The interpretation of what’s an allowable deduction has increasingly pushed the limits of imagination. Certainly what’s considered to be a business expense has changed over the last 20 years. What the IRS has allowed as deductions would make most people's heads spin but as long as it's legitimate, Uncle Sam will allow it.
So if you think your expenses are simply too crazy to deduct on your return, you may or may not be right. Don't be afraid to consult your tax professional because they have probably already seen and heard it all. Whatever you do decide to claim, make sure it's legitimate and be ready to prove it if the IRS comes knocking on your door.
Meisa Bonelli, Wall Street tax professional and business match-maker, is the President of Millennial Ventures and Managing Partner of Millennial Tax. She specializes in advising home-based business professionals, start-ups and solopreneurs throughout the United States on tax issues that can help propel their business growth. She may be reached online at www.MillennialTax.com
1. Tools of the Trade
A client of Texas CPA, Vincent Porter, is an exotic dancer and was able to deduct the cost of vibrators, lubricant, and lingerie as business expenses because she used them for her webcam work. Porter explained, "If a roofer can deduct the cost of his tools used in his line of work, then an 'actress' may deduct her 'tools' used to generate revenue as well." Porter continued, "As long as she was not doing anything illegal, then we could support the deduction." I bet he doesn’t have trouble getting clients with all the ladies on his side.
2. Don't Sweat It
Tom Walpole, a CPA in New York, successfully helped his client write off $10,000 for having air conditioning installed. When the IRS probed the deduction, the client attached a doctor’s note stating his profuse sweating was a health hazard due to the constant loss of fluids and threat of dehydration. The IRS ended up allowing the deduction.
3. Healthy Living Pays Off
Professional blood donor Margaret Green set a precedent for a special diet to be allowed as a legitimate IRS deductible expense. In reviewing Green’s case after the tax collectors had denied her claims, the court based its decision on the fact that, “unique to this situation, the taxpayer was the container in which her product was transported to market.” Not only were her supplements and high protein diet allowed, but also her commuting costs to and from the blood bank.
4. Making Bail
The good part about getting wasted, getting your butt kicked, and spending the night is jail is as long as you do it on a weeknight and were out with colleagues, it's tax deductible. Or not. One business owner learned that lesson the hard way when he attempted to deduct the $10,000 he had to pay for bail, according to Dominique Molina, president of the American Institute of Certified Tax Coaches. The bail was a no-go because justifiable penalties for wrongdoing are not tax deductible.
5. Tuition...For the Mistress
When a former client and friend came to Bonelli about a situation two years ago, she was not prepared for what she would hear. The friend had been in a long term relationship with her partner, but had left her for another woman. In addition to the situation being a mess because of the kids and vested friendships connected to their relationship, the relationship with the lover didn’t work out. Bonelli almost thought losing her partner of five years was the saddest part for her friend but when she asked Bonelli if she could deduct her mistress’s law school tuition which she had paid, Bonelli stood corrected. Bonelli had to tell her, “Newsflash hon, the line about there being a silver lining in every cloud is exempt with regard to the tax filings.”