March 23rd, 2011 Amanda Han CPA (Taxloopholes.com Tax Strategist)
I think most of you will agree that us CPA’s get a bad rap. You know what I am talking about…words commonly associated with accountants such as nerdy, boring, number-crunching, pocket protector wearing…you get the idea.
Well, today our goal is to change all that. We want to make you laugh while you learn.
One of the most common questions that we get all the time is “What can I deduct on my tax return?”
Well, if you are a business owner, you can deduct just about anything that is incurred under the IRS definition of “ordinary and necessary to the production of income.”
As such, most of the business and financial world loves this definition because this definition allows our minds to go wild with imagination in terms of what qualifies as legitimate business expenses – i.e., a tax deduction.
Mind you, just because the IRS left the definition of a legitimate business expense open for interpretation doesn’t mean they aren’t watching. If you can’t prove your deduction has merit, or you don’t have the paperwork to back up the expense, it won’t be allowed.
Recently we came across a collection of 10 of the most hilarious and unlikely tax deductions by intuit you’ll ever see – and we just have to share them with you!
- Pet food. We’ve told many people at seminars about the junk yard owner who was allowed to write off the cost of his dog as an expense. But this junkyard couple went one step further. Instead of going to the trouble of owning a dog, this couple fed the feral cat colony living in the junkyard. Their rationale was that the cats ate the rats, snakes and other rodents on the property, making the place safer for customers. The Tax Court agreed, and allowed the deduction.
- Wigs. If you like to play dress-up, you may be in luck with getting some tax deductions. If wearing wigs and costumes are ordinary and necessary for your business, then it is likely that you can write it off for taxes. For example, a professional poker player may be able to deduct his wigs and glasses as part of his business expense.
- Moving the family pet. Most people know that if you change jobs and moving is a part of the bargain, you may be able to deduct your moving costs. But did you know you can also deduct the cost of moving your dog, cat or other pet from your old residence to your new home. Although you pet may disagree, the Tax Court considers them just another part of the furniture.
- Body oil. A pro bodybuilder used body oil to make his muscles glisten in the lights during his competitions. The Tax Court ruled that he could deduct the cost of the oil as a business expense. But the Tax Court disallowed his deductions for special vitamins and buffalo meat he used as strength and muscle enhancers. I guess as far as the Tax Court is concerned, beauty really is only skin deep.
- A private airplane. Rather than drive five to seven hours to check on their rental condo or be tied to the only daily commercial flight available, a couple bought their own plane. The Tax Court allowed them to deduct their condo-related trips on the aircraft, including the cost of fuel and depreciation for the portion of time used for business-related purposes, even though these costs increased their overall rental loss. The possibilities here are endless …
- Babysitting fees. Fees paid to a sitter to enable a parent to get out of the house and do volunteer work for a charity are deductible as charitable contributions, according to the Tax Court, even though the money didn’t go directly to the charity.
- Breast augmentation. Here’s another famous deduction I’ve talked about over the years. A stripper wanted to write off her breast implants, claiming they helped her to earn additional income and so were a part of her business. The Tax Court agreed, finding her implants to be really just another stage prop. But the happy ending turned tragic when our taxpayer tripped on stage during a routine and ruptured one of her implants.
- Landscaping. A Schedule C business owner who regularly met clients in an office in his home was permitted to deduct part of the costs of landscaping the property. He was taking a percentage deduction for his home office, and the Tax Court agreed that this same percentage should be expanded to include the exterior of the property – including the landscaping. The Court also allowed a deduction for part of the costs of lawn care and driveway repairs.
- Free beer. In a fantastic demonstration of poor choices, a gas station owner gave his customers free beer in lieu of trading stamps. Ethical, legal and moral questions about alcohol and driving aside, as far as the Tax Court was concerned the cost of the beer was a legitimate and deductible business expense.
- Swimming pool. A taxpayer with emphysema put in a pool after his doctor told him to develop an exercise regime. He swam in it twice a day and improved his breathing capacity. Turns out he swam in the pool more than his family did. The Tax Court allowed him to deduct the cost of the pool (to the extent the cost exceeded its added value to the property) as a medical expense because it’s primary purpose was for medical care. The costs of heating the pool, pool chemicals and a proportionate part of insuring the pool area were treated as medical expenses.
And as an added bonus….
- A girlfriend. The owner of several rental properties hired his live-in girlfriend to manage them. Her duties included finding furniture, overseeing repairs and running his home. The Tax Court let him deduct $2,500 of the $9,000 he paid her as business expenses.
So let your imagination go wild! Connect with us today and let’s have some fun while you get your Tax Savings Plan in place for 2011 and beyond. Of course, for your Complimentary tax consultation, give us a call at (877) 975-0975 or schedule a tax consultation with on via the web