I'm always interested in what people try to deduct, so I asked a tax professional about the weirdest things she's seen. Alison Flores, tax lab manager at H&R Block, highlighted some of the most creative and strangely legitimate efforts.
A client asked the following question: He was able to deduct the cost of the various beers he sampled.
This person has found a way to monetize the peer review process.
As it turned out, he had started a blog and was earning money through self-employment. “So we had to determine which beer drinking was related to the blog and which was just a personal expense,” Flores said.
This was a yes as a deductible. It was a normal and necessary business expense.
But Flores warned recreational beer drinkers not to try this on their tax returns.
“If you're doing it for fun, like going out for beers with the guys or watching basketball, it's personal and it doesn't feel like business,” she said. “Only a small percentage of beer drinkers can deduct the cost of beer.”
Flores said the TikTok star's mother wanted the toys her child was playing with off-camera to be subtracted because they sometimes appear in the background of her videos.
“The toys appeared to be for personal use,” she said. “I didn't think it was a business expense.”
Therefore, the toy deduction was no.
3. Feed the business mascot
People try to claim the worst deductions to reduce their taxes, especially business expenses.
In this case, a client who brings her dog to work every day wanted to deduct the cost of dog treats and toys that she kept in the office.
Is it a legitimate business expense?
The dog had a positive impact on customers, the person claimed.
But no. It's not a point deduction at all. It's a pet and a personal expense.
Now, if it's a watchdog, the expense would be counted as a business expense, Flores says.
Flores said one customer was advised by her doctor to exercise more for general health reasons.
Can the cost of her water aerobics class be deducted as a medical expense?
By the way, to qualify for the medical deduction, your expenses must exceed 7.5 percent of your adjusted gross income for the year.
“Most people don't cross that threshold, Flores said.
The 7.5% standard has long been a deterrent. But today, many taxpayers are no longer able to take advantage of this deduction, in part because the standard deduction is getting higher and higher, said IRS spokesman Eric Smith. Just over 10 million taxpayers claimed it in the 2017 tax year. By his 2021 tax year, the most recent year for which data is available, that number had dropped to just under 4 million.
“For those who have significant expenses and may qualify, IRS Publication 502 may be a helpful reference,” he said.
Then there's the businessman who wants to take mileage deductions for trips to and from the local pub for afternoon cocktails.
Now, if you go to a pub to meet a particular client and pay for a drink or meal, that could be deductible, Flores said.
Smith said details, facts and context were critical, as business expenses were subject to “ordinary and necessary” standards.
“A particular expense may be normal and necessary for a particular taxpayer in one line of business, but not in another,” he said.
6. Cost of Hiring a Ghostbuster
A woman asked if services performed to cleanse her home of evil spirits could be considered a necessary medical expense.
“She may be feeling better, but this is not a medical expense,” Flores said.
7. Vehicle upgrades
This last one is not uncommon, but it's important to be careful.
Flores said she has received questions about medical expense deductions for upgrading vans for people with disabilities.
“For someone in that situation, it may be difficult to consider getting a medical deduction for an upgrade,” she says.
The challenge is often that medical expenses exceed 7.5% of adjusted annual gross income.
One strategy is to consolidate your spending into one year. So you can make modifications to your home, such as installing a wheelchair lift for your van, installing a ramp, or renovating your bathroom to make it more accessible.
The deductible cost for renovation work (such as installing an elevator) is the difference between the cost of the renovation work and the added value of the home. But many modifications, such as widening doorways, do not add value and are fully deductible, Flores said.