Tax Deductions You Won’t Believe
Americans have the right to utilize all legitimate deductions to optimize their tax obligations; however, the Internal Revenue Service (IRS) imposes restrictions on some unconventional strategies. Below are examples of deductions that the IRS has approved, alongside those that were deemed overly inventive.
Creative Deductions that Passed Muster
- Medical travel & lodging for a child’s care: A taxpayer deducted travel, lodging, and board as medical expenses to send a child with respiratory issues to an institution in Arizona.
- Pet food as a business expense: Allowed when a business owner fed a cat to protect inventory from pests.
- Clarinet & lessons: Deductible as a medical expense when used to correct a child’s overbite.
- Therapeutic swimming pool: Deductible for a taxpayer with emphysema when prescribed by a physician—limited to costs exceeding any increase in property value; ongoing maintenance could also qualify as medical expenses.
Deductions that Were Too Creative
- Mink coat for client dinners: Disallowed despite the claim it aided entertainment and conversation.
- Bath oil for dry skin: Denied as a medical expense.
- “Loss of memories”: Attempt to deduct disposal of personal photos/memorabilia was denied.
- “Consulting fee” to an arsonist: Reported insurance payout as income, then tried to deduct the payment—denied.
- Cosmetic procedures: Ballerina’s tummy tuck and another taxpayer’s Botox were not deductible as appearance enhancements.
Important: The IRS does not typically reward “creative” strategies. The above are historical examples and not advice. For guidance tailored to your situation, consult a qualified tax or legal professional.
A Look Into Our Process
When establishing an effective retirement plan, we begin by assessing your willingness to engage in the funding process for your retirement. Following this, we will conduct a thorough fact-finding session and meet with you to gain a comprehensive understanding of your current financial situation, along with your unique goals and needs. This allows us to create a retirement plan that is customized specifically for you.
Readiness & Goals: Align on participation, priorities, and the outcomes you want from planning.
Fact-Finding & Fit: We review your current financial picture and clarify needs to tailor your plan.
Plan & Projection: We prepare a retirement income projection that accounts for all relevant sources.
Straightforward Option (when appropriate): If a full projection isn’t necessary, we may propose a simple allocation of a portion of assets to generate supplemental income while emphasizing safety and growth.