Tax Read Time: 3 min

Tax Deductions You Won't Believe

While Americans are entitled to take every legitimate deduction to manage their taxes, the Internal Revenue Service (IRS) places limits on your creativity. Here are some examples of deductions from the IRS that were permitted and some that were, well, too creative.¹

Creative Deductions that Passed Muster

Usually a child’s school-related costs are not deductible. However, one taxpayer was allowed to deduct the cost of travel, room, and board as a medical expense for sending a child with respiratory problems to a school in Arizona.

Pet food typically doesn’t qualify as a write-off, except in the case where a business owner successfully argued that it was a legitimate expense to feed a cat protecting their inventory from vermin.

Does your child have an overbite? If so, you may find that the IRS is okay with a medical deduction for the cost of a clarinet (and lessons) to correct it.

A deduction for a swimming pool won’t float with the IRS, except if you have emphysema and are under doctor’s orders to improve breathing capacity through exercise. The deduction, however, was limited to the cost that exceeded the increase in property value. And yes, ongoing maintenance costs are deductible as medical expenses.

Deductions that Were Too Creative

The cost of a mink coat that a business owner bought for his wife to wear to dinner for entertaining clients was denied even though he claimed it was an integral part of dinner conversation and provided entertainment value.

Despite having dry skin, one taxpayer was denied a deduction for bath oil as a medical expense.

Losses associated with theft may be deductible, but one taxpayer went too far in deducting the loss of memories when her photos and other life souvenirs were discarded by her landlord.

One business owner reported an insurance payment as income, but then deducted the cost of the arsonist as a “consulting fee.”

Don’t expect taxpayers to pay for enhancements to self-image. Just ask the ballerina who tried to deduct a tummy tuck or the woman who tried to write off her Botox expenses.

Creativity is not something that the IRS typically rewards, so you should be careful testing the limits of its understanding. Seek the counsel of an experienced tax or legal professional for specific information regarding your situation.

1. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

 

Related Content

Buying vs. Leasing a Car

Buying vs. Leasing a Car

Whatever your relationship with your car, it may eventually come time for a new one. Familiarize yourself with your options.

Managing the Risk of Outliving Your Money

Managing the Risk of Outliving Your Money

Steps to help you sustain and grow your retirement savings.

The Half Million Dollar Baby

The Half Million Dollar Baby

The true cost of raising a child may be far more than you expect.

 

Have A Question About This Topic?







Thank you! Oops!

Mortgages in Retirement

Explore the benefits and drawbacks to paying off your mortgage prior to retirement with this article.

Keep Your Umbrella Handy

Umbrella liability can be a fairly inexpensive way to help shelter current assets and future income from the unexpected.

Critical Estate Documents

Sound estate management includes creating financial and healthcare documents. Here's an inside look.

View all articles

Capital Gains Tax Estimator

Use this calculator to estimate your capital gains tax.

Potential Income from an IRA

Estimate your monthly and annual income from various IRA types.

Self-Employed Retirement Plans

Estimate the maximum contribution amount for a Self-Employed 401(k), SIMPLE IRA, or SEP.

View all calculators

5 Smart Investing Strategies

There are some smart strategies that may help you pursue your investment objectives

Your Cash Flow Statement

A presentation about managing money: using it, saving it, and even getting credit.

Managing Your Lifestyle

Using smart management to get more of what you want and free up assets to invest.

View all presentations

RE: Retirement

How does your ideal retirement differ from reality, and what can we do to better align the two?

When Do You Need a Will?

When do you need a will? The answer is easy: Right Now.

Saving for College 101

Here’s a crash course on saving for college.

View all videos