Tax Deductions for Healthcare Professionals
By: Emil J. Belvin,
Use this form to summarize and organize your tax deductible business expenses. In order to deduct expenses in your trade or business, you must show that the expenses are "ordinary and necessary." An ordinary expense is one which is appropriate, but not necessarily essential in your business. The application of these terms to you relies heavily on the "facts and circumstances" of your unique situation. A business expense deduction must also take into account any reimbursement you have received, or could have received for that expense from your employer or another source.
The information provided here is an abbreviated summary of the rules for business expenses applicable to healthcare professions. For additional details to specific business expenses and deductions, especially when working more than one job feel free to give us a call.
Key Expenses For Healthcare Professionals
A] Supplies & Expenses:
Generally, to be deductible, items must be ordinary and necessary to your healthcare profession and not reimbursable by your employer. Record separately from other supplies, the cost of business assets which are expected to last longer than one year and cost more than $100. Normally, the cost of such assets are recovered differently on your tax return than are other recurring everyday business expenses like business cards, medical supplies, etc.
B] Other Expenses:
Expenses of looking for new employment in your present line of work are deductible - you do not have to actually obtain a new job in order to deduct the expenses. Out-of-town job seeking expenses are deductible only if the primary purpose of the trip is job seeking, not pursuing personal activities.
C] Telephone Expenses:
The basic local telephone service costs of the first telephone line provided in your residence are not deductible. However, toll calls from that line are deductible if the calls are business related. The costs (basic fee and toll calls) of a second line in your home are also deductible, if used exclusively for business.
D] Uniforms & Upkeep Expenses:
If you are required to wear a uniform in your healthcare profession, the
cost and upkeep may be deductible. IRS rules specify that work clothing cost and the cost of its maintenance are deductible if: (1) the uniforms are required by your employer, (if you're an employee) and (2) the clothes are not adaptable to ordinary street wear. Normally, the employer's emblem attached to the clothing indicates it is not for street wear. The cost of protective clothing (e.g., safety shoes or goggles) is also deductible.
E] Continuing Education:
Educational expenses are deductible under either of two conditions: (1) your employer requires the education in order for you to keep your job or rate of pay or (2) the education maintains or improves skills as a healthcare professional. Costs of courses that are taken to meet the minimum requirements of a job or that qualify you for a new trade or business are not deductible.
F] Auto Travel:
Your auto expense is based on the number of qualified business miles you drive. Expenses for travel between work locations or daily transportation expenses in going between your residence and temporary work sites are deductible; include them as your business miles. Your trips between home and work each day or between home and one or more regular places of work are COMMUTING and NOT deductible.
Document business miles in a record book as follows: (1) Give the date and business purpose of each trip; (2) Note teh place to which you traveled; (3) Record the number of business miles; (4) Record your car's odometer reading at both the beginning and the end of the tax year. Keep receipts for all car operation expenses - gas, oil, repairs, insurance, etc. and of any reimbursement you received for your expenses.
G] Travel - Out-of-Town:
Expenses of traveling away from "home" overnight on job-related and continuing education trips are deductible. Your "home" is generally considered to be the entire city or general area where your principal place of employment is located. Out-of-town expenses include transportation, meals, lodging, tips and miscellaneous items like laundry, valet, etc.
Document away from home expenses by noting the date, destination, and business purpose of your trip. Record business miles if you drove to the out-of-town location. In addition, keep a detailed record of your expenses - lodging, public transportation, meals, etc. Always list meals and lodging separately in your records. Receipts must be retained for each lodging expense. However, if any other business expense is less than $75, a receipt is not necessary if you record all of the information in a timely dairy. You must keep track of the full amount of meal and entertainment expenses even though only a portion of the amount may be deductible.
H] Professional Fees & Dues:
Dues paid to professional societies related to your healthcare profession are deductible. However, the cost of initial admission fees paid for membership in certain organizations or social clubs are considered capital expenses.
Deductions are allowed for payments made to a union as a condition of initial or continued membership. Such payments include regular dues, but not those which go toward defraying expenses of a personal nature. However, the part of union dues which goes into a strike fund is deductible.
Emil J. Belvin is the founder of EZXco., a Los Angeles-based tax service company, which specializes in taxes and financial services for healthcare professionals. For more information on tax strategies for healthcare professionals, please call 310.670.3002 .