Most people would do anything to lower their taxes, even if it means pushing their creativity to the limit. Ask any seasoned accountant, and you'll hear stories of folks who tried to claim the most insane deductions imaginable -- like the man who tried to write off the cost of hiring an arsonist to burn down his failing business. (He was rightfully denied by the IRS.)
In fact, over the years, countless filers have attempted to push the limits of the tax code, and most have been glaringly unsuccessful. But apparently, in extremely rare cases, you can claim what can only be described as an outrageous deduction and actually get away with it. Here are a few of the wackiest tax deductions in history that, incredibly, managed to stick.
1. The cat food deduction
Normally, you can't deduct the cost of caring for a pet, nor can you claim one as a dependent. But in a 2011 case, a tax court ruled in favor of a California woman who wrote off more than $12,000 in expenses to care for the 70 -- yes, 70 -- cats she was fostering. Because she was working with a registered charitable organization, and you're allowed to deduct expenses that solely relate to foster animals, the court upheld 90% of her deduction for cat food and supplies. (Since she had seven cats of her own, she lost out on a portion of her original deduction). The woman was also allowed to deduct 50% of her cleaning and utility expenses, claiming that the foster cats were responsible for a portion of those costs.
2. The breast enhancement deduction
In the early 1990s, an exotic dancer managed to successfully write off the cost of her breast augmentation surgery, claiming it was a necessary component of doing her job. The reason she got away with the deduction was that the court agreed that her breasts could be considered a uniform of sorts, which would normally be deductible under the tax code.
Here's the best part, though. For a work uniform to be tax-deductible, it must meet two criteria: First, it must be required as a condition of employment, and secondly, it must be attire that isn't suitable for everyday use. Because the dancer's breasts were enlarged to the point where they weighed 10 pounds apiece, she claimed that if given the choice, she wouldn't have "worn" them outside of work. It was this distinction that apparently persuaded a judge to allow the write-off.
3. The drug lab casualty loss deduction
It's not very often that you see folks get rewarded for illegal activity. But when a chemistry-savvy entrepreneur purchased a building, turned it into a drug lab, and lost that property in a fire after a hot plate ignited his explosive chemicals, he claimed a $9,000 casualty loss on his tax return -- and won.
Some less risky options
Entertaining as these stories might be, none of us should be fooled into thinking that these offbeat deductions are by any means the norm. More often than not, the IRS will deny deductions that aren't completely by the books, so if you're thinking of fostering a large family of guinea pigs to score a quick tax write-off, try again.
That said, there are plenty of legitimate deductions you can take to lower your taxes. If you're a homeowner, for instance, you can deduct the interest you pay on your mortgage, points on your mortgage, property taxes, and PMI premiums (as long as your income isn't too high). If you're self-employed, you can deduct business expenses such as supplies, travel to client meetings, and a home office, if you meet the right criteria.
If you spend a lot on medical care, you might qualify for a medical expense deduction, which includes not just prescription drugs and in-office copays, but travel to and from appointments. You can also deduct donations to charitable organizations, even if they're of the non-cash variety.
Some other legitimate items you may be eligible to deduct include:
- Job search costs
- Moving expenses
- Tax preparation fees
- Unreimbursed business expenses (even if you're a salaried employee)
- Student loan interest
- College tuition and fees
It pays to read up on the various deductions out there, because they could shave some serious money off your tax bill -- and you won't have to concoct a crazy story in order to claim them.