Board Exams are deductible as an employee (resident/fellow/employee). You take them as an itemized deduction on your Schedule A of your 1040. The catch is that the expense must exceed 2% of your income to start being deductible. So if you're making $200,000, then 2% of that is $4,000. If your board exams cost $4001, then you can only deduct the expense in excess of 2%, or $1 in this scenario. Therefore, this really doesn't help an MD with a real doctor's salary. So this discussion really is in regards to residents and fellows who are making $50,000/year with a 2% floor of $1000 and are paying large sums for their board exams.
It is true that you cannot take the deduction for first time licenses to allow you to practice in your field. But board exams have nothing to do with licensure. Your boards are for a certification, not licensure. After you graduate Med school, you are an MD. Typically after the first year of residency, you will receive licensure (and pay the fee). So boards, either way you look at it, pass the test of first-time licensure and are outside the scope of licensure to begin with.
The next argument people may make is that if your boards are classified as an employee education expense, they are non-deductible because they qualify you for a new trade or business. This is clearly false as stated by the IRS in Publication 970 in their examples:
"Example 2. You are a general practitioner of medicine. You take a 2-week course to review developments in several specialized fields of medicine. The course does not qualify you for a new profession. It is qualifying work-related education because it maintains or improves skills required in your present profession.
Example 3. While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. The program will lead to qualifying you to practice psychoanalysis. The psychoanalytic training does not qualify you for a new profession.
It is qualifying work-related education because it maintains or improves skills required in your present profession."
Therefore, take the examination costs as unreimbursed, work-related education expense on your itemized deductions.
Hope that helps!
Brian Kim, CPA, MAS
http://www.BMKbusinessSolutions.com