You would definitely get a bigger bang for your buck by claiming the amount paid for your malpractice insurance tail as a deduction on your Schedule C instead of as a Miscellaneous Itemized Deduction on the Schedule A. Remember, while professional expenses claimed on the Schdule C are fully deductible, expenses claimed as a Miscellaneous Itemized Deduction are only deductible to the extent they exceed 2% of your income, and then are capped if you are subject to the Alt Min tax.

You have two dynamics in place. Since the tail applies to the income you earned as an employee, it seems like it should be claimed as a Miscellaneous Itemixed Deduction. However, while you are paying the premium, you have no W-2 income, but only independent contractor income. That seems to suggest you might be able to claim this expense on your Schedule C.

So which way should you go with this deduction? It depends on a number of variables, including how aggressive or conservative you want to be with your taxes.

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