Are professional licensing tests and fees tax-deductible?

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MrMiyagi
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Are professional licensing tests and fees tax-deductible?

Post by MrMiyagi » Wed Sep 01, 2010 8:27 am

I was wondering if anyone knew professional licensing tests fees, any test prep program fees were considered tax-deductible as "work-related?"

Specifically referring to my USMLE (United States Medical Licensing Exam) and my specialty boards exam fees. Also any books/test prep programs associated with them.

I'm sure the same question applies to CPA, Law bar exam fees, etc..

Thanks!

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BruceM
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Location: Manzanita, Oregon

Re: Are professional licensing tests and fees tax-deductible

Post by BruceM » Wed Sep 01, 2010 11:40 am

MrMiyagi wrote:I was wondering if anyone knew professional licensing tests fees, any test prep program fees were considered tax-deductible as "work-related?"

Specifically referring to my USMLE (United States Medical Licensing Exam) and my specialty boards exam fees. Also any books/test prep programs associated with them.

I'm sure the same question applies to CPA, Law bar exam fees, etc..

Thanks!
Probably not.

The testing required to get the initial license is an expense that is necessary to meet the minimum threshold standard of the profession. Expenses here are considered to be 'capitalized' expenses and are not deductible. From p.16 of PUb 529

Nondeductible Expenses

Professional Accreditation Fees: Medical and dental license fees paid to get initial licensing.


This is in keeping with the rule that educational expenses required to meet the minimum industry/regulatory standard are not deductible.

As to the exam prep fees/books/materials to take the exam, logic would suggest that these are all part of the same expense to get your intitial license, even though the qualified educational expense to get you to this point may qualify as a Lifetime Learning Credit, although your income would likely phase you out of this credit.

BruceM

Sulvar
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Post by Sulvar » Wed Sep 01, 2010 1:52 pm

I believe that ongoing fees for belong to the bar or medical licensing and such can be deductible, but there is an MAGI phase out that is pretty low, so if you are actually a doctor or lawyer then it is sort of a moot point.

the intruder
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Re: Are professional licensing tests and fees tax-deductible

Post by the intruder » Wed Sep 01, 2010 3:05 pm

MrMiyagi wrote:I was wondering if anyone knew professional licensing tests fees, any test prep program fees were considered tax-deductible as "work-related?"

Specifically referring to my USMLE (United States Medical Licensing Exam) and my specialty boards exam fees. Also any books/test prep programs associated with them.

I'm sure the same question applies to CPA, Law bar exam fees, etc..

Thanks!
See IRS pub 535 P 43 col 3 and IRS pub 970. Generally expenses that are incurred to meet the minimum requirements of your present trade or business are not deductible. I dont know how that rule applies to doctors who graduate from med school and then take many different specialty exams. I would assume that once you have an MD and are licensed to practice medicine any specialty medical exams would be a deductible trade or business expense because you have met the minimum requirements for your trade or business as an MD.

Here is an analogy: law student gradautes and passes bar exam. He works for one year and then stops working to get an LLM in tax law. All LLM expenses are deductible because he is improving the skills of his trade or business (law). Or NY lawyer takes bar exam in FL and NJ. Expenses of FL and NJ bar exam are deductible because they expand his trade or business as an attorney.

Radiohead
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Post by Radiohead » Wed Sep 01, 2010 4:02 pm

Between online research and talking to a lot of different people, I think what the other people have said is correct.

USMLE: Positive it is not deductible

Specialty boards: Once you pass Step 3 and get your own state medical license (not the resident one) you can technically deliver babies and perform whipples by yourself if you so choose...although you may have a hard time attracting business and you will certainly attract a lot of lawyers. Therefore, any test after Step 3 is above the technical minimum and should be deductible. That said, I would say about 50% of the people I have talked to in residency have not deducted specialty board exam fees "just in case".
"Trying is the first step towards failure" -Homer

kenbrumy
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Re: Are professional licensing tests and fees tax-deductible

Post by kenbrumy » Wed Sep 01, 2010 4:04 pm

the intruder wrote:
MrMiyagi wrote:I was wondering if anyone knew professional licensing tests fees, any test prep program fees were considered tax-deductible as "work-related?"

Specifically referring to my USMLE (United States Medical Licensing Exam) and my specialty boards exam fees. Also any books/test prep programs associated with them.

I'm sure the same question applies to CPA, Law bar exam fees, etc..

Thanks!
See IRS pub 535 P 43 col 3 and IRS pub 970. Generally expenses that are incurred to meet the minimum requirements of your present trade or business are not deductible. I dont know how that rule applies to doctors who graduate from med school and then take many different specialty exams. I would assume that once you have an MD and are licensed to practice medicine any specialty medical exams would be a deductible trade or business expense because you have met the minimum requirements for your trade or business as an MD.

Here is an analogy: law student gradautes and passes bar exam. He works for one year and then stops working to get an LLM in tax law. All LLM expenses are deductible because he is improving the skills of his trade or business (law). Or NY lawyer takes bar exam in FL and NJ. Expenses of FL and NJ bar exam are deductible because they expand his trade or business as an attorney.
If someone is required to have the professional certification to be employed in that profession, then it wouldn't be required. I don't think lawyers, accountants or engineers must have their professional certifications to be employed but it can expand their career opportunities. Therefore, I believe the initial testing (and possibly prep courses) are deductible. You can't be a doctor with passing the exam so it wouldn't be.

the intruder
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Re: Are professional licensing tests and fees tax-deductible

Post by the intruder » Wed Sep 01, 2010 4:06 pm

kenbrumy wrote:
the intruder wrote:
MrMiyagi wrote:I was wondering if anyone knew professional licensing tests fees, any test prep program fees were considered tax-deductible as "work-related?"

Specifically referring to my USMLE (United States Medical Licensing Exam) and my specialty boards exam fees. Also any books/test prep programs associated with them.

I'm sure the same question applies to CPA, Law bar exam fees, etc..

Thanks!
See IRS pub 535 P 43 col 3 and IRS pub 970. Generally expenses that are incurred to meet the minimum requirements of your present trade or business are not deductible. I dont know how that rule applies to doctors who graduate from med school and then take many different specialty exams. I would assume that once you have an MD and are licensed to practice medicine any specialty medical exams would be a deductible trade or business expense because you have met the minimum requirements for your trade or business as an MD.

Here is an analogy: law student gradautes and passes bar exam. He works for one year and then stops working to get an LLM in tax law. All LLM expenses are deductible because he is improving the skills of his trade or business (law). Or NY lawyer takes bar exam in FL and NJ. Expenses of FL and NJ bar exam are deductible because they expand his trade or business as an attorney.
If someone is required to have the professional certification to be employed in that profession, then it wouldn't be required. I don't think lawyers, accountants or engineers must have their professional certifications to be employed but it can expand their career opportunities. Therefore, I believe the initial testing (and possibly prep courses) are deductible. You can't be a doctor with passing the exam so it wouldn't be.
I dont think that is correct. You are not a lawyer until you pass the bar exam which means the bar exam is the minimum requirement for a lawyer, not graduating law school.

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dm200
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Post by dm200 » Wed Sep 01, 2010 6:26 pm

Interesting discussion.

If such a fee/charge is not deductible by an individual as a self-employed person, but later became an employee of company/corporation and that employer reimbursed for such fees in order to enhance the credentials of its employees, would such reimbursements be deductible by the company?

the intruder
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Post by the intruder » Wed Sep 01, 2010 8:42 pm

dm200 wrote:Interesting discussion.

If such a fee/charge is not deductible by an individual as a self-employed person, but later became an employee of company/corporation and that employer reimbursed for such fees in order to enhance the credentials of its employees, would such reimbursements be deductible by the company?
Its deductible by the company and is not taxed to the employee.

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ram
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Post by ram » Wed Sep 01, 2010 9:15 pm

I never deducted my usmle expense and do not know anybody who did. This of course proves nothing.

As a physician I give actual receipts of my medical conference expenses to my employer and they are refunded and no tax is deducted on it.
Ram

Sulvar
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Post by Sulvar » Thu Oct 06, 2011 11:07 am

I believe that ongoing fees, such as bar membership fees for a lawyer ARE deductible in theory, but they are subject to the 2% of AGI rule, so in practice you can't actually deduct them.

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Nestegg_User
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Post by Nestegg_User » Thu Oct 06, 2011 3:52 pm

Sulvar wrote:I believe that ongoing fees, such as bar membership fees for a lawyer ARE deductible in theory, but they are subject to the 2% of AGI rule, so in practice you can't actually deduct them.
I think that's why my wife (a CPA) has the company pay her membership fees and CPE

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