You’re starting one of the most interesting and likely momentous part of your life; your residency. You’ve got enough on your mind when starting residency, let us help you hopefully save some money! Read below to find out what potential tax deductions you may have when starting residency!
One of the more costly parts of starting residency is the potential move from where you live to your residency location. These expenses which can include air travel, shipping costs, and moving materials can add up substantially. Thankfully, the IRS allows you to deduct these expenses if you meet certain requirements. The requirements are:
- Move related to start of work – your actual move must be related to the start of work. The IRS considers a move within 1 year of starting work to be be “related to the start of work.” Most people tend to move in the month before residency starts so you’re usually meeting this requirement.
- The distance test – you need to actually move a distance! The IRS requires that your new job you just moved for is at least 50 miles from your old home compared to your previous job from your old home. Here is where some people may not actually meet the requirement. For example, you did all of your medical school rotations at Hospital A which you lived next to for the past 2 years. You then match into a residency at Hospital A. You don’t actually move for the job even though you’ve started a new job so you do not meet the distance test.
- The time test – the IRS requires that you be a full time employee for at least 39 weeks out of 12 months immediately after you move to the new area of your general job location. Since you’re a resident, you’re near definitely a full time employee during this time.
What can you actually deduct? The IRS permits you to deduct reasonable moving expenses incurred to transport your personal items to your new place. This includes the cost of packing and shipping your items. It also includes up to 30 days of storage expenses for the period after moving out of your old home and before you move into your new home.
You can also deduct travel expenses (air, bus, train, etc.) for all members of the household that are moving. If you’re driving, you can deduct the gas, tolls, and even the hotel you may stay at overnight if you need to. Meals are NOT deductible. Also, if your residency program will reimburse you for the move, you will have to adjust your deduction based on what they reimburse you.
Please refer to IRS Publication 521 for more information!
If you are required to purchase scrubs for your residency and they do not reimburse you, then you can deduct the purchase of these scrubs on your tax return.
Keep in mind that you cannot deduct regular clothes like suits, ties, dresses, etc. that would normally be usable outside of work.
Stethoscope, Penlight, Reflex Hammer, Etc.
If you’re purchasing a new stethoscope, penlight, reflex hammer, etc. for residency and these are purchases that are ordinary and necessary for work, then you’ll likely be able to deduct these as well. Don’t forget that these deductions are small (even if you’re buying a very expensive stethoscope) and will really only help if you’re itemizing your deductions.
As long as your residency does not offer a way for you to be reimbursed, you can likely claim the textbooks you purchase for residency. For example, you started an internal medicine residency and wanted to purchase Harrison’s Principles of Internal Medicine, you would likely be able to claim the purchase as tax deductible as you purchased it as a reference textbook for your residency.
Always check with your accountant before submitting anything as the information can change after we post this article.