More Crazy Tax Deductions: What Worked, What Didn't

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carrier pigeonFrom hip replacements to pole dancing classes, here are some of the most outlandish deductions taxpayers have tried to slip past the IRS. You won't believe what claims these people made that their accountants said wouldn't fly -- and you really won't believe what did (literally).

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More Crazy Tax Deductions: What Worked, What Didn't

Call it extreme communication. One taxpayer was so distrustful of technology that he wouldn't use a telephone or computer.

That posed a problem when it came to communicating with his business partner, who lived across town in Phoenix. So he came up with a plan: carrier pigeons.

The two now send messages to each other via the birds. And the technophobe thought it made sense to write off the pigeons, as well as their care, food and housing, as a business expense.

Shauna Wekherlien, the CPA at Tax Goddess Business Services who prepared his return, said she asked him a lot of questions (like whether he has ever owned a computer) to establish whether he had ever used technology to communicate with people in the past.

He said he hadn't, so she determined that the deduction was fair game, given that it was the only way he could reach his business partner.

A woman from Arizona actually tried to deduct the cost of her own baby.

Because she used photos of her child in marketing materials for her curtain and blinds business, she thought the money she spent on her baby's food, clothing, nanny, diapers and baby powder -- a total of about $26,000 -- should all count as deductible business expenses.

CPA Wekherlien, at Tax Goddess Business Services, said she was able to write off the cost of hiring the photographer who took the photos of the baby, as well as the baby's stroller and the onesies that carried the company logo (which pictured the baby), but the rest of the expenses weren't allowed.

Deducting the cost of your own hip replacement is one thing, but it's another to write off your dog's surgery.

When one client dropped off her tax information to Bruce McFarland, a tax preparer at L&R Tax Preparation in Missouri, he noticed that she had written off an unusually high amount of medical expenses, including $8,000 for a "family dependent" -- even though she had no spouse or children.

That "family dependent" turned out to be her dog. She considered the pooch such an important part of the family that she thought it would be legitimate to write off its medical expenses.

But because the animal wasn't a medical necessity for the taxpayer, McFarland couldn't let her deduct the cost of its surgery or any of its other expenses.

Watching your wife pole dance may be a good way to unwind from a long day of work, but it hardly counts as a business-related activity in the eyes of the IRS.

Nevertheless, one man tried to write off the cost of his wife's pole dancing lessons as a business expense under "meals and entertainment." The man explained that watching her dance was his post-work relaxation and made him better at his job.

Wekherlien, at Tax Goddess Business Services, said she had to remove the deduction from his return, informing the man that the $800 he spent on pole dancing classes would be swiftly denied by the IRS.

With the right prescription, even bottled water can be deductible. In fact, one very wealthy client managed to deduct $1,095 worth of Evian as a medical expense on her taxes.

Somehow, the woman had convinced her doctor to give her a prescription for three bottles of Evian water every day, said John Lieberman, a CPA at Perelson Weiner LLP.

Lieberman didn't ask her what the medical condition was that required her to drink only Evian water, but he said the deduction was permissible since it was actually prescribed by a doctor and she still had the prescription note for her files.

A real estate agent who was "a little bit big on the bottom", according to her tax preparer, bought a number of pairs of the slimming underwear called Spanx because she thought looking smaller would help her sell more houses.

The tax preparer, who asked to remain anonymous, said the woman also argued that wearing Spanx helped her to sit down more comfortably with clients. But the preparer had to axe the deduction since there was no hard proof it impacted her business or income, making it hard to qualify the undergarment as a business expense.

Certain drugs qualify as legitimate medical deductions. But when they're recreational drugs, like say cocaine or ecstasy, the expenses are a little harder to slip by the IRS.

Dave Spaulding, an enrolled agent at Janover LLC, a financial planning firm, said clients who were in a rock band actually tried to deduct an item labeled "drugs" as "travel & entertainment" expenses.

The total cost of the "drugs" was in the high five-figures, and the band didn't even try to disguise them as prescription or medical drugs.

"The band's bookkeeper had concluded that the cost of recreational drugs was necessary and ordinary," he said. "Apart from admitting to possession of illegal drugs, the IRS would strongly differ with their tax position."

Needless to say, Spaulding's firm removed the deduction from the band's tax form.

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