improve one's existing skills at his current career might be deductible as a business-like deduction (eg. an "executive MBA", for example), it doesn't work for people embarking on new careers.
For the overview, see http://www.irs.gov/publications/p970/ . Bear in mind that IRS publications, though usually good, are just the agencies summary of the law (and you should never rely on them, or your interpretation of them) -- for the real law you'd need someone to look it up in the Code and regs.
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Amen to all of this. My brother-in-law is a tax lawyer and he talked to the IRS about it for me and they said application fees, interview travel, etc. are NOT deductible. Yeah, that sucks.

But, this is a random online forum so you don't have to believe what anyone says.
 
I asked my tax accountant sighed when I asked if I could write off application fees to medical school or any costs associated with the interview process and he said "Absolutely not." That was clear enough for me.
 
Law2Doc said:
It's not likely going to be legal, but even if he attempts it, he won't necessarilly know if he "gets away with writing off the fees" for at least three years or more from the following April (plus any extensions taken) -- the time when the returns cease to be "open" years subject to audit. Till then the IRS can always go back and catch him. And the IRS doesn't audit everyone so he could always have been in the 90+% who don't get audited each year, notwithstanding taking a nontenable position. So unless he gets audited and the IRS agrees with his position in a year when your return is still open for amendment and refund, his experience will be of no help to you. :rolleyes:
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Actually, the statistic that I've heard is that less than 2% of returns with an AGI of 200k+ are audited. While I've never heard a specific statistic, the wisdom is that far fewer returns with an AGI of < 200k are audited.

Not that I am insinuating anything whatsoever.
 
notdeadyet said:
I asked my tax accountant sighed when I asked if I could write off application fees to medical school or any costs associated with the interview process and he said "Absolutely not." That was clear enough for me.
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yeah, i was just thinking about how some people posting on this thread have some pretty clueless accountants...
 
You should really look at whehter itemizing your deductions will help you. you might get a better deduction by just using the standard deduction (and it is a lot easier!)

You can still "writeof" tuiton this year..it is hidden on the 1040 under some nonsense about other expenses/farms...lol, I don't remember exactly. But it isn't on the form nor the instructions as tution. You need to search irs.gov for "tuition" to find where to write it and the limit ($3000 I think.)

also, don't forget to look for places where you can write off rent, and rememebr that you can't usually take educational credits if your parents deduct you!

Enjoy!

ps- for those who know little about taxes, my personal, non-accountant suggestion is to do your taxes yourself using the paper or adobe forms from irs.gov, and to not use a program like turbotax or a comapny. that way you really see what is dedcuted, credited, etc, and how it all works.
 
what?! you can write off rent? I don't believe you..
 
msl2007 said:
You should really look at whehter itemizing your deductions will help you. you might get a better deduction by just using the standard deduction (and it is a lot easier!)

You can still "writeof" tuiton this year..it is hidden on the 1040 under some nonsense about other expenses/farms...lol, I don't remember exactly. But it isn't on the form nor the instructions as tution. You need to search irs.gov for "tuition" to find where to write it and the limit ($3000 I think.)

also, don't forget to look for places where you can write off rent, and rememebr that you can't usually take educational credits if your parents deduct you!

Enjoy!

ps- for those who know little about taxes, my personal, non-accountant suggestion is to do your taxes yourself using the paper or adobe forms from irs.gov, and to not use a program like turbotax or a comapny. that way you really see what is dedcuted, credited, etc, and how it all works.
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My advice is precisely the opposite. Turbotax is a well-proven and excellent program. 2 things it will do that are relevant to your post is figure whether it makes sense to itemize or take the standard deduction, and handle your tuition and fees credit properly (it will even optimize your educational credit if you are eligible for more than one.)

However, if you suspect that you won't be itemizing and will thus be filing form 1040-EZ, turbotax is pretty much a waste of $20. I actually resisted Turbotax for a long time. It wasn't until I tried to fill out my first Schedule D that I finally caved and never went back.

yabbadabbadoo said:
what?! you can write off rent? I don't believe you..
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Your instincts are correct -- you can't write off rent.
 
notdeadyet said:
I asked my tax accountant sighed when I asked if I could write off application fees to medical school or any costs associated with the interview process and he said "Absolutely not." That was clear enough for me.
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I am an accountant, and you can NOT write off application fees on your 1040
You also can NOT write off rent either.
 
jen48 said:
I am an accountant, and you can NOT write off application fees on your 1040
You also can NOT write off rent either.
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Not always true...In massachusetts, you may be entitled to a rental deduction equal to one-half (50%) of the rent you paid during 2006 (up to a maximum of $3,000 per return) for your principal residence in Massachusetts.
 
jota_jota said:
However, if you suspect that you won't be itemizing and will thus be filing form 1040-EZ, turbotax is pretty much a waste of $20. I actually resisted Turbotax for a long time. It wasn't until I tried to fill out my first Schedule D that I finally caved and never went back.
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Why are you paying $20 for TurboTax? Go to http://www.taxfreedom.com and use the online version of TurboTax for FREE.*


* You must make less than 30-something thousand dollars a year to qualify. Few students will make above the threshold.
 
jen48 said:
I am an accountant, and you can NOT write off application fees on your 1040
You also can NOT write off rent either.
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Not on the 1040, on the state form, depending on your state.

You must not be an accountant in a state that has that option, nor trained in one (I hope!)

A poster above mentioned MA. WI also does it. You can write off 25% of rent without heat and 20% with heat, depending on your income (fairly low), you get a certain amount back. So I actually gt alarger tax refund than I paid in, because of this credit (Homestead Credit). I have been doing it for four years!
 
PBandJ said:
Not always true...In massachusetts, you may be entitled to a rental deduction equal to one-half (50%) of the rent you paid during 2006 (up to a maximum of $3,000 per return) for your principal residence in Massachusetts.
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That is state specifc rule not a Federal. We are talking about Federal here
 
msl2007 said:
Not on the 1040, on the state form, depending on your state.

You must not be an accountant in a state that has that option, nor trained in one (I hope!)

A poster above mentioned MA. WI also does it. You can write off 25% of rent without heat and 20% with heat, depending on your income (fairly low), you get a certain amount back. So I actually gt alarger tax refund than I paid in, because of this credit (Homestead Credit). I have been doing it for four years!
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I am an accountant in IL
 
You can write off rent. You can write off application fees. You can write off travel expenses.

Hell, you can write off prostitutes and happy meals, too. The question is whether you can write any of these off legally.

Beware of the anecdotals, like "My cousing wrote off his expenses and was fine." Your cousing may be fine until he's later audited a couple years later, and then the IRS will come down on him like a ton of bricks when they find out what he was writing off. There is not a spot on your 1040 where you are specifying the fact that you're writing off application fees. This will come up during the audit. And once you are audited for falsifying you return, prepare for it to cost you much more over the years than any write-off you made for your app fees.

Application and interview expenses are not federally tax deductible. The IRS is very very clear on this one.
 
jen48 said:
That is state specifc rule not a Federal. We are talking about Federal here
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Whoa, sorry. I thought that we were talking taxes and trying to maximize cash in the bank during an expensive time. I guess that I didn't read the "rules" of this thread well enough, although the title doesn't say "Application fees ...A FEDERAL tax writeoff?"

I'll go back to my surgery forum and leave you premeds alone.

I guess I should just feel lucky that I was admitted to med school off a free application in high school and never had to deal with this.
 
Just throwing this out there, but my standard deduction has always been greater than if I itemize. I think that this will be true for most students.
 
msl2007 said:
Whoa, sorry. I thought that we were talking taxes and trying to maximize cash in the bank during an expensive time. I guess that I didn't read the "rules" of this thread well enough, although the title doesn't say "Application fees ...A FEDERAL tax writeoff?"

I'll go back to my surgery forum and leave you premeds alone.

I guess I should just feel lucky that I was admitted to med school off a free application in high school and never had to deal with this.
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Perhaps you missed where she mentioned the federal form.
 
Critical Mass said:
Just throwing this out there, but my standard deduction has always been greater than if I itemize. I think that this will be true for most students.
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That's a very good point. I don't think it makes sense for most folks itemize until they're making pretty good money.
 
notdeadyet said:
That's a very good point. I don't think it makes sense for most folks itemize until they're making pretty good money.
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Agree with this - unless you have big deduction items, like mortgage interest, you are unlikely to exceed the standard deduction.

I have to say, I'm impressed that people are replying to things I wrote over a year and a half ago.:)
 
Law2Doc said:
Agree with this - unless you have big deduction items, like mortgage interest, you are unlikely to exceed the standard deduction.

I have to say, I'm impressed that people are replying to things I wrote over a year and a half ago.:)
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Whoa, a :thumbup: from L2D!

I'm impressed that someone searched and revived an open thread rather than start a new one.
 
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