application costs tax deductable?

[physicsMD]

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Hi guys,
I'm itemizing this year and was wondering if anyone knows whether or not application costs are tax deductable and if so under what category do these deductions fall in?

 

[rebaj]

I'm not an accountant, but I think not. As far as claiming it as a tuition credit kind of thing, the IRS is pretty clear about what can be claimed, and I'm pretty sure its just tution, no fees, expenses, books, etc. Though you could double-check that pretty easily in the 1040 instruction book.

And as for claiming it as a business-type deduction, I think that is dead in the water because a business deduction has to be an expense related to how you make your income. Though, for some things, you can get away with it if you will have future income related to the expenses - like, actors can claim stuff like headshots even if they have had no paying acting jobs within the year where the expense fell - but only for a couple of years; if it goes on indefintely, the IRS will flag it.

 

[sponch]

if you are incorporated (inc, llc, llp) or are self employed (sole propriertorship) and actually have revenue then it's real easy to write off your travel expenses to your business. otherwise, i wouldn't risk it. i would also forget about the application fees. don't get too greedy. 🙂

 

[sd77]

OK, first I will say that I am not 100% sure on this topic, so probably shouldn't be posting. That said, I can tell you what I know. I searched this topic quite a bit before filing, and I found it difficult to find the appropriate information. Because I'm doing my own taxes, I don't have the "professional opinion" but I can read IRS forms like anyone else.

So, there are two areas of interest that are somewhat related. First, the Education credits (Hope credit and a Lifelong Learning credit). These are for the most part only relevant to actual education expenses paid to qualifying universities/colleges. So, I don't think you could deduct on this basis. However, another issue relates to expenses incurred when searching for jobs...

If you are actively seeking a job WITHIN YOUR PROFESSION then you can deduct a significant portion of these expenses, such as INTERVIEW EXPENSES (this includes the cost to travel to the interview, including hotel rooms, rental cars, taxis, etc). You may also deduct expenses such as that of preparing information for your job search, such as expenses relating to the preparation of resumes (in this case, I assume an equivalent to the AMCAS application, secondary apps, etc.) and other correspondence. If you are feeling really liberal (or lucky), then you could claim that the fees spent on your MCAT, and the review course, were also dedicated toward your pursuit of this job.

OK, so the question remains...is this within our "profession"??? I would feel somewhat confident in saying that non-traditional applicants coming from a completely unrelated industry/occupation would not be eligible. However, many of us are students, both graduate and undergraduate, so we are not really changing professions are we? but then again, last time i checked, students weren't professionals, but the IRS is not attempting to distinguish between professions, occupations, etc.

So, if you ask me, BASED ON THE INFORMATION I HAVE FOUND, I believe these expenses are tax deductible. What I do not know, is to what extent they are deductible. This is often more important than the question of whether or not they are deductible, so this is the first question you should consider. The original poster said s/he was itemizing deductions, so the only other thing to consider is whether or not there is a deduction limit that says it must be above a certain percentage of your AGI (adjusted gross income), often 2%.

So, my answer is that I don't know, but I am leaning toward it being deductible. If I did not learn any more on the subject, I would take the risk (and I have spent more than the standard deduction on application and interview expenses!) Sorry so long, but at least anyone who reads this may know more than they did when they started.

Be careful not to take someone's advice on tax issues just because they are a CPA. Hopefully, someone could ask their tax accountant buddies.

 

[sponch]

i would disagree with your interpretation. if you count being a student as a profession, not only would you be able to write off the cost of applying to medical school, you could also write off the cost of your entire undergraduate education because it is in pursuit of medical school. try doing this and see how quickly you'll get 1) audited and 2) the deduction disqualified.

i'm almost sure that the irs defines a profession to be an income generating career.

i think the deductions you listed are not valid until you begin interviewing for residencies. only then would you be able to reasonably argue that your expenses are within your "profession" since you'll actually be an MD during residency.

my original point was that you may be able to pass off your medical school interview travel expenses off as business expenses if you're self employed or are incorporated. this is not legitimate unless you spend some time during your trip doing work related things -- i.e., meeting with clients or prospective clients, looking for clients, or anything that is remotely related to your business (wink wink nudge nudge).

 

[sd77]

OK, first of all let me say that because I am new to posting on this message board, I am going to make every effort not to become one of those individuals that spend their entire time saying "You didn't read my post, you misread my post...etc.", as I have seen that quite a bit on these boards in other threads, and it just seems to become a neverending process.

But, I am going to be a hypocrit, I can't stop myself after all...I did not say that I count being a student as a profession (although it seems that I am, in fact, making a career of it🙂. I did say that the last time I checked, students were not considered professionals. But that is another topic, and if we want to talk about what it means to be a "professional", we should probably first consult with our sociologists and organizational theorists.

You do not have to be incorporated to write off expenses such as this. Interview costs (and other preparations) are allowable as a personal deduction when job searching, but only within your current job description/occupation/profession, etc.. I was just trying to figure out if the medical school application process counts as job searching since we are remaining students.

Whether you are incorporated or not, you can not write off expenses for medical school tuition. The reason is because educational expenses incurred as part of obtaining the minimum or necessary knowledge for certification/licensure/etc., are not tax deductible. This means medical school. However, this also brings up another interesting point...After one completes the minimum necessary training to practice medicine, any educational expenses incurred after that (that you can relate to your job, which for medicine, could arguably be ANYTHING) are tax deductible. The most obvious example that comes to mind in light of this topic is if you wanted to get an MBA, MPH, or something similar after medical school, that you could obviously use in your practice. Of course at that point, you will have to justify that it exceeds a certain portion of your income in order to itemize.

So, after going back and reading up on the tax codes, I realized that this exact sort of stuff is why I am no longer a financial analyst, but a future physician. So I gave in and called the IRS 800 number and got the lowdown...

Apparently this is not a subject which has been asked of them very much, as I had to talk to five different people before getting an official answer...and it is no. APPLICATION AND INTERVIEW COSTS ARE NOT TAX DEDUCTIBLE, because we are pursuing education that will allow us to enter an occupation of which we are not currently part.

anybody guess what my undergrad major was? sorry for going into too much detail.

But you can still take the risk if you need the writeoff!!!

 

[goredsox]

bumping this, for tax-preparing procrastinators like myself. I'm going to go for it and deduct some expenses related to applying, only because I'm currently doing research in Pathology at a med school and I'd consider the pursuit of a medical school degree as a pursuit within my current profession.

 

[Caffeinated]

I am a non-trad, and I had my taxes done by an accountant this year. First, the expenses were not deductible because it is a change of career for me, and second, it is subject to the 2% AGI limitation (i.e., you can only deduct that portion that is greater than 2% of your AGI). If you don't make a lot, then it is easier to go above the 2% of your AGI. Then again, if you don't make that much (which is most likely the case for traditional students), you are less likely to be itemizing your deductions because the standard deduction is greater.

Of course, I am not an accountant, I don't want to be one, and I don't even play one on TV. So my accountant could have been messing with me and I would never know.