Crazy Tax Deductions Aren’t Usually Correct

By Jeffery Levine, IRA Technical Expert  
Follow Me on Twitter: @IRAGuru4EdSlott

With less than two weeks to go in tax season, accountants across the country are putting in the long hours and nights that are so often required. With 10, 12, 16+ hours a day the norm, it can be easy to go a little loopy. One way to help keep one’s sanity through the process is to try and inject a little humor now and then. Cue ridiculous tax deductions people try and claim…

Most of the time, people come into the office with legitimate expenses that qualify as deductions, but every once in a while you see an expense a client wants to write-off and you can only muster a “You want to deduct what!?” Sometimes the person may simply be trying to beef-up expenses to lower their tax liability, but other times, it’s just a simple misunderstanding of the rules.

Although there’s no shortage of options to choose from, two of the most abused and/or oft confused areas of deductions are medical expenses (a personal deduction) and business expenses (which may be claimed on either a personal or a business tax return).

For instance, many people incorrectly assume that the cost of any medical procedure that’s not covered by insurance is deductible. Not true! In fact, most voluntary procedures, such as a face-lift, a hair transplant or, shall we say, “enhancements” are generally not deductible as medical expenses. Neither are over-the-counter medications or the costs of medical procedures for family pets, even if medically necessary.

Another area that tends to bring to light “interesting” deductions – or more aptly, expenses that people try to deduct – is business deductions. In order for an expense to be deductible as a business expense, it must be both ordinary and necessary. That of course, leaves things open to some interpretation, but some expenses that people try and deduct are just so over-the-top that even the most liberal interpretation of the rules wouldn’t help.

A recent article from CNN Money highlighted a truly hilarious real-life example of just how far some people try to stretch things. The article, which discusses crazy expenses people have tried to deduct, includes the story of a Doctor who wanted to deduct the cost of magazine subscriptions he left in his waiting room for patients to read. That sounds all well and good – and it normally would be – but included in the Dr.’s list of magazines was his subscription to a certain “adults only” magazine. That’s hardly the type of reading material that one would typically find in a waiting room. And even if it was left in a waiting room, it would be hard to argue that such reading material would be a necessary or ordinary expense for the doctor to conduct business.

To see the full CNN Money article and other crazy expenses that people have tried to deduct, click here.

Mistakes do happen, but don’t be greedy. Claiming deductions that don’t exist or don’t qualify can lead to significant issues down the road if you’re audited. We may not have a perfect system, but hey, it’s the one we’ve got. Thankfully though, it does provide a whole host of available deductions, exemptions, credits and planning opportunities to help limit your tax liability. Stick to those and you’ll be better off for it.