Imagine being an IRS auditor and having to scrutinize business deductions in the taxes of the self-employed. A business coach deducts 30 percent of her honeymoon costs. A doctor claims his streaming service subscriptions (Amazon, Netflix, and Hulu) are business deductions. A parent deducts the cost of a clarinet and clarinet lessons for her child. An exotic dancer takes a deduction for the cost of her breast augmentation.
Far-fetched as these may sound, they’ve all been claimed on taxpayers’ 1040s. One—the exotic dancer “Chesty Love”—prevailed in her 1994 court case, Reginald R. Hess and Cynthia S. Hess v. Commissioner of Internal Revenue. Hess maintained that her size 56N implants were “stage props” that increased her earnings and that she derived “no personal benefit from them.”
The court found in favor of Chesty stating in its ruling that her “extraordinarily large” implants were “useful only in her business.” Originally submitted to the court as $2,088 of depreciation on a deductible business expense (Schedule C), she was eventually granted a Schedule A deduction (medical expenses) for the full cost of the implants, $5,368.
As for the honeymooning business coach, she deducted a percentage of her rental costs for an Airbnb, business meals, and the costs of photography equipment she used for doing brand and content shoots. The doctor streamed content in his office waiting room for nervous patients. And the parents were told by a medical professional that playing the clarinet might help correct their daughter’s overbite.
Strange But True
You couldn’t make up the expenses some people have actually tried to claim on their income taxes. If you use one of the best online tax software prep services, it might suggest deductions that you didn’t know you could take, but how far you push your interpretation of the deduction is ultimately on you. Numerous famous stories get repeated by tax preparers and software companies when the topic of strange tax deductions comes up, but it’s impossible to track down the actual IRS rulings since they involve private taxpayer returns.
Here’s one of the most famous—and most outrageous. A business owner hired an arsonist to burn his building down so he could collect the insurance money. Problem was, he tried to claim the money he paid the arsonist as a “consulting fee.” Needless to say, he didn’t get the deduction, much less the insurance money.
People joke about declaring their pets as dependents, which, of course, doesn’t fly with the IRS either. One creative business was able to deduct the cost of cat food, however. A junkyard owner was feeding the local feral felines so they’d hang around and take care of the rats and snakes for him.
Kudos to the professional bodybuilder who successfully deducted the cost of body oil he used to shine himself up before competition.
A man suffering from emphysema was told by his doctor that regular swimming would help with his condition. He deducted the cost of building a swimming pool at his home as a medical expense.
A gas station owner was able to give his customers free beer instead of offering trading stamps and write it off as a business expense. In the 1980s and earlier, there used to be programs where customers would receive trading stamps when they made purchases at gas stations and grocery stores, and once they collected enough stamps, they could trade them in for goods.
There’s no way to know for sure if an iffy expense you’re trying to claim as a business deduction would fly with the IRS should the agency audit you. You can, though, pore through IRS publications that explain in excruciating detail what can legitimately be deducted, like travel expenses. But there are easier ways.
Is it ‘Ordinary and Necessary?’
How does the IRS determine whether you can claim an expense on your 1040?
“The general rule is that any expense which is ordinary and necessary for the business is deductible,” says Barbara K. Blacklidge, an enrolled agent (EA) who spent 16 years as a tax preparer for H&R Block and has been a Tax Expert for JustAnswer for 10 years. “An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business.”
For the 70 million freelancers in the US, the question of which business expenses will be accepted by the IRS is “a severe pain point in the entire community,” according to Jaideep Singh, CEO of tax app provider FlyFin, which uses artificial intelligence to categorize and store business expenses in advance of tax preparation.
“Content creators, Uber drivers—they all keep Googling [their questions] and still aren’t really sure,” he says.
Basically, you won’t know for sure unless you’re audited. To try to avoid that, you can consult with a CPA. Or you can use an online tax prep app. TurboTax and H&R Block, for example, offer a hybrid option to personal tax prep so that it’s not all DIY. You do a lot of the grunt work yourself and pay extra to have access to tax experts via chat, phone, and screen share. That way you can ask about questionable expenses. Alternatively, you can pay someone at TurboTax or H&R Block to take on your return entirely.
Obscure But Legitimate Deductions
Ever had a friend who crashed on your couch for a year or so? You may be entitled to up to $500 (dependent credit).
Speaking of friends, have you ever had one who stiffed you on a personal loan? If you can prove that you tried to recover the money, you can write off up to $3,000 per return.
Do you live in Hawaii? Do you have what’s considered an “exceptional tree?” The IRS will allow you to claim up to $3,000 per tree, once every three years.
If you maintain a home in an historical neighborhood in some cities in the northeast, you may be eligible for tax breaks, as long as you maintain the historical integrity of the property.
It’s unlikely that you’re a whaling ship captain, but if you were, you could claim up to $10,000 for ship repairs.
Even starving artists can get a tax break, an above-the-line adjustment… if you have W-2 income and your artistic expression is a side gig.
Wait, What?
Lisa Greene-Lewis, a tax expert for TurboTax, shared some of the unusual questions that she and her team have seen on TurboTax Live. Thanks to Miguel Burgos Neil, Balanay, and the other TurboTax Live experts who provided examples.
Poochie Provides Business Security
Question: An interstate truck driver who took his dog on all his trips wanted to know whether he could deduct part of the pooch’s expenses since he provided security.
Answer: If the use of your pet is directly related to your self-employed business, like using them as a guard dog to protect your business, then you may be able to deduct them as a security expensesecurity expense.
My Pet Racks Up Moving Expenses
Question: May we deduct pet moving fees?
Answer: For tax years beginning after 2017, you can no longer deduct moving expenses unless you are a member of the Armed Forces on active duty and you move because of a permanent change of station on military orders. If this applies, then you may be able to deduct your personal effectsdeduct your personal effects up to certain limits.
Aren’t Business Suits for Business?
Question: Why could we not deduct business suits since we only wear them at work?
Answer: Business suits must meet certain IRS criteriacertain IRS criteria to be deductible. Any business expense must be both ordinary and necessary for your business operations and your industry, and not suitable for everyday wear.
Dependent Support
Question: When TurboTax asks if I provided more than half of the support for my dependents, does that mean emotional or financial support?
Answer: It’s referring to financial supportfinancial support. However, TurboTax Live will be happy to provide you with emotional support while resolving your tax questions.
A Higher Earner Tween
Question: Can my 12-year-old child file as head of household and claim me as their dependent? The child is a Broadway star making more than $100,000 annually and supports a single parent and younger sibling.
Answer: Unfortunately, no. The 12-year-old child is still in the custody of the parent and considered a dependentdependent. But congratulations on raising a talented child!
Houseboat Dweller
Question: I live on a barge on the Mississippi River. What should I use as my address? Do I have to file state taxes?
Answer: Please use the addressaddress where your mail is delivered. Enter a P.O. Box number only if your post office doesn’t deliver mail to your home.
I Want My $1 Back
Question: Can I amend a California return for $1 so I can get my dollar back?
Answer: That is not a material reason to file an amendmentfile an amendment. Common reasons why you need to amend a tax return are to report changes to your income; update your credits, deductions, or filing status; and report federal income tax adjustments.
Mom and Dad Don’t Know I’m Married
Question: I live with my parents but they don’t know I’m married. How should I file?
Answer: If you are married, your filing statusfiling status is either married filing joint or married filing separate.
Hopeful Tax Filer Seeking Permanent Tax Help
Question: Will you marry me?
Answer: I am flattered! I do have an amazing “plus one” already, though.
Find a Balance
We don’t recommend that you push it with the IRS. Certainly, claim as many legitimate business deductions as you can, and ask a professional if you think you might be going over the line. But don’t get too creative. You’ll have a lot of explaining to do if you get audited, which can be a painful, expensive, and time-consuming process.
