Most nurse practitioners have had a “CME vacation” using that lovely CME allowance provided by your employer (if you did not negotiate a CME allowance into your compensation you are getting screwed and need to get on that by the way.) You pick an interesting course and an awesome location, pay for everything up front, then submit all your receipts to your employer in hopes they will reimburse you fully for it. A few weeks go by and you get that fat $3,000 check in the mail. You do your happy dance. Such a beautiful thing! It is one of the perks of being a medical provider.
But what if I told you that you could have as many “CME vacations” as you wanted if you owned your own business? Yep, that is right my friends.
You see, when your employer reimburses you for your CME it is a tax-deductible expense for them. They use their tax-free revenue to reimburse you for your CME expense.
You know what the problem is though? That the money you used to pay for that CME vacation was already taxed to begin with if you are a W2 employee. You used taxed money to pay for a CME, then your company reimbursed you for it. So, the $3,000 you used on the CME was more like $4,000-$4,500 if you factor in the taxes you paid before you were issued your paycheck to begin with.
This is another reason that you need to start a side business as soon as possible. We will keep numbers uncomplicated for simplicity purposes here. Let’s say you make $3,000 in your side business one month and decide you want to go to Costa Rica for 5 days. Well if you go for CME that vacation now has turned into a business trip and became a totally tax-deductible expense because you need this knowledge to operate your business, right?
Say the vacation costs $3,000. You can pay for that vacation TAX FREE through your business. You just saved $1,000-$1,500 in taxes because you used pre-tax money from your business. This is 100% legal and represents another tax advantage of having your own business.
This is the main perk of having a side business as a nurse practitioner. This side business provides you many tax incentives that are totally legal. Instead of paying yourself the $3,000 of last month’s revenue to go on vacation, which after taxes would be more like $2,000, you have a vacation that also entails some business with it. Therefore, you use the tax free $3,000 of business revenue to go on a business trip. This is how you reward yourself for being a hard working business owner in our great country.
We must have a certain amount of CME hours every year to maintain licensure. It is a VITAL portion of our livelihood. Luckily for us a lot of these CME courses are in Costa Rica, Jamaica, Miami, etc… It is a legitimate business expense.
So, go on a few CME vacations a year as a proud and productive nurse practitioner business owner. I sure as hell do!
Your blog has been so inspiring to me. I will be complete with my FNP degree in May. I can’t wait to eventually start my own business. Thanks for all the solid advice. I love your enthusiasm. Karen
So, does this apply for independent contractors? I work at an UC but get no CME perks.
Are you a w-2 employee or do you get a 1099? If you get a 1099 as an independent contractor you can definitely claim your vacation!
Absolutely! If you are an independent contractor being paid through a 1099 you should be taking full advantage of the pre-tax dollars. See the 1099 article.
Your blog has been an eye opener and an inspirational for me as Nurse Practitioner. Just by reading form our pearls of knowledge and business education I’m in a process of opening my own business . Do you have any toughs and ideas to overcome my fears and anxiety please.
Push through them. Anxiety and fear is the primitive part of your brain trying to talk you out of a minimal risk. Tell that part of your brain, F*CK YOU! Move past it, stay strong, and open that business. The best way to overcome the fear of starting a business is to literally click a button and form that LLC.
Justin, can we claim expenses for our spouse and child as well? 😉
Only if they are employed by your LLC. Hey, you are the CEO of the LLC after all. You make the decisions. Don’t you need a secretary and a child model for your business cards? 😉
“So, the $3,000 you used on the CME was more like $4,000-$4,500 if you factor in the taxes you paid before you were issued your paycheck to begin with.”
It was a dollar for dollar exchange.
I was taxed on that income whether I used it for reimbursable CME, hookers in Vegas for my little brother with Down’s Syndrome, or just use it to invest in a three-ETF portfolio.
WRONG. If you pay for your CME vacation with after tax dollars vs pre tax dollars you loose money. CME is a 100% tax deductible expense through your business. Your W2 employer simply reimburses you on what you spent, which is after tax dollars. This is another reason you need a side business which is the entire point of the article.
Justin – can you address doing a virtual conference? Let’s say I want to travel to the beach, spend the weekend doing a virtual conference, but then can I expense the travel?
Sure you can do that. All the same principles apply as discussed in the tax course for business travel.