Quantcast

Tax deduction question

This forum made possible through the generous support of SDN members, donors, and sponsors. Thank you.

odieoh

Member
10+ Year Member
15+ Year Member
Joined
Jun 25, 2003
Messages
384
Reaction score
30

Members don't see this ad.
Does anyone know what all we can deduct during residency? Can we deduct expenses as education expenses? Obviously there is no tuition, but other expenses such as taking step 3 and equipment and so on? How about costs of moving?

thanks
 

carpe diem

Senior Member
7+ Year Member
15+ Year Member
Joined
Mar 7, 2002
Messages
159
Reaction score
2
odieoh said:
Does anyone know what all we can deduct during residency? Can we deduct expenses as education expenses? Obviously there is no tuition, but other expenses such as taking step 3 and equipment and so on? How about costs of moving?

thanks

Any interview/ travel time expenses after January 1, 2006 (for those starting residency this year) should be able to be deducted as "job search" expenses, if this type of deduction is still allowed. I've thought about this and the other expenses that you mentioned. For me, it could be a sizeable deduction.

Carp
 

emed

New Member
15+ Year Member
Joined
Apr 4, 2004
Messages
1
Reaction score
0
I recommend you talk to a CPA (not H and R Block). Get some advice now - well before April 15 - because you might have some options with the expenses incurred before January 1, as well, but there are options that you should know about. Focus on your medical knowledge and obtain proper advice from professionals in other areas. Could you learn this? Sure - though not in the short time you have, and not without taking away from medicine, and your personal life. Use a pro, learn the basics, and why not start now - a relationship with a good CPA will save you a great deal of money over the years. Make sure he or she is a CPA - certified public accountant. Good luck.
 

MM9

Member
10+ Year Member
Joined
Aug 6, 2004
Messages
47
Reaction score
0
emed said:
I recommend you talk to a CPA (not H and R Block). Get some advice now - well before April 15 - because you might have some options with the expenses incurred before January 1, as well, but there are options that you should know about. Focus on your medical knowledge and obtain proper advice from professionals in other areas. Could you learn this? Sure - though not in the short time you have, and not without taking away from medicine, and your personal life. Use a pro, learn the basics, and why not start now - a relationship with a good CPA will save you a great deal of money over the years. Make sure he or she is a CPA - certified public accountant. Good luck.

I agree 100%. A CPA will more than pay for themselves in terms of $, not to mention time saved and peace of mind.

A couple of things to remember:

- While you may have plenty of deductions (a lot of things the OP mentioned are deductable), you might not have enough to itemize your tax return. The "standard deduction" for someone that is filling individually for 2005 is $5,000. You have the choice of taking this standard deduction or "itemizing", you don't get both. Obviously you're going to do whichever provides the greater deduction. Unless you have several deductions that add up to more than $5,000 ($10,000 if you are filling jointly) you are better off taking the standard deduction. Yes, $5,000 is a decent amount of money and it might be hard to get there without a mortgage.

- The biggest thing students have going for them is the tuition they paid in that year. You can take a "credit" through either the Hope Credit or the Lifetime Learning Credit (I’m not really sure of the difference). Each gets a credit of around 20% of your tuition paid, but don't quote me on that. (A credit works differently from a deduction. A deduction reduces your the total income that your taxes are based on. For example, if you made $50,000 (gross income) and take the standard $5,000 deduction, your taxes are calculated based on an income of $45,000 (adjusted gross income or AGI if you’re curious). A credit, on the other hand, directly reduces your tax amount. Using the same example, you would calculate the tax owed based on the income of 45,000 and THEN reduce the tax amount by the credit.) Yes, you can, and will, have deductions and a credits in the same year. You cannot however deduct your tuition and also take a credit for it; it's one or the other. If you don't have an income in 2005, don't worry, you'll be able to take a credit next year for the tuition you paid in 2006. Also, it doesn't matter if you borrowed the money.....you still get the credit.

What's great is you never really have to know all of this, unless you’re insane like me and want to.....for between $100-$150 someone will figure it all out for you.
 

carpe diem

Senior Member
7+ Year Member
15+ Year Member
Joined
Mar 7, 2002
Messages
159
Reaction score
2
......for the above posts (recent ones). So, are you guys saying that 2005 expenses that helped you get a job (residency) in 2006 could possibly be deducted on 2006 taxes?

I'm not talking about 2005, because, as far as I know, a tax deduction in a year in which you have no income (me in 2005 as a 4th year student) will not save any money.

Carpe
 

JetsPickVYoung

Junior Member
10+ Year Member
5+ Year Member
Joined
Jan 5, 2006
Messages
21
Reaction score
0
I think moving expenses are deductible. Good thing if you match somewhere far away...
 
1

14022

carpe diem said:
Any interview/ travel time expenses after January 1, 2006 (for those starting residency this year) should be able to be deducted as "job search" expenses, if this type of deduction is still allowed. I've thought about this and the other expenses that you mentioned. For me, it could be a sizeable deduction.

Carp


This is wrong. You can aonly deduct expenses for a "job search" if you are already employed in that profession and looking for a new job. Being unemployed and looking for a job (as is the case with med students) does not qualify for a deduction.
 

toxic-megacolon

Toxic Member
15+ Year Member
Joined
Oct 27, 2004
Messages
555
Reaction score
6
scholes said:
This is wrong. You can aonly deduct expenses for a "job search" if you are already employed in that profession and looking for a new job. Being unemployed and looking for a job (as is the case with med students) does not qualify for a deduction.

Since an internship is required for a medical license, and is an educational experience, why isn't the residency hunt an "educational expense" ?
 

mpp

SDN Moderator
Moderator Emeritus
15+ Year Member
Joined
Jan 18, 2001
Messages
3,403
Reaction score
27
The eligible expenses for the Lifetime Learning Credit (the Hope Credit is only for the first two year of an undergraduate degree) include tuition plus expenses required for the degree. The regulation explicitly does not include expenses for room & board and transportation. So residency application expenses do not count under either the education expenses credit or the job search deduction.
 

Poety

Full Member
10+ Year Member
5+ Year Member
Joined
Dec 22, 2004
Messages
2,226
Reaction score
1
I haven't been filing tax returns since I've been in medical school - my brother (a cpa) said I dont have to since I have no income - does everyone else file during school and living off loans? Thanks for any info!
 

toxic-megacolon

Toxic Member
15+ Year Member
Joined
Oct 27, 2004
Messages
555
Reaction score
6
Poety said:
I haven't been filing tax returns since I've been in medical school - my brother (a cpa) said I dont have to since I have no income - does everyone else file during school and living off loans? Thanks for any info!

This thread only really applies to current interns who are interested in refunds of their withheld money.
 
Members don't see this ad :)

Poety

Full Member
10+ Year Member
5+ Year Member
Joined
Dec 22, 2004
Messages
2,226
Reaction score
1
toxic-megacolon said:
This thread only really applies to current interns who are interested in refunds of their withheld money.


oops, thanks mega!
 

carpe diem

Senior Member
7+ Year Member
15+ Year Member
Joined
Mar 7, 2002
Messages
159
Reaction score
2
scholes said:
This is wrong. You can aonly deduct expenses for a "job search" if you are already employed in that profession and looking for a new job. Being unemployed and looking for a job (as is the case with med students) does not qualify for a deduction.


Well, I guess this is one less thing I'll need to worry about....... I'm saving all my receipts just in case. I think the restrictions on this type of deduction used to be much less strict. Thanks for clarifying.
 

edmadison

1K Member
15+ Year Member
Joined
Feb 28, 2001
Messages
2,076
Reaction score
74
toxic-megacolon said:
Since an internship is required for a medical license, and is an educational experience, why isn't the residency hunt an "educational expense" ?

Just so everyone knows, you can't deduct the cost of fees to get you initial licesense. This includes the price of the COMLEX/USMLE, the licensure fee and any prep classes. On the bright side, once you have the license, renewing it is deductable.

Ed
 

doctorsquared

Member
7+ Year Member
15+ Year Member
Joined
Nov 3, 2002
Messages
66
Reaction score
1
JetsPickVYoung said:
I think moving expenses are deductible. Good thing if you match somewhere far away...

Moving expenses are only deductible if you switch from one job location to another. You must have income from the job at your current location. A 4th year medical student could not deduct their moving expenses to a residency. Most expenditures required by your new job are likely to be deductible. (licensing fees, unreimbursed continuing education etc.). These are deductible if they exceed the 2% floor. Since residency is a job, when you move to a fellowship or other job, you can deduct your moving expenses.
 

edmadison

1K Member
15+ Year Member
Joined
Feb 28, 2001
Messages
2,076
Reaction score
74
doctorsquared said:
Moving expenses are only deductible if you switch from one job location to another. You must have income from the job at your current location. A 4th year medical student could not deduct their moving expenses to a residency. Most expenditures required by your new job are likely to be deductible. (licensing fees, unreimbursed continuing education etc.). These are deductible if they exceed the 2% floor. Since residency is a job, when you move to a fellowship or other job, you can deduct your moving expenses.

I do not believe this is correct. My read of publication 521 is that you can deduct the moving expenses for the first job if it meets their test. In general, a starting resident should qualify as long as the move is at least 50 miles from the resident's former residence.

Ed
 

endodoc

Endocrinologist (MD, PhD)
10+ Year Member
7+ Year Member
Joined
Aug 6, 2004
Messages
268
Reaction score
1
JetsPickVYoung said:
I think moving expenses are deductible. Good thing if you match somewhere far away...

nope
 

doctorsquared

Member
7+ Year Member
15+ Year Member
Joined
Nov 3, 2002
Messages
66
Reaction score
1
edmadison said:
I do not believe this is correct. My read of publication 521 is that you can deduct the moving expenses for the first job if it meets their test. In general, a starting resident should qualify as long as the move is at least 50 miles from the resident's former residence.

Ed
I checked publication 521. You are correct. A first job is eligable. Sorry.
 

CameronFrye

Senior Member
10+ Year Member
7+ Year Member
15+ Year Member
Joined
Feb 13, 2005
Messages
614
Reaction score
0
edmadison said:
I do not believe this is correct. My read of publication 521 is that you can deduct the moving expenses for the first job if it meets their test. In general, a starting resident should qualify as long as the move is at least 50 miles from the resident's former residence.

Ed


I don't know anything about this stuff, but publication 521 does contain this section:

"First job or return to full-time work. If you go to work full time for the first time, your place of work must be at least 50 miles from your former home to meet the distance test.

If you go back to full-time work after a substantial period of part-time work or unemployment, your place of work also must be at least 50 miles from your former home."
 

proman

Member
Moderator Emeritus
20+ Year Member
Joined
Mar 6, 2002
Messages
1,857
Reaction score
12
For everyone who is eligible for the $2,000 lifetime learning credit for 2006, forget about deductions. If, in the period from July-December 2006, you earn less than about $24,000, the credit will eliminate all federal income tax. Doesn't matter how many deductions you have, you won't have a federal income tax bill. So, unless your annual residency salary will be greater than about $48,000 you likely will owe no federal income tax. This also assumes you have no spouse contributing to your family income. Note that you will still owe social security and medicare tax and state/city taxes depending on where you live. That is the beauty of the lifetime learning credit.
 

toxic-megacolon

Toxic Member
15+ Year Member
Joined
Oct 27, 2004
Messages
555
Reaction score
6
proman said:
For everyone who is eligible for the $2,000 lifetime learning credit for 2006, forget about deductions. If, in the period from July-December 2006, you earn less than about $24,000, the credit will eliminate all federal income tax. Doesn't matter how many deductions you have, you won't have a federal income tax bill. So, unless your annual residency salary will be greater than about $48,000 you likely will owe no federal income tax. This also assumes you have no spouse contributing to your family income. Note that you will still owe social security and medicare tax and state/city taxes depending on where you live. That is the beauty of the lifetime learning credit.

Thanks, very good practical advice.
Simple question: How are 'deductions' and 'credits' different?
 

CameronFrye

Senior Member
10+ Year Member
7+ Year Member
15+ Year Member
Joined
Feb 13, 2005
Messages
614
Reaction score
0
Deductions reduce your taxable income, therefore indirectly reducing your tax bill.

Credits are subtracted directly from your final tax bill.
 

gryffindor

Full Member
20+ Year Member
Joined
Feb 3, 2002
Messages
3,003
Reaction score
310
How about for those of you earning a resident's salary and spending money to apply to fellowship? Can you then deduct the application expenses as "job search?"
 

toxic-megacolon

Toxic Member
15+ Year Member
Joined
Oct 27, 2004
Messages
555
Reaction score
6
So I just completed my taxes (with TurboTax). All the painstaking recepit hoarding was totally useless, because with my half-year intern salary for 2005, the standard 5000 dollar deduction everyone gets, and the lifetime learning credit, I paid ZERO in federal taxes (actually I got 12 cents extra because of rounding :D ). So if you are filing for the fiscal year where you were both a resident and med student at the same time, don't worry about deductions, etc. You're going to get all your tax money back. Now.... what to spend that 3000 dollar check on... :cool:
 

Monty Python

Full Member
15+ Year Member
Joined
Apr 5, 2005
Messages
1,483
Reaction score
305
odieoh said:
Does anyone know what all we can deduct during residency? Can we deduct expenses as education expenses? Obviously there is no tuition, but other expenses such as taking step 3 and equipment and so on? How about costs of moving?

thanks

This is a different topic, but the two fastest ways to invite close IRS scrutiny of your return is:

1. having your schedule A list of itemized deductions exceed 35% of your adjusted gross income, and

2. claiming the home office deduction.

Either of those items is a huge red flag to the feds.

If you're entitled to these items, great, claim it. But make sure you have supporting documentation, because you're at greater risk of audit.
 

PharmaTope

Full Member
10+ Year Member
5+ Year Member
Joined
Jan 28, 2008
Messages
1,359
Reaction score
3
any updates on this? i only got a credit of $563 this year according to turbo tax. i am a first year resident too.
 
Last edited:
Top