First the good news. One of our NYC psychiatrist clients had his deduction for psychoanalysis survive an IRS audit. So as long as the analysis is a required part of your training, I would say that the money you spend on it is deductible as a professional expense.

You bring up an interesting point, however. If you pay for a portion of your analysis with pre-tax dollars through your employer's flexible spending account, aren't you saying that the analysis is a medical expense instead of a professional expense?

On one hand, I would tend to agree. And you need to remember that the IRS is very "form over substance" oriented, so paying for your analysis through your FSA at work may be enough for the IRS to consider reclassifying the money you spent as a medical expense, which are only deductible to the extent they exceed 7.5% of your income.

However, there are times when certain tax breaks fall in more than one bucket within the tax code. I think the argument you would make is that even though the analysis is really a professional expense, you took advantage of the fact that the FSA allowed you to pay for some of it with pre-tax dollars. Plus, you made sure not to deduct any of the analysis that you paid for through the FSA.

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