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Book sessionHere Some Tax Breaks I Can’t Even Believe!
Tax season is in full swing here and, just like we do every year, the team and I have been explaining why a lot of “tax breaks” simply aren’t legal.
No matter what, you cannot claim your cat as a dependent – but keep reading, because, under the right circumstances, you can write off the cat food…
On the other hand, we HAVE found some interesting (and legal) tax breaks that are legit…
· Any compensation you receive from being wrongly incarcerated. Think about it – every week, men and women are being released from prison after being wrongly convicted and the vast majority of them are being financially compensated. Congress has now passed a law prohibiting taxation on any of that compensation.
· An ironic precedent has been set as the result of a music professor who happened to play bass in his free time. Recently, he won in Tax Court with the decision that he could, in fact, write off his travel expenses since he used this “hobby” to help further his ability to communicate musical theory to his students.
· Remember the cat food I mentioned earlier? You guessed it – a couple who ran a junkyard were able to prove in court that the money they spent on food to attract and keep feral cats on the property constituted a business expense, as the cats kept rodents and snakes off the property and contributed to a safer environment for customers.
· A gas station owner who began offering a free beer with a fill-up won his day in court when it was ruled in his favor that the beer could, in fact, be deducted as a business expense.
· Another recent ruling in Tax Court has paved the way for babysitter fees a parent pays while they do volunteer work counts as a charitable contribution, even if the charity in question was not receiving the funds involved.
· A man who struggled with emphysema was able to deduct a substantial amount of the costs of the pool he installed to help him with his physical health and exercise. (This, by the way, is something we’ve discussed with various HSAs – I told you so!)
· As a result of sponsoring his son’s motorcycle racing career while the boy was still an amateur, a real estate developer who invested over $160,000 into the race team was able to claim the money was a deductible business expense as a result of the publicity and networking opportunities that came from the sponsorship. When the lad turned pro, the sponsorship stopped.
· Ironically, a couple argued the purchase and operating costs associated with their private plane could be deducted when they used the plane to check on a rental property they owned. The Tax Court sided with them to the extent the plane was used to check on the property. The real irony, of course, is the rental property was losing money and the added expenses made it an even bigger loss.
So there you have it – a lot of intriguing twists on how people are taking on the IRS and winning.
Should you? That remains to be seen. In my experience, though, the reason cases like this get picked up and shared is that they are so uncommon. For everyone we’ve shared here, there are hundreds – or even thousands – that lost in Tax Court or with an IRS review.
Not to worry, we’ve still got plenty of time, so make sure you’re getting everything ready if you haven’t filed yet and, as always, if you have questions, don’t hesitate to reach out to us.
See you soon!