Tax Deductible Expenses in Residency

[Speculatrix]

I'm hoping to max out my tax deductions for when I start, and hoping savvy people would be able to contribute here.

Health Savings Accounts: worth it? I am in good condition, though I do take medication for some chronic benign conditions. Maybe this money will accrue for when I have to go out on my own after residency/fellowship? Can I use the money in a HSA for orthodontics/cosmetic work?

I am also thinking about using the money for a gym membership. I have chronic muscle spasms (doesn't everyone? ) and I don't think it would be a stretch to get a PCP to "prescribe" me exercise and/or personal training. Google has told me that the IRS is only cool with this with a doctor's note, and that expenses should be billed every month AFTER services have been rendered, and not in advance for, say, a 1 year gym membership. Any thoughts on this?

Any other tax savings and tips specific to starting residency? Maybe relocation expenses I can deduct?

Sadly Step 3 seems tax non-deductible. I have no student loans since I'm MD/PhD so sadly no possibilities there for loan-related deductions (if any).

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[Speculatrix]

Can I deduct prep books or Harrison's? AMA/ACP membership fees?

Create part of my apartment as a 'study corner' (IRS definition "Home Office") with a computer and only books, and use it to exclusively answer my pages, look up charts / enter orders? (as in http://www.irs.gov/pub/irs-pdf/p587.pdf ) Perhaps deduct my monthly internet bill since I use it to check charts? I'm kind of unclear whether I can deduct all these business expenses if I am just an employee of a hospital, though I would do a lot of work at home.

Not going to make much money as a resident and hoping I can maximize what I get.

 

[PostLessOne]

Keep in mind that all of these fancy tax deductions can only reduce the relatively small amount of taxes you have to pay on a resident's salary. Also, there's costs to take advantage of the deductions (time, money for accountant fees, attorney fees if you are audited, etc). In general, you can take very few deductions as an employee.

 

[surg]

Many things are deductible IF you are itemizing. If you don't own a home though, it is doubtful that you will be itemizing as a resident as you would be unlikely to come up with enough to justify itemizing otherwise. Relocation though, is an expense that has its own form and can be deducted even if you don't itemize so long as you otherwise meet the test (you have to move a minimum distance of I think 50 or 100 mi, and you have to end up closer to your job than you started)

A few things that would be itemizable receipts on Schedule A (subject to the 2% AGI minimum) if you were already otherwise itemizing: dues to professional societies, educational materials, uniforms and equipment required for work that cannot be worn outside of work (i.e. dress clothes don't count, but loupes for surgeons would).

Home office would be hard to justify as it would need to be required by your employer and not used for anything else. (If you had lots of home call, you might be able to pull it off I suppose, but that would be difficult and might invite an audit).

HSA might be a reasonable option if you don't have a cheaper option through residency. Many if not most residencies offer a relatively low cost option that is an HMO that is not any more expensive than just getting major medical by itself. But make sure to follow the rules on setting it up.

Roth IRA is probably a great idea if you have any extra cash that you won't need immediately. Also don't forget that student loan repayment interest is tax deductible so long as you stay under the income threshold if you start making payments.

 

[Law2Doc]

Can I deduct prep books or Harrison's? AMA/ACP membership fees?

Create part of my apartment as a 'study corner' (IRS definition "Home Office") with a computer and only books, and use it to exclusively answer my pages, look up charts / enter orders? (as in http://www.irs.gov/pub/irs-pdf/p587.pdf ) Perhaps deduct my monthly internet bill since I use it to check charts? I'm kind of unclear whether I can deduct all these business expenses if I am just an employee of a hospital, though I would do a lot of work at home.

Not going to make much money as a resident and hoping I can maximize what I get.

Home office deduction wouldn't be realistic as a resident. Nor would internet expense unless you are using it exclusively for chart purposes and your residency demands it. (If you also check email, look at SDN, etc, forget it). You can generally deduct reference books and journals as "ordinary and necessary business deductions" if you itemize and your program doesn't reimburse you for them. You can't deduct USMLE prep materials/books because that goes toward your initial licensing, not your post-licensing career (much as you cannot deduct expenses toward your first bar exam). You might be able to deduct prep books for in-service type exams.
Generally, you aren't going to have significant tax deductions during residency. Now after, once you start incurring expenses to set up your practice, you probably will have a lot of deductible business expenses. But not really so much now.

 

[gutonc]

I'm hoping to max out my tax deductions for when I start, and hoping savvy people would be able to contribute here.

Health Savings Accounts: worth it? I am in good condition, though I do take medication for some chronic benign conditions. Maybe this money will accrue for when I have to go out on my own after residency/fellowship? Can I use the money in a HSA for orthodontics/cosmetic work?

As many have pointed out already. Unless you own a home, have a kid or 3, a small business and have significant non-earned income (investments), you won't get anywhere near where you need to be to make itemizing worthwhile.

As for HSAs, it totally depends on what you need, what your insurance already provides and what it covers. First, no, you can't roll them over. Money in the end of the account at the end of the year is lost. So unless you use $5k in out of pocket healthcare a year ($5k is the max you can set aside, might as well go big if you're going to do it at all), you're going to lose money. Generally speaking, it's your money, so as long as it is care provided by a license healthcare provider (however that is defined in your state), it should be covered. My wife uses one for a chiropractor, acupuncturist and massage therapist. So you should be able to get orthodontic and cosmetic stuff covered. But remember, if it's not something you were going to do anyway, it's not like this is free money or anything, you're still spending your cash.

Finally, it can be a total PITA to get our HSA stuff reimbursed. We've sometimes had to send the exact same paperwork in 3 or 4 times to get our money back. If we didn't spend more than that amount of money anyway, there's no way we would bother...too much hassle for minimal benefit.

 

[rounder10]

Are travel expenses ( hotels, train,planes) tax deductible? also, would the ERAS fee that we all unfortunately pay for applications be tax deductible? thanks!