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Tax Deductions
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tail insurance question

I have worked for a university health system now for 2 years. As part of my initial employment agreement, they payed my tail insurance which was about 60k. The condition was that this money would be loaned to me initially, and after 2 years of employment, this amount would be forgiven. Now that 2 years has passed and the amount forgiven, it will be placed on my W2 this year as income. Is there any way to deduct this on my taxes as a professional expense? Looking for any way to minimize my tax burden. Thanks!

Re: tail insurance question

Wow, that's a tough one. It's great that the hospital paid your tail insurance already. They left you in a tough tax situation.

Since they are reporting the loan forgiveness as taxable income this year, you should be able to deduct the premium paid for the tail. The problem is that as an employee, you'll write off the cost of the insurance as a miscellaneous itemized deduction which is only deductible to the extent your total miscellaneous deductions exceed 2% of your income. And then, if you are subject to the Alternative Minimum Tax (AMT), you end up daving no federal income taxes.

I would suggest that you find out whether you get a better tax break by claiming the premium on the tax return for the year the premium was paid by the loan, or the year the loan was forgiven. It seems that you could probably argue that the premium could be deducted in either of these years. And there is still time to amend your return from two years ago.

Don't forget about using this deduction to save you some state taxes. Many states do allow peoplle to claim the same itemized deduction allowed on your federal return, and there isn't the AMT in many instances.

So I think speaking with a tax specialist who works with many doctors in your state might make sense based on your current situation.

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