14 Tax Breaks You Won’t Believe Are Real

Wisdom from Joy Taylor, Editor with Kiplinger
Focused on You. Dedicated to Your Success.
April 8, 2019

Kiplinger published another article worthy of sharing with you entitled 14 Tax Breaks You Won’t Believe Are Real by Joy Taylor, Editor. While I find some of these deductions humorous, I am surprised that the IRS actually sided with the taxpayer. As eloquently stated by Wayne Gretzky: “You miss 100% of the shots you don't take.” Here are the 14 tax breaks you won’t believe are real, as well as the reason why according to Kiplinger:

  1. Compensation for Being (Wrongly) Locked Up – With exonerations on the rise, Congress has taken a step to make amends as well. Compensation that these victims receive is fully exempt from federal taxation.
  2. Playing Bass – An accomplished bass player and music professor traveled to jazz rehearsals and performances to keep his skills sharp so he could play with other well-known musicians. The IRS said he could not deduct his travel costs because he enjoyed playing the bass and performing wasn’t part of his teaching duties. Nevertheless, the Tax Court allowed him the write-off because he translated what he saw and heard in the music scene and taught it to his students.
  3. Being a Starving Artist – This deduction is both obscure and listed right there on the tax forms. If you are a “performing artist,” you have the ability to deduct business expenses related to your work, even if you don’t itemize—it’s one of the rare “above the line” tax deductions. There are however, considerable restraints on this deduction: You have to have at least two employers (not gigs—actual W-2 income), and each has to pay you at least $200. Your expenses have to be at least 10% of what you make as a performer and your adjusted gross income can’t be more than $16,000, even if you’re married.
  4. Cat Food – A couple who owned a junkyard was allowed to write off the cost of cat food they set out to attract wild cats. The feral felines did more than just eat. They also took care of snakes and rats on the property, making the place safer for customers. When the case reached the Tax Court, IRS lawyers conceded that the cost was deductible.
  5. Cat Food, Part II – A woman used her own money to care for feral cats that she fostered in her home for a charity that specialized in the neutering of wild cats. She spent more than $12,000 of her own money paying for vet bills, food and other items. The Tax Court ruled that she can claim a charitable deduction for her expenses but limited her write-off because she didn’t meet the substantiation rules, failing to procure a contemporaneous written acknowledgment from the charity each time she spent $250 or more on the charity’s behest. With the proper documentation, she could have deducted all the costs she incurred for the organization.
  6. Body Oil – A pro bodybuilder used body oil to make his muscles glisten in the lights during his competitions. The Tax Court ruled that he could deduct the cost of the oil as a business expense. Even so, the Court nixed deductions for buffalo meat and special vitamin supplements to enhance strength and muscle development.
  7. Barking Dogs – A self-employed consultant who worked in her condominium sued her neighbors and the condo association, alleging that her work was disrupted by noise from faulty construction and barking dogs. Also, in connection with the litigation, she was charged with a criminal misdemeanor. She deducted $26,000 of attorney fees associated with both of these proceedings as business expenses. The IRS said the legal fees were personal costs. But the Tax Court OK’d half of the write-off because she used 50% of the condo for business, and the IRS failed to prove that the noise didn’t adversely affect her business use of the residence.
  8. Free Beer – In a novel promotion, a service-station owner offered his customers free beer with a fill-up. Not surprisingly, his station’s gasoline sales increased significantly. Proving that alcohol and gasoline do mix—for tax purposes—the Tax Court allowed the owner to deduct the cost of the beer as a business expense.
  9. Making Movies – A lawyer faced a challenge from the IRS as she sought to deduct losses during the six-years she spent making a documentary film on the musical group Up With People. At first, the IRS would not allow the deduction. Ultimately, the court ruled in her favor, allowing her deduction of six-figure losses. It noted that she acted in a businesslike manner, hiring staff such as a bookkeeper, buying insurance, consulting experts, changing the story line to make the film more marketable, blogging about it, and taking it on tour to movie festivals.
  10. Babysitting Fees – Fees paid to a sitter to enable a parent to get out of the house and do volunteer work for a charity are deductible as charitable contributions even though the money didn't go directly to the charity, according to the Tax Court.
  11. Landscaping – A sole proprietor who regularly met clients in his home office was allowed to deduct part of the costs of landscaping the property, on the grounds that it was a part of the home being used for business, according to the Tax Court. The court also allowed a deduction for part of the costs of lawn care and driveway repairs.
  12. Swimming Pool – A taxpayer with emphysema put in a pool after his doctor told him to develop an exercise regime. He swam in it twice a day and improved his breathing capacity. Turns out he swam in the pool more than his family did. The Tax Court allowed him to deduct the cost of the pool (to the extent the cost exceeded the amount it added to the value of the property) as a medical expense because its primary purpose was for medical care. Also, the cost of heating the pool, pool chemicals and a proportionate part of insuring the pool area are treated as medical expenses.
  13. Helping Your Child’s Career – A father owned a profitable real estate development business. His teenage son was a local celebrity for his successful motocross racing, so the father decided to have the company become a sponsor for his son’s racing activity. Over a two-year period, the firm paid $160,000 for motorcycles, equipment and other costs. The funding ceased when the son turned pro. The Tax Court said that most of the $160,000 was a deductible business expense because the firm obtained new business connections, favorable construction financing deals and other similar benefits from its sponsorship.
  14. Airplane – Rather than drive five to seven hours to check on their rental condo or be tied to the only daily commercial flight available, a couple bought their own plane. The Tax Court allowed them to deduct their condo-related trips on the aircraft, including the cost of fuel and depreciation for the portion of time used for business-related purposes, even though these costs increased their overall rental loss on the condo.

Feel free to contact any member of our team to discuss your particular situation at 610-828-1900 (PA) or 732-341-3893 (NJ). You can also contact Jackie Himes, CPA, Director - Tax Services at Jacquelyn.Himes@MCC-CPAs.com or me at Marty.McCarthy@MCC-CPAs.com . We are always here to answer your questions. 

Martin C. McCarthy, CPA, CCIFP
Managing Partner 
McCarthy & Company, PC 

Disclaimer:  This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).