5 Wacky Tax Deduction Ideas (and Why They Might Work)

Slideshow February 20, 2013 at 09:11 AM
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If you're thinking of writing off your brand-new boat as a business expense because a client helped you pick the color, think again. Tax professionals, and IRS agents, are well-versed in wacky ideas when it comes to deductions.

The Wall Street Journal's Rachel Louise Ensign helpfully rounds up some of the zaniest, and explains why some work and others don't.

"How do I value a taxidermy I donated to charity? (It can involve estimating stuffing and mounting costs)," she relates. "I'm putting a swimming pool in this year, I'm going to use it for exercise, can I deduct it as a medical expense? (Likely not.) What if my neighbor gives me a cow in exchange for help building a barn? (You must report the fair market value of that cow as ordinary income.)"

Here's a sampling of some of the more common, but still offbeat, questions that tax experts receive:  

More cute puppies!

1. Can I deduct my pet?                        

There are rare circumstances where a pet may qualify for a tax deduction if you itemize, Ensign notes.

"If your pet is a service animal for a disability that you have, the cost of buying, training and maintaining the animal may qualify as a medical expense. This typically includes vet visits, grooming and food, according to the Internal Revenue Service."

However, she adds a big caveat: "You can only deduct medical expenses that exceed 7.5% of your adjusted gross income in 2012 (the threshold is 10% for 2013 for most people)."

Lazy boyfriend in the pool.

2. Can I claim my boyfriend or girlfriend as a dependent?

"Claiming a dependent reduces your taxable income. Dependents can be family members and individuals who aren't family members, but meet criteria."

To claim a nonrelative as a dependent, she explains, that person has to live in your home for the full tax year and make less than $3,800 in gross income during that time. You also generally must provide more than half of the person's financial support, among other criteria. Happy, shiny volunteers

3. l left a bag of clothes at Goodwill. What's stopping me from saying it's worth $10,000 and deducting that amount?

Short answer—Big Brother. Ensign notes the IRS has documentation rules for these kinds of donations that vary depending on their value.

"If an item or group of similar items donated is worth more than $5,000, you typically have to obtain, among other things, a qualified written appraisal of the item or items donated."

Treadmill

4. My doctor said that I need to lose weight. Can I deduct my gym membership?

You only qualify if you need to lose weight because of a specific, doctor-diagnosed disease, she writes, citing tax experts.

"The only costs that would then qualify as medical expenses would have to be specific to your weight-loss regimen. So a so-called general-use item, such as a gym membership, wouldn't pass muster, but a specific weight-loss program would. Again, you can only deduct medical expenses once they exceed 7.5% of your adjusted gross income for 2012."

Enjoying tablet computer

5. I bought a tricked-out new computer, which I partially use for my studies. Is it covered under education tax breaks?

"The Lifetime Learning Credit and American Opportunity Tax Credit allow students and parents to subtract a certain percentage of educational expenses from their tax bill," Ensign writes.  

But whether a computer qualifies depends on where you go to school, she concludes.

"You can put a laptop's cost toward these credits only if the device is formally required by a school or degree program. You'll want a receipt for the purchase and documentation of the school's requirement."

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