Taxes While in Residency

[Resident Spouse]

My wife is a 1st year optho resident and I am working on our taxes for last year. We own a home and both put money aside for retirement. I just wanted to start a thread to get some advise and opinions on write-offs, shelters, and tax planning for residents.

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[Rocky2007]

All the advise I can think of is to deduct your mortgage payments and moving expenses (if you moved for your job). I would also consider putting money away in a 403(b) (I think that's what it is called)...where your pre-tax $ is put away for retirement savings. You should also consider putting $ away in a Roth IRA (if you qualify)....the initial investment is from after-tax earnings, but none of the interest is ever taxed...even when you retire and take out the money you are never taxed (as opposed to a 401K or 403(b)).

I asked this in another post - but does anyone know if FICA is taken out of residents paychecks? I hate that friggin FICA.

 

[NinerNiner999]

Yes - FICA, medicare, and federal are all taken out, plus whatever state taxes you have.

 

[colbgw02]

If you're an intern, or you paid tuition in 2006, then you can itemize your tuition. You just need to have your 1098-T from your school.

 

[dpmd]

Some schools are bastardly and make tuition for that last spring semester due on Dec 28 and screw you out of the deduction. Check when you paid, or risk the wrath of the IRS.

 

[neurokitty]

Two other big deductions that may or may not be possible (check with an accountant): unreimbursed travel costs to secure her job, and moving expenses if you guys moved more than 50 miles for her job. Unfortunately, you can't deduct your interviewing clothes.

 

[MBK2003]

My wife is a 1st year optho resident and I am working on our taxes for last year. We own a home and both put money aside for retirement. I just wanted to start a thread to get some advise and opinions on write-offs, shelters, and tax planning for residents.

Two things we ran into this year:
1) Because of extra $$ from moonlighting, we hit the Roth IRA income eligibility ceiling, so had to take the money back out and pay 10% penalty on earnings.
2) The Buzz Saw known as the AMT (alternative minimum tax). Due to increased income from moonlighting, 3 kiddy deductions, mortgage interest & propery tax deductions, and high state income tax deductions, we got caught in the AMT to the tune of several thousand dollars above our usual taxes. There's nothing like doubling up your moonlighting shifts in Feb-April in order to pay off your unexpected several thousand dollar federal tax bill due to the AMT. We were so diligent about having extra money withheld from all our paychecks (including moonlighting) and we still got SCR*WED by the AMT. Now we're doing the calculations to see if moonlighting is even worth the extra money for next year.

MBK2003

 

[Stimulate]

I am notoriously cheap and have done my taxes myself (albeit with Turbotax in 2005) with the exception of this last year (2006)... I used an accountant this year and although it cost $300 (sounds expensive but I had a ton of deductions and narrowly avoided that damn AMT) it was WELL worth the investment for two reasons.
First, I had incredible piece of mind and much less stress. What would have taken me hours took me only 1 hour and I have some back-up if I were to get audited (my accountant had free coverage for the first $5000 of audit-related expenses).
Second, they found additional deductions and suggested strategies to reduce my taxes for the next year. Also, they offered to review my returns for the last couple of years for free.
I am going to stick to my expertise...taking care of patients...and let the tax professionals do the same...

 

[drwatson]

Some of the best financial advice I was given was to spend the money and have an accountant do your taxes. They will probably find enough deductions alone to pay for themselves. Multiple incomes, loans, mortages, tuition, 401(k), Roth, moonlighting...enough to make your head spin.

Plus as the above poster mentioned, you get to stick to that which you know best and leave the taxes to the pros.