Existing users please login

 

Home / Personal Finance / Financial Planning / Tax

Feeling Risky? Take a Look at These Daredevil Tax Deductions

 
By Kathryn Glass
FOXBusiness
     

    If the strangest thing you’ve ever claimed as a deduction on your tax return is the interest on your mortgage apparently you're boring.

    Taxes are On Topic in March at FOXBusiness.com. From tips on how to save money when you file to how to avoid an audit, check back throughout the month to find out what you need to know.

    According to a February 2007 report by Washington, D.C., think tank the Urban Institute,  more and more people are itemizing deductions on their tax returns--some with stunning creativity. Indeed, between 1995 and 2004, the percentage of taxpayers that claimed specific expenses as deductions increased from 29% to 35%.

    For this growing number of determined, tax-savvy individuals, just claiming the basics: mortgage interest, charitable giving and medical expenses means leaving money on the table. These fiscally intrepid folks are pushing the envelope. Some have even succeeded in forcing the mighty IRS to bow to their singular deduction demands. 

    Here are some of the more creative deductions allowed, according to sources at H&R Block and the American Institute of Certified Public Accountants, and remember kids, don’t try this on your tax return without the supervision of a licensed professional.

    Professional Losses
    In 2007, the Tax Court ruled that Linda Myers could be considered a professional gambler and could therefore legally deduct all of her gambling losses (normally, the amount of gambling losses deducted cannot exceed the amount of winnings). Myers owned a trucking business where she worked 25-35 hours a week. But as a "professional gambler," she logged 40-60 hours per week in the casino playing slot machines and kept careful records of her hours and the amount of money she spent each day.  She claimed she did not derive any enjoyment from gambling and considered it tiring work. The court ruled in her favor.

    Deduction or Bust
    If your body is your primary source of income--as it was for exotic dancer Cynthia Hess (also known as “Chesty Love”)--you might be entitled to deduct your “business expenses” or in this case, your breast implants.  Hess successfully won her case against the IRS when the court ruled she could claim her size 56FF breast implants as a business expense because they could be viewed as a “stage prop.”

    Claiming your Cat Food
    In 2001, cat food was ruled as a business expense for Samuel and Carol Seawright, the owners of a scrap yard in Columbia, S.C.  The Seawrights claimed the food was used to attract wild cats to keep snakes and rats away from their automobile salvage yard.  The court agreed. 

    Music Really is Therapeutic
    In 1962, a taxpayer was allowed to deduct the cost of a clarinet and clarinet lessons to correct a child’s “severe malocclusion” or overbite. The instrument was recommended as treatment by an orthodontist, thereby qualifying as a medical expense.

    See Spot Move
    Even the cost of moving your pet can be claimed as a moving expense.  In 1966, the court decided the term "moving expenses" included the cost of moving a household pet.

    Tax Breaks for Eating Organic
    Before you go running to Whole Foods with this one, you'd better get a doctor’s note. In 1976, the Tax Court ruled that a taxpayer on a special, medically-required diet could deduct the cost differential between the cost of organic or chemical-free food and the cost of food that has been chemically treated, as a medical expense.

    As these approved deductions illustrate, it can certainly pay off to use your imagination when itemizing deductions. But don't go out on a limb alone.

    “Go to a competent tax professional,” said Tom Ochsenschlager, with the American Institute of Certified Public Accountants. “They have the ability to look up the court cases and IRS rules, and will be able to tell you probably whether the IRS will accept them or not. And if they don’t what the risks are if you took it to court, and what the costs might be.”

    You never want to try an uncommon deduction without preparing a plan of action in case it’s rejected. And if the IRS rejects the deduction and audits you, many tax preparation firms will represent you.

    Click here for the On topic archive

     

    Fox Business Video