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8 crazy tax deductions
Did you hear the one about the shaving razor deduction? Or the lingerie model’s tax-deductible kitchen renovation? Or the proud parents who creatively included their children’s annual incomes on their joint tax return?
Pull up a bar stool and pour yourself a stiff one; it’s time once again for Bankrate’s annual 8 crazy-but-true taxpayer attempts to dodge, shirk and limbo under their constitutional obligation to help keep our country afloat.
This year’s edition of groaners for grownups comes courtesy of some of America’s finest certified public accountants, who somehow manage to stifle a Starbucks spit-take when they hear the logic behind some decidedly questionable client tax deductions.
Past Bankrate crazy tax editions exposed haywire attempts to claim medical or business deductions for everything from breast enhancements and Harley-Davidsons to charitable sperm donations and Rolex “time monitoring systems.” One cash-strapped shopkeeper even tried to write off his own arsonist!
Warning: Do not try to slide zingers like these past the Internal Revenue Service. Serious consequences may result if you fail to file, falsely file or otherwise concoct your own alternate reality on your annual return.
All aboard the crazy tax train! Here come Bankrate’s 8 craziest tax deductions, 2016 edition!
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Good thing he didn’t see ‘Gravity’
Sometimes popular films take on a life of their own, and occasionally even inspire the odd tax dodge. Larry Pon, a CPA in Redwood City, California, remembers when just such a star-struck client waltzed into his office.
“The client had seen the movie, ‘Shall We Dance?'” he recalls. “A character in the movie said his doctor forced him to take dance lessons to lose weight. This client thought that was good tax advice, so he wanted to deduct his ballroom dancing costs as a medical expense.”
Pon advised the gentleman to abandon that move, lest he find himself in an Argentine tango with the IRS.
“Moral of the story: Please don’t get tax advice from Hollywood,” Pon advises.
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That’s no way to shave your taxes
Sometimes the line between deductible and nondeductible can be razor-thin. Then again, sometimes it’s just outright laughable, as CPA Sean Duncan of Frisco, Texas, found out recently.
“I had a prospect tell me, ‘My husband’s a fireman and all the other guys at the station say he can write off his shaving equipment because they have to be clean shaven,'” he recalls.
Hmm, this sounds familiar. Ah, yes! One policeman tried to trim his taxes the same way by writing off his flattop haircuts back in our 2011 edition.
Duncan’s advice against such a move was equally clear-cut.
“I said, ‘OK, No. 1: No.
“No. 2: Do you really want to keep all the receipts for every stinking razor? That doesn’t even make sense,'” he recalls. “She said, ‘Well, the guys at the station do it,’ and I said, ‘Well, tell the guys in the station to get a better adviser because that’s just silly.'”
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Someone needs to come up for air
One evergreen, if ill-advised, tax dodge involves trying to deduct the cost of a swimming pool, tennis court, indoor gym, home spa or even a basketball court as a medical or business deduction — at least without a solid prescription or business reason to back it up.
New Jersey CPA Gail Rosen has sniffed out her share of strange hobby-smelling “mandatory” tax dodges during her 35 years in practice, but one client recently proposed a novel twist on this otherwise risky proposition.
“The client said, ‘My daughter is taking advanced scuba diving classes, and we wondered if the tax exemption would apply there if we were to cash out bonds to pay for the classes,'” Rosen recalls.
“I think you know the answer to that question,” she chuckled.
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Speaking of crazy parental strategies …
New Jersey CPA Christopher Arun Kumar recently encountered a bold tax move only a busy parent could dream up.
“While reviewing the tax returns of a client, I found that the income amount reported was significantly higher than the current year. Further investigation revealed that the husband and wife taxpayers had reported their dependent children’s W-2 income on their tax return,” he recalled.
“The explanation given by the taxpayer was, he wanted to avoid preparing 3 separate federal tax returns, 1 for himself and 2 separate tax returns for his 2 children, so he combined all their income into 1, which was incorrect.”
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Could we interest you in a nice skull and crossbones?
Body art is another costly indulgence that some taxpayers just can’t resist asking Uncle Sam to help cover. Sean Duncan, for one, got closer than a CPA may prefer to one client’s proposed write-off.
“I had a client show me his tattoo. This guy had a full owl across his chest, which was this crazy, monstrous thing. It was also not deductible. He is an embalmer, so there is really no correlation between an owl across your chest and embalming dead bodies,” Duncan says.
Still, Duncan could appreciate the temptation to take body art as a business write-off.
“He just needed a different tattoo,” he chuckled. “There’s always the marketing opportunity. I should do my logo on my back and walk around the pool and get all kinds of leads that way.”
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Unfortunately, the dog ate its 1099
Who doesn’t love our canine companions, right? For most dog owners, their pet’s unconditional love, constant companionship and full-on, nonstop merrymaking far outweigh the cost of feeding and caring for their 4-legged family members.
That said, there always seem to be a few humans who insist on exploring the most doggone tax deductions, writing off Rover’s doggie day care, food, vet bills and even air travel as legitimate business expenses in exchange for their dog’s security, landscaping and even breeding services.
St. Louis CPA Joe Eckelkamp recalls one client who cooked up an ingenious, if ill-fated, way to take a bite out of his taxes.
“He sought to write off his dog and its maintenance expenses because it was used as ‘part of our holistic patient treatment’ at a chiropractor’s office — because they brought the dog to the office every day,” he recalls.
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Need a brand-new oven to cook those books?
Those who work from home sometimes become a tad intoxicated with their ability to write off their workspace and business-related accoutrements as legitimate home office expenses. But one of Sean Duncan’s clients, a clothing saleswoman/lingerie model, got a little carried away recently.
“I’m working on her QuickBooks return and there are just too many things popping up in there that are weird. She managed her own books, so I called a meeting to go over it,” he recalls.
In going through the client’s home office deductions, Duncan flagged a new Sub-Zero refrigerator.
“I asked about it and she said, ‘Oh, I keep the drinks in there if somebody comes by my home office for a meeting,'” he recalls. “I said, ‘But this refrigerator is in your kitchen, right? You can’t take that; it’s the same place you keep your pizza and your kids’ food.’ I ask how many times someone comes by her house. ‘Oh, 4 or 5 times a year.’ I said, ‘Absolutely not.'”
Duncan also nixed her new granite countertops “where they would stand and have those drinks 4 or 5 times a year.”
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To deduct a vehicle, you’d better mean business
Another of life’s major expenses — motor vehicles — also proves tempting as a potential tax deduction, especially for those non-accountants who dare to cross the line regarding legitimate business use of a personal vehicle.
Larry Pon encountered one such reckless would-be tax dodger and quickly steered clear.
“A prospective client had a foundation,” he recalled. “I was reviewing the balance sheet on her foundation and asked her about a $68,000 asset.”
That asset turned out to be a very nice car the woman uses to drive to her volunteer events.
“I did not take her on as a client,” Pon says.