Determining tax deductions can be complex for clients and advisors alike. The Minnesota Society of CPAs recently surveyed its members about the most outrageous tax deductions clients tried to claim on their tax returns.
"Creativity is a beautiful trait to embrace, but there are better places to exercise yours than with your CPA and the IRS," says MNCPA Board Chair Jeff White. "Tax laws are very nuanced, but many of the deductions our members shared from their clients would create issues with the IRS."
The following list shows that, quite often, taxpayers don't know which deductions are allowed or not. Here is the MNCPA's annual list of the most outrageous, and unacceptable, deductions.
1. Tummy tuck
One client wanted to deduct an abdominoplasty — more commonly known as a tummy tuck — as a medical expense because of the amount of money she had to spend on the procedure. No dice.
2. Building your dream home
As a contractor, one client talked to their CPA about writing off the cost of building themselves a new house. That one didn't get off the ground.
3. All by myself (for lunch)
One client tried to claim mileage for 25 roundtrips to a restaurant for lunch with himself.
4. Working vacation?
One client tried to deduct expenses for a family vacation to Disney because he "was working the whole time." Let's hope Disney hired him.
5. Boats (again)
A nearly annual addition to this list, one client wanted to deduct his pontoon as an advertising expense because he occasionally took out clients for a cruise.
6. Dental work across the border
This one is a doozy. One CPA had a client who flew to Mexico — multiple times — for dental work and, in their infinite wisdom, thought they could extract the difference via deductions.
7. Pools don't make good offices
Repairs and maintenance to an in-ground pool, as one client found out, cannot be used as a home office deduction.
8. Stretching charity
While helping out family members with monetary gifts is kind, it is, however, not legally classified as charitable donations.
9. High-class cleaning
This is a new one. One CPA had a client who wanted to deduct the cost of her fur coat because she wore it to keep warm as she cleaned homes.
10. Super Bowl gambling loss: $2
That's not a misprint. One client wanted to file for a gambling loss on a $2 bet on the Super Bowl. While gambling losses can be deducted by following instructions from the IRS, $2 leaves a bit to be desired. Better luck next year.