Crazy Yet Legal: Income Tax Deductions - CPA Red Bank

At tax time, you may have some questions about what you can write off and what you can’t, especially when you’re self-employed. After all, you’re trying to save yourself some money, so it stands to reason you want to claim what you can within the law.

As CPAs, we come across a lot of requests for crazy deduction questions from our clients. Turns out, though, some are actually legit.

Swimming Pools

Yes, you heard right, swimming pools. If you put in a $30,000 swimming pool this year and you think you can claim it on your taxes, you MAY be right. You can legitimately do this IF your doctor prescribed daily laps in order to manage a medical condition like arthritis or emphysema. The catch is, that has to be the main use of the pool. If family and friends use the pool as a recreational pastime, and your swimming laps is only an adjunct to that, it will be difficult getting the IRS to see your point of view.

If you claim it, there are a few ground rules. First, only the amount exceeding the property value increase is deductible. Second, only the amount over 10 percent of income can be put towards the medical expense deduction if you are under 65. Over that age and the percentage decreases to 7.5 percent.

Pet Expenses

It’s a no-brainer to deduct children as dependents on your taxes, but pets and supplies? Maybe. If you are a dog rescuer who takes dogs in, patches them up and then puts them in a loving home just out of the goodness of your own heart, it’s possible to claim the cost of dog food, vet bills and medication as a charitable deduction. However, you have to prove these acts directly relate to an approved charity or organization and that those expenses were only used for that charity, not for your own pets. Be prepared to provide documentation.

MBA Tuition

Did you rack up a $100k MBA education? Think you can claim it on your taxes? Possible. It depends on whether or not you meet these three factors by the IRS when allowing a deduction of business school tuition as an employee business expense:

• In order to claim this deduction, you must be established in your career, making good use of that education.
• The MBA has to have helped improve your skills in a current job, trade or business.
• The MBA can’t have been used to develop a new trade or business.

If you fail to meet those requirements, you could claim either the Lifetime Learning Credit or the Tuition and Fees Deduction for higher education expenses, but the maximum you’ll get hovers around $2,000. However, you could stand to gain tax benefits in the tens of thousands of dollars if you can legitimately claim the employee business expense deduction.

Here at Chris Whalen, CPA Red bank, it’s our job to advise clients on possible tax breaks and deductions to save money. We know how hard you work throughout the year, and we all want a little something back for our troubles. While some deductions may sound crazy, you just have to ask us and we’ll be honest about whether the deduction is legitimate for your situation, and whether it’s worth the possible red flags to claim it in the first place.

Get in touch with the offices of Chris Whalen, CPA Red Bank today to get your complimentary evaluation and consultation.