Let's Talk about Taxes... AGAIN.

Attributed to 401kcalculator.org

Attributed to 401kcalculator.org

Last weekend before the 4/15 tax filing deadline, let's revisit the topic.  Hopefully you've read my previous post on taxes, chose a tax filing provider and already have all your documents and forms ready to submit.  Now let's review several tax deductions/credits you should not forget.

Quick definitions:

  • Tax deduction - reduces your taxable income.  For example, if you made $10,000 in a year and qualify for a $1,000 deduction, the income you pay taxes on is $10,000 - $1,000 = $9,000.
  • Tax credit - reduces your tax bill dollar for dollar.  For example, if you owe Uncle Sam $500 in income taxes and you qualify for a $500 tax credit, you owe nothing! Generally speaking, a credit is more beneficial than a deduction.

Moving on...

  1. Moving expenses deduction - whether you recently moved for a job or are planning to start residency in 2015.  Make sure you gather all receipts related to your move as you will be able to deduct your moving expenses provided you meet the following criteria:
    1. You move within 1 year of starting work at the new job
    2. Your new job is at least 50 miles farther from your home than your old job.
    3. You have to work for at least 39 weeks during the first 12 months at your new job.
  2. Student loan interest deduction - if you have student loans and made payments on it during 2014, you are likely eligible for this deduction.  This information is furnished to you by your lender on a 1098-E form.
    1. Max deduction - $2,500.  Example, if you paid $5,000 in interest on your students loans, only $2,500 of that is deductible. 
    2. Income limits - your modified adjusted gross income (MAGI) is less than $80,000 ($160,000 if married filing jointly).
    3. You have to have been enrolled at least half-time in a degree program during the year. 
  3. Tuition and fees deduction - for those who are in school or were recently in school, you can deduct a portion of your tuition and fees expenses on your income tax return.  This information is usually furnished to you by your school on a 1098-T form.
    1. Max deduction - $4,000.
    2. Income limits - your modified adjusted gross income (MAGI) is less than $80,000 ($160,000 if married filing jointly).
    3. Only tuition and fees qualify, so no you cannot deduct your rent and food expenses.
    4. No double benefit allowed - if you claim this deduction, you cannot also claim the lifetime learning credit (#4) described below.
  4. Lifetime learning credit - for those who are in school or were recently in school, you may elect to take this credit instead of the tuition and fees deduction above.  Again, you can look to your 1098-T form for information needed to claim this credit.
    1. Max credit - $2,000
    2. Income limits - your modified adjusted gross income (MAGI) is less than $64,000 ($128,000 if married filing jointly).
    3. Credit is NON-REFUNDABLE - which means it will be applied toward your tax bill, but you will not received a refund if the credit exceeds what you owe in income taxes.  For example, if you owe Uncle Sam $1,500 in taxes, the credit will make your tax bill $0 but you won't receive $500 back.
    4. No double benefit allowed - if you claim this deduction, you cannot also claim the tuition and fees deduction (#3) described above.
  5. Business and professional expenses deduction - just like other professions, you can deduct expenses related to work such as supplies, travel, phone, uniforms, continuing medical education, professional fees and others.  As long it's relevant to your job.

Did I forget any deductions/credits relevant to medical professionals?  Let me know in the comments!


Future Proof, MD

Dr. Bo Liu is an aspiring radiologist-in-training and the founder and editor of the White Coat Money Blog.  He has an interest in interventional radiology and helping his medical colleagues get ahead in this mad world of medicine and money.  When he's not crushing the list at the PACS station or typing up your next favorite blog post, you can usually find him at the local badminton club, movie theater or the most recently opened restaurant.