tax writeoff?

martin lynch · Joined: 01 Jan 2008 Posts: 3

Here's the situation:

Graduating on May 10th.
Begin medical residency on July 1.

I'm required to purchase some really expensive camera equipment for
residency ($1,000+ worth). Will this purchase be tax deductible? I
am paying 100% myself (not reimbursed by hospital).

Also, would I be required to purchase the camera after May 10th?
After July 1? I'd like to purchase it now, as I found a bargain on a
kit that won't last....

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Archived from group: misc>taxes>moderated

Allan Martin · Joined: 10 Feb 2008 Posts: 9

"martin lynch" wrote in message @z17g2000hsg.googlegroups.com...
> Here's the situation:
>
> Graduating on May 10th.
> Begin medical residency on July 1.
>
> I'm required to purchase some really expensive camera equipment for
> residency ($1,000+ worth). Will this purchase be tax deductible? I
> am paying 100% myself (not reimbursed by hospital).
>
> Also, would I be required to purchase the camera after May 10th?
> After July 1? I'd like to purchase it now, as I found a bargain on a
> kit that won't last....

The date the camera is put into business use is the date you should use.
There are a lot of other factors not mentioned in your post that will
determine if the 2106 miscellaneous itemized deduction (Depreciation or 179
expensing of the camera) will have any benefit to you.

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removeps-groups · Joined: 09 Dec 2007 Posts: 98

On Feb 23, 4:37 am, martin lynch wrote:

> I'm required to purchase some really expensive camera equipment for
> residency ($1,000+ worth). Will this purchase be tax deductible? I
> am paying 100% myself (not reimbursed by hospital).

You can include equipment as part of qualified education expenses only
if they are required as a condition of enrollment and must be paid to
the school. Then you can take the lifetime learning credit or tuition
and fees deduction, provided you qualify for it (as long as your AGI
is not too high, etc). From your next paragraph, it seems you can buy
the cameria anywhere you want, so it would not be deductible

http://www.irs.gov/publications/p970/ch03.html#d0e3168
http://www.irs.gov/publications/p970/ch06.html#d0e5923

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dpb · Joined: 25 Aug 2007 Posts: 47

removeps-groups@yahoo.com wrote:
> On Feb 23, 4:37 am, martin lynch wrote:
>
>> I'm required to purchase some really expensive camera equipment for
>> residency ...
>
> You can include equipment as part of qualified education expenses ...

But by the time start residency, might not possibly be considered as a
business expense rather than educational???

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removeps-groups · Joined: 09 Dec 2007 Posts: 98

On Feb 23, 2:42 pm, dpb wrote:
> removeps-gro...@yahoo.com wrote:

> > You can include equipment as part of qualified education expenses ...
>
> But by the time start residency, might not possibly be considered as a
> business expense rather than educational???

If he buys his equipment on May 10th, or anytime in the year, and
residency starts July 1, then the equipment is still a qualified
expense as long as it is required to be purchased from the university
as a condition of enrollment.

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dpb · Joined: 25 Aug 2007 Posts: 47

removeps-groups@yahoo.com wrote:
> On Feb 23, 2:42 pm, dpb wrote:
>> removeps-gro...@yahoo.com wrote:
>
>>> You can include equipment as part of qualified education expenses ...
>> But by the time start residency, might not possibly be considered as a
>> business expense rather than educational???
>
> If he buys his equipment on May 10th, or anytime in the year, and
> residency starts July 1, then the equipment is still a qualified
> expense as long as it is required to be purchased from the university
> as a condition of enrollment.

For an qualified educational expense, yes...I'm suggesting if it isn't
purchased from the university as was implied, perhaps it would be a
business expense rather than educational...

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Bill Brown · Joined: 25 Aug 2007 Posts: 104

On Feb 23, 7:37 am, martin lynch wrote:
> Here's the situation:
>
> Graduating on May 10th.
> Begin medical residency on July 1.
>
> I'm required to purchase some really expensive camera equipment for
> residency ($1,000+ worth). Will this purchase be tax deductible? I
> am paying 100% myself (not reimbursed by hospital).
>
> Also, would I be required to purchase the camera after May 10th?
> After July 1? I'd like to purchase it now, as I found a bargain on a
> kit that won't last....
>

You will have an unreimbursed employee business expense reported on
Form 2106 and deductible on Schedule A as a miscellaneous itemized
deduction. There are a number of limits on the usefulness of this
deduction.

First, only the business use percentage of the cost of the equipment
is deductible. Others have mentioned IRC Section179 which would allow
an immediate tax write off in the first year. That is available only
if business use is greated than 50%. If business use falls below 50%
in a later year you would have to recapture (include in taxable
income) much of the original deduction.

Second, total miscellaneous itemized deductions are reduced by 2% of
adjusted gross income. Only the remaining excess reduces taxable
income.

Third, itemized deductions only provide a tax benefit of the total
exceeds the standard deduction for your filing status.

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Bill Brown · Joined: 25 Aug 2007 Posts: 104

On Feb 24, 12:48 am, dpb wrote:
> removeps-gro...@yahoo.com wrote:
> > On Feb 23, 2:42 pm, dpb wrote:
> >> removeps-gro...@yahoo.com wrote:
>
> >>> You can include equipment as part of qualified education expenses ...
> >> But by the time start residency, might not possibly be considered as a
> >> business expense rather than educational???
>
> > If he buys his equipment on May 10th, or anytime in the year, and
> > residency starts July 1, then the equipment is still a qualified
> > expense as long as it is required to be purchased from the university
> > as a condition of enrollment.
>
> For an qualified educational expense, yes...I'm suggesting if it isn't
> purchased from the university as was implied, perhaps it would be a
> business expense rather than educational...
>
He better hope it's a business expense rather than educational. From
the facts of the OP (stated and inferred) there is no tax deduction if
the equipment is an educational expense.

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removeps-groups · Joined: 09 Dec 2007 Posts: 98

On Feb 24, 6:31 am, Bill Brown wrote:

> First, only the business use percentage of the cost of the equipment
> is deductible. Others have mentioned IRC Section179 which would allow
> an immediate tax write off in the first year. That is available only
> if business use is greated than 50%. If business use falls below 50%
> in a later year you would have to recapture (include in taxable
> income) much of the original deduction.

The item is for educational use, not business use, so how does that
impact section 179?

Also, a camera would normally be depreciable as 5 year property. So
if your business use drops to below 50% after 5 years, then is there
anything to recapture?

And fourth, misc expenses on schedule A are subject to AMT.

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Seth · Joined: 25 Aug 2007 Posts: 177

In article ,
removeps-groups@yahoo.com wrote:
>On Feb 24, 6:31 am, Bill Brown wrote:
>
>> First, only the business use percentage of the cost of the equipment
>> is deductible. Others have mentioned IRC Section179 which would allow
>> an immediate tax write off in the first year. That is available only
>> if business use is greated than 50%. If business use falls below 50%
>> in a later year you would have to recapture (include in taxable
>> income) much of the original deduction.
>
>The item is for educational use, not business use, so how does that
>impact section 179?

A medical resident is paid for her work. Therefore, business use.

Seth

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Bill Brown · Joined: 25 Aug 2007 Posts: 104

On Feb 24, 7:59 pm, "removeps-gro...@yahoo.com" email_removed wrote:
>
> The item is for educational use, not business use, so how does that
> impact section 179?

As Seth indicated, being an employee is a trade or business even if
the employee learns stuff.

One more time. If by chance this is an educational activity of the OP
then the OP has NO deduction.

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