Some taxpayers love to test the IRS boundaries on allowable deductions. Consider the business owner who had his store burned down and tried to deduct the arsonist's payment as a "consulting fee", or the businessman who amortized the value of his own life and tried to deduct it as a business expense.
While those efforts rightfully failed, the Tax Court has upheld some other strange deductions throughout the years. Here are a few of the more eyebrow-raising examples.
- Free Beer – One gas station owner managed to deduct the cost of beer used as a free promotional item to attract customers. (Hopefully customers didn't consume it while pumping gas.)
- Body Oil – A bodybuilder argued that the body oils he used in competitions were a legitimate business expense. The IRS agreed with his premise, although they disallowed his vitamin supplements. We won't even try to assess the logic involved.
- Clarinet Lessons – In one case, expenses for a clarinet and clarinet lessons were allowed as medical expenses. According to a 1962 case, playing the clarinet can help correct a child's overbite because of the typical positioning of the clarinet in the mouth.
- Breast Implants – Cosmetic surgery may be deductible if you can argue that it's a legitimate business expense. A stripper was allowed to write off the cost of her breast implant operation under the premise that it was a business expense that allowed her to increase her income. Enough said.
- Guard Animals – The Tax Court allowed cat food expenses to be deducted for a "guard cat" that kept the owner's junkyard free of rats and snakes. Choose your guard animal wisely, as it's hard to justify expenses for a guard armadillo or giant panda.
- Addiction Treatment – Some expenses associated with addiction treatment, such as inpatient treatment for drug/alcohol addiction or programs to quit smoking, are tax deductible as medical expenses.
- Charitable Work – You may be able to deduct childcare costs incurred while you perform charity work for a non-profit – but it's unclear whether the new tax laws will allow this for tax year 2018 and beyond.
- Landscaping – Landscaping, lawn care, and driveway repair expenses may be deductible if you are a sole proprietor who regularly meets with clients in a qualified home office. The deduction is in proportion to the percentage of the home's area that is used strictly for business.
- Breast Pumps – Breast pumps and other supplies that help new mothers with lactation and breastfeeding may be deductible, according to a 2011 IRS Announcement.
- Swimming Pool – One taxpayer was able deduct some costs associated with his home swimming pool because it was part of his exercise routine to battle the effects of emphysema. Logically, this could extend to other healthy-lifestyle expenses that have medical approval.
- A Girlfriend – It's probably not what you're thinking. An owner of multiple properties hired his live-in girlfriend to manage them. Of the $9,000 he paid to his girlfriend, $2,500 was allowed as a legitimate business expense.
It may be more difficult to get some of these deductions through in 2018. The recent Tax Cuts and Jobs Act (TCJA) was designed to steer people toward taking the standard deduction and away from itemized deductions. However, the TCJA did remove the overall limit on itemized deductions, and every valid deduction counts.
If you think you have an unusual tax deduction that might save you money, seek the advice of a qualified tax professional – and remember, if arson is involved, it belongs in court, but not Tax Court!
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