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Tax Write-offs

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kas23

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Let me first say I no nothing about taxes, I just begrudgingly pay them.

But I have a question about writing-off our expenses for residency interviews? Can we do this? How much of a tax break will this get us and can we only write-off the expenses incurred in January 2005, since this will be in the year we actually have an income?
 

amuse

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kas23 said:
Let me first say I no nothing about taxes, I just begrudgingly pay them.

But I have a question about writing-off our expenses for residency interviews? Can we do this? How much of a tax break will this get us and can we only write-off the expenses incurred in January 2005, since this will be in the year we actually have an income?

correct, you can only write off expenses from 2005. you can write off all expenses related to your interviewing, including interview apparel, hotels, gas, subway cards, airfare. you cannot, however, write off food.

don't expect to save much, since your 2005 income is just for half a year, so your income tax bracket will be the lowest.
 

kas23

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So, what do you do, save your receipts?
 

Snoopy

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You cannot deduct the expenses from your residency interviews. Here is what the IRS says:

"You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. You cannot deduct these expenses if: 1) You are looking for a job in a new occupation, 2) There was a substantial break between the ending of your last job and your looking for a new one, or 3) You are looking for a job for the first time."

You are just becoming a physician so you are looking for a new job. In addition, job search expenses fall into the Miscellaneous Deductions category which means that you can only deduct that amount which exceeds 2% of your adjusted gross income. Also, keep in mind that unless you own a home you are not likely to benefit from taking itemized deductions on your tax return.

The big benefit you will have on your 2005 tax return is the Lifetime Learning Credit. This will allow you to take 20% of your education expenses, up to $2000, as a credit on your tax return. This reduces your tax burden by $2000, it does not just reduce your taxable income. That said, I had several friends who were unable to take this credit because their schools took their loan money for their final semester of school (the only semester which is eligible for the credit) and applied it in December instead of January. Check with your school to ensure that your loans are applied for the 2005 tax year so that you can take full advantage of this credit.

For more information on taxes, check out this publication:

http://www.irs.gov/pub/irs-pdf/p17.pdf
 

PACtoDOC

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Snoopy said:
You cannot deduct the expenses from your residency interviews. Here is what the IRS says:

"You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. You cannot deduct these expenses if: 1) You are looking for a job in a new occupation, 2) There was a substantial break between the ending of your last job and your looking for a new one, or 3) You are looking for a job for the first time."

You are just becoming a physician so you are looking for a new job. In addition, job search expenses fall into the Miscellaneous Deductions category which means that you can only deduct that amount which exceeds 2% of your adjusted gross income. Also, keep in mind that unless you own a home you are not likely to benefit from taking itemized deductions on your tax return.

The big benefit you will have on your 2005 tax return is the Lifetime Learning Credit. This will allow you to take 20% of your education expenses, up to $2000, as a credit on your tax return. This reduces your tax burden by $2000, it does not just reduce your taxable income. That said, I had several friends who were unable to take this credit because their schools took their loan money for their final semester of school (the only semester which is eligible for the credit) and applied it in December instead of January. Check with your school to ensure that your loans are applied for the 2005 tax year so that you can take full advantage of this credit.

For more information on taxes, check out this publication:

http://www.irs.gov/pub/irs-pdf/p17.pdf

You are actually somewhat incorrect for some of us out here. Some of us have already been working in the medical profession for years, and to move up to a position as a physician has no bearing on the IRS laws. The law just says you are looking for a new job in your current field, which is medicine!! I have been a PA for years, and now I will be applying for a position as a physician. So it is a "promotion", but it is not changing careers. I figure this is plenty good of a loophole seeing as though most auditors would never understand this complex issue. So yes, I do in fact plan to deduct even my Fall interview expenses.
 

mpp

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Actually the tax code says the new job must be in your current occupation...not current field. Although it is unlikely that you would be audited, if you were they would likely find against you. You must be looking for the same exact job at a new location. Check out IRS Publication 529 for a listing of deductions available.
 

Snoopy

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Well, even if you argue that you are in the same profession, which I think is incorrect, you still lose on point 2 which is that "there was a substantial break between the ending of your last job and your looking for a new one" unless you were working continuously as a PA during medical school. I would think that just about anyone would say that a 4-year break in employment qualifies as substantial. In your bracket as a resident you are unlikely to be audited, but for the future as attendings, anyone who thinks about trying to play the gray areas of the tax code should remember that physicians are one of the most frequently audited groups.
 

PACtoDOC

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Snoopy said:
Well, even if you argue that you are in the same profession, which I think is incorrect, you still lose on point 2 which is that "there was a substantial break between the ending of your last job and your looking for a new one" unless you were working continuously as a PA during medical school. I would think that just about anyone would say that a 4-year break in employment qualifies as substantial. In your bracket as a resident you are unlikely to be audited, but for the future as attendings, anyone who thinks about trying to play the gray areas of the tax code should remember that physicians are one of the most frequently audited groups.

There is no break. I have worked my entire time in medical school.
 

Hercules

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Snoopy said:
The big benefit you will have on your 2005 tax return is the Lifetime Learning Credit. This will allow you to take 20% of your education expenses, up to $2000, as a credit on your tax return. This reduces your tax burden by $2000, it does not just reduce your taxable income.

So could a married couple claim up to a $4000 credit in this situation?
 

Snoopy

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The IRS states: "The maximum lifetime learning credit for 2004 is $2,000, regardless of the number of students." Sorry, that sucks.
 
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