Expenses Common to Young Health Care Professionals       

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Below is a list of professional expenses commonly incurred, and deducted, by young health care professionals.  Remember, to be deductible, an expense must be both "ordinary" and "necessary" in connection with your profession.  This information will help our accountants minimize your taxable exposure. Please contact us if you would like to use our tax services.  If you are an intern, resident or  fellow, you receive a discount on the preparation of your tax return.

Expense IRS PUB Deductible Non-Deductible

Automobile expenses

917

The portion of automobile expenses attributable to driving between two different workplaces, or between your principal residence and a temporary job site.

The portion of automobile expenses incurred while commuting between your principal residence and a regular place of business.

Beeper and pagers

529

The rental fees paid by you for pagers used in connection with your employment.

Any costs associated with the personal use of these items.

Books/Library

534

Depreciation expense on reference books purchased during the year.  You can also depreciate your "library" the first year you use it for business use, based on the fair market value of the library on that date.

Any books not related to your profession.

Cellular phones

534

The business portion of the cost of the cellular phone can be depreciated.  Plus, you can deduct the business use portion of the monthly cellular phone bills.

Any portion of the cost of the cellular phone and the monthly cellular phone bills relating to personal use.

Computer purchases

534

Depreciation on the business use percent of any computer or peripheral purchased (1) as a requirement of your employment and (2) for the convenience of your employer.

Any computer and peripheral not specifically purchased as a requirement of employment or for the benefit of your employer.

Education, examinations and licenses

508

Expenses incurred that are required as part of your employment and maintain or improve your skills in your current profession.

Expenses incurred that prepare or qualify you for a new trade or business.

Equipment and instruments

534

Depreciation expense on any items purchased during the year, or based on the fair market value of equipment and instruments purchased in previous years but put into business use this year.

Equipment and instruments not associated with your profession.

Home office

587

The percentage of your home (based on square footage) used regularly and exclusively in connection with your profession.  Great for renters since rent isn't otherwise deductible on your federal tax return.

The portion of your home used for any non-business purpose during the year, even if just for one day.

Insurance

529

Malpractice insurance and insurance on business assets

Health, life and disability insurance.  Health insurance is deductible as an "adjustment to income" if you have net self-employment income.

Interest on school loans

535

Up to $2,500 of student loan interest paid during the year, subject to income limitations.

Interest on school loans in excess of $2,500 per year.

Job search

529

Expenses associated with finding a new position in your current trade or business.

Any expenses associated with finding your first job, or a job in a new trade or business.

Meals and entertainment

463

50% of the cost of a meal when there is a specific business purpose in connection with the meal, or you're temporarily traveling on business.

Personal meals, including meals while on call at a hospital located in the general vicinity of where you live.

Parking and tolls

463

Parking and tolls incurred in connection with traveling  between two different workplaces or between your principal residence and a temporary job site.

Parking and tolls incurred in connection with commuting between your principal residence and a regular place of business.

Professional dues, journals and subscriptions

535

Fees paid to join professional organizations or to subscribe to their journals

Dues paid to business, social or athletic clubs.

Psychoanalysis

N/A

A licensed psychiatrist or psychologist who is undergoing psychoanalysis as a required part of training in that field

Any other licensed professional must claim costs associated with psychoanalysis as a medical deduction

Supplies

535

Supplies, such as slides for presentations, that are required in connection with your employment.

Supplies that don't fall within the definition of "ordinary" and "necessary" for a professional in your field.

Temporary job assignments

463

The travel, lodging, and 50% of the cost of the meals incurred during a job rotation outside the general vicinity of where you live.  The rotation must be for a specific period of less than one year, and you must intent to return to the city that you were living in prior to the rotation.

Any expense associated with a job rotation outside the general vicinity of where you live that will last for more than a year, or for an unspecified length of time.

Travel and lodging

463

Travel and lodging expenses incurred while outside the general vicinity of your residence in connection with a deductible activity.

Travel and lodging incurred when the primary purpose of the trip is not business related.

Uniforms and cleaning

529

The cost of purchasing and cleaning clothing, such as lab coats and scrubs, required by your employer that isn't considered "everyday street clothing".

Items such as suits, shirts, shoes, ties and wristwatches because they fit the description of "everyday street clothing"

IRS Pub indicates the IRS Publication that contains the information on this topic.  You can access this information at www.irs.gov.

How to Deduct Your Unreimbursed Business Expenses

How you deduct your allowable unreimbursed business expenses depends on how you were compensated during the year:

  • Individuals compensated as employees (having taxes withheld from their pay) are required to deduct these type expenses as a miscellaneous itemized deduction on their Schedule A. These individuals will also be required to complete and attach a Form 2106 or 2106-EZ, Unreimbursed Employee Business Expense, to their Form 1040.
  • Individuals compensated as independent contractors (having NO taxes withheld) will deduct their business expenses directly against their income. These individuals will be required to complete and attach a Schedule C or Schedule C-EZ, Profit or Loss From Business, to their Form 1040.
  • Individuals compensated as both employees and independent contractors will need to determine whether to reflect a specific expense on the Schedule C or the Form 2106. Items which are specifically related to a person's income as an independent contractor, such as malpractice insurance and directly related auto expenses, will be deducted directly against that income. Other items, such as job search expenses, are most likely related to a person's employment and should be reflected on the Form 2106.

 

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Copyright 2001 Kaplan Management & Insurance Services
Last modified: June 13, 2012