Can physicians deduct license fees, board exams and CME?

For federal income taxes, it depends on how the physician is paid. Physicians who are employees and receive a Form W-2 generally cannot deduct what they pay out of pocket for medical license renewals, board certification exams or continuing medical education (CME). Physicians who work as independent contractors and receive a Form 1099 generally can deduct those costs as business expenses, within Internal Revenue Service (IRS) rules on which education qualifies.

The employee side of that rule has applied since 2018, and Congress made it permanent in 2025.

Why can't employed physicians deduct license fees or CME?

Before 2018, employees who itemized could deduct unreimbursed job expenses as miscellaneous itemized deductions, to the extent those deductions exceeded 2% of adjusted gross income. The Tax Cuts and Jobs Act of 2017 suspended them for tax years 2018 through 2025.

The One Big Beautiful Bill Act, signed into law July 4, 2025, according to an IRS fact sheet, removed that end date. Section 67 of the Internal Revenue Code now states that no miscellaneous itemized deduction is allowed "for any taxable year beginning after December 31, 2017," with no expiration. The 2025 law carved out expenses for K-12 educators and coaches starting in 2026. It created no comparable exception for physicians.

The instructions for IRS Form 2106, the employee business expense form, now limit its use to four groups: Armed Forces reservists, qualified performing artists, fee-basis state or local government officials and employees with impairment-related work expenses. A W-2 physician outside those groups has no federal deduction for license renewals, board fees, CME tuition or conference travel paid out of pocket, whether or not they itemize. IRS Tax Topic 513 on work-related education lists the same groups, plus self-employed individuals.

What can self-employed 1099 physicians deduct?

Independent contractors report business income and expenses on Schedule C. The Schedule C instructions for line 23 include "licenses and regulatory fees for your trade or business paid each year to state or local governments."

CME falls under the IRS rules for work-related education. According to Tax Topic 513, self-employed individuals can deduct education on Schedule C if it maintains or improves skills needed in their present work, or if an employer or the law requires it to keep their present salary, status or job. Even education that meets one of those tests doesn't qualify if it is needed to meet the minimum educational requirements of the current trade or business, or if it is part of a program that qualifies the taxpayer for a new trade or business. Deductible costs include tuition, books, supplies, lab fees and certain transportation and travel.

The Treasury regulation behind those tests, 26 CFR 1.162-5, uses physicians in its examples. A general practitioner who takes a two-week course reviewing new developments in several specialized fields of medicine can deduct it. So can a practicing psychiatrist who trains in psychoanalysis, because the training maintains existing skills and does not qualify the psychiatrist for a new business. The regulation also lists "refresher courses or courses dealing with current developments" as deductible education.

Travel to a CME conference follows the same regulation. When a trip is primarily for deductible education, travel, meals and lodging are deductible, while expenses for personal activities are not. Whether a trip is primarily personal turns largely on how much time goes to personal activities compared with the coursework. Meals carry their own limits, covered in IRS Publication 463.

Schedule C deductions also reduce net earnings from self-employment, the base for self-employment tax. That tax runs 15.3%: 12.4% for Social Security, which stops at an annual wage base, and 2.9% for Medicare.

Are board certification exam fees tax deductible?

No IRS publication or form instruction addresses board certification exams by name. For a physician with self-employment income, the fees fall under the same two questions from 26 CFR 1.162-5 that govern CME: Does the exam maintain or improve skills used in the physician's current work? Or is it part of meeting the minimum requirements for that work, or of qualifying for a new trade or business?

In Sharon v. Commissioner (1976), the U.S. Tax Court held that an attorney's bar review courses were nondeductible personal education and that the fees he paid to obtain his license to practice were capital expenditures, recovered over his life expectancy instead of deducted in the year paid. The 9th U.S. Circuit Court of Appeals affirmed in 1978. The case involved a lawyer, but the regulation it applied covers every profession.

A first-time board exam and a recertification exam can come out differently under those tests, depending on the facts. Physicians with 1099 income who are weighing either one can take the regulation's two questions to a tax professional. For W-2 physicians, the question is moot on the federal return, because none of these costs is deductible.

What happens when an employer pays for CME or licenses?

Under 26 CFR 1.62-2, amounts an employer pays under an accountable plan are excluded from the employee's income, are not reported as wages and are exempt from withholding. An accountable plan has three requirements: the expense has a business connection, the employee substantiates it and the employee returns any excess. An IRS information letter from 2008 restates the same treatment.

Payments that fail those requirements, such as a flat allowance paid without receipts, fall under a nonaccountable plan. Those amounts count as income, are reported as wages and are subject to withholding and employment taxes.

An employer can also pay a cost directly. IRS Publication 15-B treats property or services as a working condition benefit to the extent that, "if the employee paid for it, the amount paid would have been allowable as a business or depreciation expense." Working condition benefits are exempt from income tax withholding and from Social Security, Medicare and federal unemployment taxes.

Employed physicians can ask their employer's payroll or benefits office whether a CME allowance is paid as an accountable reimbursement or as taxable wages.

What if a physician has both W-2 and 1099 income?

A physician who is employed full time and also moonlights or works locum tenens shifts as an independent contractor files Schedule C for the contract work. Expenses of that business are deductible there, and expenses of the employee job are not. IRS publications do not spell out how to divide a single cost, such as a state license, that both jobs require. That allocation is a question for a tax professional.

Physicians who are partners in a practice receive a Schedule K-1 rather than a W-2 or 1099. The Schedule E instructions allow partners to deduct unreimbursed partnership expenses "if you were required to pay these expenses under the partnership agreement," limited to trade or business expenses under Section 162.

To decide whether a worker is an employee or an independent contractor, the IRS looks at the whole relationship, weighing behavioral control, financial control and the type of relationship. Either the business or the worker can file Form SS-8 to ask the IRS for an official determination.

Are there any tax breaks left for W-2 physicians?

The Pennsylvania Department of Revenue lets employees deduct unreimbursed business expenses, including professional license fees and certain educational costs, on PA Schedule UE, with documentation and a letter from the employer. The California Franchise Tax Board's Schedule CA (540) instructions state that "California law does not conform" to the federal suspension and direct filers to prepare Form 2106 using California amounts. New York's Form IT-196 instructions allow state itemizers to deduct unreimbursed employee business expenses whether or not they itemized federally. Rules differ in other states, and a physician's state revenue department is the place to confirm them.

On the federal return, the Lifetime Learning Credit can apply to "courses to acquire or improve job skills" taken at an eligible educational institution. It equals 20% of the first $10,000 in qualified expenses, up to $2,000 per return. The credit phases out between $80,000 and $90,000 of modified adjusted gross income, or between $160,000 and $180,000 on a joint return, and married couples filing separately can't claim it.

The IRS education credits page says the law requires the student to have received Form 1098-T from the institution, but Publication 970 allows the credit without one when the institution isn't required to issue it, as with courses that award no academic credit, if the taxpayer can substantiate the payment. The IRS Interactive Tax Assistant checks eligibility question by question.

Where can physicians check the rules for their own situation?

• Tax Topic 513, Work-Related Education Expenses explains who can deduct education and the qualifying tests.
• IRS Publication 970, Tax Benefits for Education covers the business deduction for work-related education and the education credits.
• The instructions for Schedule C show where self-employed physicians report licenses and other business expenses.
• The instructions for Form 2106 list the narrow groups of employees who can still deduct job expenses.
• IRS Publication 15-B explains how employer-provided benefits, including working condition benefits, are taxed.
• A physician's state revenue department can confirm state-level deductions for employee expenses.

Frequently asked questions about physician license, board and CME deductions

Can a W-2 physician deduct CME on a federal tax return?

No. Unreimbursed employee expenses, including CME, have not been deductible on federal returns since 2018, and the One Big Beautiful Bill Act made that permanent starting with the 2026 tax year. Only four narrow groups of employees listed in the Form 2106 instructions can still deduct job expenses, and physicians generally fall outside them.

Can a 1099 physician deduct CME?

Generally, yes. Self-employed physicians can deduct work-related education on Schedule C when it maintains or improves skills needed in their current work, according to IRS Tax Topic 513. Education needed to meet the minimum requirements of the profession, or that qualifies the physician for a new trade or business, does not qualify.

Is a medical license renewal tax deductible?

For self-employed physicians, the Schedule C instructions list licenses and regulatory fees paid each year to state or local governments as deductible on line 23. For W-2 physicians, a license renewal paid out of pocket is not deductible on the federal return, though some states, including Pennsylvania, allow it on the state return.

Are board certification exam fees deductible for doctors?

The IRS has not addressed board exams by name. For physicians with self-employment income, the fees fall under the general rules in 26 CFR 1.162-5, which turn on whether the exam maintains or improves current skills or instead meets minimum requirements or qualifies the physician for a new trade or business. W-2 physicians cannot deduct them federally either way.

Is a CME stipend from an employer taxable?

It depends on how it's paid. Reimbursements under an accountable plan, which requires a business connection, substantiation and return of any excess, are not income and are not reported as W-2 wages. A flat allowance paid without that accounting is treated as wages and taxed.

Did the One Big Beautiful Bill Act bring back the deduction for unreimbursed employee expenses?

No. The law, signed July 4, 2025, removed the 2025 end date from the suspension, so Section 67 of the tax code now bars miscellaneous itemized deductions for every tax year beginning after Dec. 31, 2017. It added an exception for K-12 educators and coaches, not for physicians.