Nine Unusual Tax Deductions People Legally Have Taken or May Take
You might be surprised to learn about some of the tax deductions people have claimed on their tax return, and with what they got away! Remember, the difference between a tax deduction and a tax credit is simple: a tax deduction lowers your taxable income, where a tax credit (such as energy tax credits, for example) lowers your tax liabilities dollar for dollar.
Here are some unusual tax deductions real people have been able to claim – do they spark any ideas for new deductions you could prepare to claim this coming tax year?
- Vacationing in Paradise
You can write off the expense of a business convention held in Bermuda, Barbados, Costa Rica, Dominica, Dominican Republic, Grenada, Honduras, Jamaica, Trinidad, Tobago, Canada and Mexico. There does not need to be any particular reason to have the business meeting in paradise to qualify in most cases. Remember, just because you can deduct it doesn’t mean it makes sense from a business perspective because it is a deduction not a tax credit.
- Swimming for Rehabilitation Purposes
If your doctor tells you that you require more exercise and that swimming is a good way to get it, you could possibly deduct the cost of a new swimming pool (and the chemicals, heater, cleaning and upkeep!) as a necessary medical expense at tax time. A man with emphysema succeeded with a swimming pool medical expense deduction on his tax return. This is a gray area deduction, because the IRS will not approve this in most cases. You will need to prove that your doctor prescribed it and be able to show medical documentation and reasoning. Moreover, if other individuals (family members) are using the pool, your deduction would be in proportion to the usage for medical rehab. Thus, if six members of your family use it, then your deduction percentage on it would be 1/6. Furthermore, the IRS has a history of only approving small simple pools and will not let you deduct accessories that are not medically necessary with the pool (water slide, diving board, pool patio, etc). Lastly, you must lower the deduction by the amount that the pool increased the value of your home. Therefore, the deduction is not that large and normally will lead to an audit (so be prepared to defend yourself).
- Breast Pumps – A Win for Women This Year
This tax deduction may not be considered unusual, but until this year, the IRS considered a breast pump to be a piece of equipment for feeding and not a piece of medical equipment. Therefore, mothers who had pre-tax savings accounts such as HSAs or FSAs, could not use any pre-tax money to purchase a breast pump because it was not classified by the IRS as a medical device. Recently, after the efforts of a few members of Congress and a few organizations, the IRS changed its policy or classification on breast pumps to medical equipment which means that, now, they are a tax deductible medical expense. For women without a HSA or FSA, breast pumps will be tax deductible if the total cost of medical expenses is greater than 7.5% of AGI (adjusted gross income). See publication 502.
- Personal Jet Expense for Long Distance Landlords
A couple owned a rental condo located 7 hours by car from their own home. They got tired of driving that far to check on the home, and did not like the confinements of booking a flight according to the schedule at their local airport. The couple decided to buy their own jet in order to make the trip to and from their rental condo whenever it suited them. They were able to deduct the expenses for running the jet, as part of their rental condo expenses. Honestly, even with the tax deduction, is the plane really worth it?
- Deducting the Cost of the Babysitter
Ok this may sound crazy, but you legally can deduct the babysitter as long as you are paying the babysitter in order to do something for charity (e.g. work in a soup kitchen) during that time. Individuals have taken this deduction, but again, like with any unusual tax deduction, be prepared to defend it.
- Deducting the Cost of Pet Food
Yes, a couple tried to deduct the cost of pet food for cats, and took it to US tax court. Basically, the couple owned a junk yard that had all types of animals living in it due to the fact that it was an area used for the collection and resale of garbage. The junk yard attracted many types of unwanted animals from snakes to mice, making the property unsafe for potential customers sifting through the scraps. The couple argued that the cat food they provided to the junkyard’s cats helped keep the unwanted animals out of the junkyard. The attorneys for the IRS backed down after they realized that the deduction was unusual, but legitimate.
- Deducting the Cost of Landscaping
A businessman with a home office tried to deduct a percentage of his landscaping costs on his personal residence including other repairs to his property. His argument was that since clients visit him at his home office (as part of the process of doing business) that part of the landscaping costs should be tax deductible. The IRS challenged this deduction, and the case landed up in a US tax court. The court agreed that the deduction was valid.
- BodyBuilder Oil
A professional bodybuilder tried to deduct buffalo meat, as well as tanning oil on his tax return. The IRS disagreed, and he took the case to tax court. The court ruled that the buffalo meat was not tax deductible. However, the tanning oil was because it improved his look in competitions. The Tax Court ruled that the oil was tax deductible because it was mainly sold only through bodybuilding publications and not through normal marketing channels.
- Breast Implants Deduction
We have all heard this story and the deduction is no doubt unusual. A woman who calls herself Chesty Love had a breast enhancement to increase her tips as a professional stripper. She increased her chest to size 56-FF, and wrote the cost of the surgery off on her taxes as a business expense. The write-off was allowed by the IRS after she sued and won in tax court in 1994, as it was considered a “stage prop” essential to her business. Chesty Love showed that she increased her income with her breast enhancement investment. Moreover, the court agreed that obviously the additional 20 pounds she was carrying around now offered no personal gain…if anything just back pain.
Matt Robinson is an accountant and part-time personal finance blogger. Matt contributes regularly to TaxDebtHelp.com’s tax blog, a website that provides tax debt resolution services, information, and guidance for taxpayers looking to resolve serious tax problems.