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Tax Deductions
When starting our medical career, we are receiving a new steady source of income, and we are incurring several one-time and recurring professional expenses. These expenses are all tax deductible (Table 2) and can be itemized in your annual tax return (you only claim the total amount that exceeds 2% of your salary). In calculating year-end taxes, you can either itemize deductions or take a standard deduction (calculated by the IRS, based on marital status and a few other criteria).
Itemizing is better than taking the standard deduction only if the itemized expenses exceed your standard deduction. It is often difficult to find enough expenses to exceed the annual standard deduction. However, inherent in residency status are several large, required expenses. It would be prudent to plan all your major expenses (eg, licensure examinations, licensure fees, laptop computers, society memberships) to occur within the same tax filing year so that you can have a large itemized deduction and avoid making any business-related expenses during years when you will be claiming the standard deduction.
The following are a few examples of deductions you may be able to claim in your next tax return:
Moving expenses
• Airfare/car rental during your apartment search ($200-$400)
• Charitable donations of items you do not bring with you ($400-$800)
• Gasoline during your move (eg, $200, including the car/van you drive for your move)
• Interviewing expenses for your new job: airfare, hotels ($100-$400)
• Moving van ($400-$600, depending on distance)
Professional expenses
• Desktop/laptop computers ($500-$2000)
• Journal subscriptions
• Licensing examinations (eg, $600 fee for US Medical Licensing Examination, step 3)
• Licensing fees (eg, California state, $300; Drug Enforcement Administration, $395)
• Society memberships ($50-$200)
• Specialized medical equipment/clothing (eg, stethoscopes, white coats)
If you are a new intern, you may want to have all your residency expenses occur during that intern year, because you probably had large job-related expenses for that position (eg, moving, interview travel). You may, however, want to save the expenses for the next calendar/tax year, because you will have a full year’s salary during the next calendar year (you are only paid 6 months’ worth this year, from July to December). This approach is called “bunching deductions” and entails clustering deductible expenses in a single year so as to maximize any available tax savings.
When starting our medical career, we are receiving a new steady source of income, and we are incurring several one-time and recurring professional expenses. These expenses are all tax deductible (Table 2) and can be itemized in your annual tax return (you only claim the total amount that exceeds 2% of your salary). In calculating year-end taxes, you can either itemize deductions or take a standard deduction (calculated by the IRS, based on marital status and a few other criteria).
Itemizing is better than taking the standard deduction only if the itemized expenses exceed your standard deduction. It is often difficult to find enough expenses to exceed the annual standard deduction. However, inherent in residency status are several large, required expenses. It would be prudent to plan all your major expenses (eg, licensure examinations, licensure fees, laptop computers, society memberships) to occur within the same tax filing year so that you can have a large itemized deduction and avoid making any business-related expenses during years when you will be claiming the standard deduction.
The following are a few examples of deductions you may be able to claim in your next tax return:
Moving expenses
• Airfare/car rental during your apartment search ($200-$400)
• Charitable donations of items you do not bring with you ($400-$800)
• Gasoline during your move (eg, $200, including the car/van you drive for your move)
• Interviewing expenses for your new job: airfare, hotels ($100-$400)
• Moving van ($400-$600, depending on distance)
Professional expenses
• Desktop/laptop computers ($500-$2000)
• Journal subscriptions
• Licensing examinations (eg, $600 fee for US Medical Licensing Examination, step 3)
• Licensing fees (eg, California state, $300; Drug Enforcement Administration, $395)
• Society memberships ($50-$200)
• Specialized medical equipment/clothing (eg, stethoscopes, white coats)
If you are a new intern, you may want to have all your residency expenses occur during that intern year, because you probably had large job-related expenses for that position (eg, moving, interview travel). You may, however, want to save the expenses for the next calendar/tax year, because you will have a full year’s salary during the next calendar year (you are only paid 6 months’ worth this year, from July to December). This approach is called “bunching deductions” and entails clustering deductible expenses in a single year so as to maximize any available tax savings.