Taxes. We all have to pay them, but no one enjoys it. In a desperate attempt to lower their taxable income and get bigger refunds, some taxpayers make quite creative claims on their tax returns. From pet horses to swimming pools, read on for 8 unbelievable tax deductions Americans have attempted to write off.
Introduction to Tax Deductions
Benjamin Franklin once famously said, “in this world, nothing can be said to be certain, except death and taxes.” While paying taxes is inevitable, some people have cooked up crazy ways to avoid handing over as much hard-earned cash to Uncle Sam and state governments every year.
This article highlights some of the most outrageous, unbelievable tax deductions ever claimed on real IRS tax returns. From pet cats and designer underwear to landscaping and swimming pools, you won’t believe what expenses taxpayers argue are essential “business” costs.
While pushing the envelope, let’s just say these ballsy filers are very legally questionable. Read on for 8 tax deductions so insane the IRS had to shut them down. Your mind and sides are about to hurt from laughing!
Deduction #1: A Pet Cat
In 2014, an anonymous taxpayer tried deducting their pet tabby cat as a business expense, cynically claiming it caught mice in the office. Unfortunately for cat lovers desperate for a tax break, the IRS swiftly denied it.
Animals for comfort or protection don’t count. And while this business owner argued their precious feline “protected” company equipment from rodents, the cat clearly resided as a personal pet at home. Nice try though! This takes the tax deduction cake.
Deduction #2: Landscaping
An orthodontist from Colorado believed the trees, flowers and lawn care services for his medical practice added enough curb appeal to warrant an annual tax deduction. Wrong.
The IRS classified the cosmetic landscaping as related only to the doctor’s house underneath. Had the property been pure business, there was an outside shot. Alas, the government deemed the manicured money pit around his home office a losing battle.
His outdoor deduction was denied faster than smores catch fire at a campsite. And the defeated taxpayer was left with quite the financial cavity when the bill came.
Deduction #3: Designer Underwear
Here’s an intimate tax deduction that’ll really make your cheeks blush…
In 2009, the IRS allowed approximately $15 million total in suspect “business expenses” for prostitutes and associated costs like travel and clothing.
But when one sex worker tried writing off over $50,000 for perfume, cosmetic surgery and oh yes, designer underwear at a rate of 365 pairs per year (a daily pair change), tax agents finally recognized it as extravagant.
Talk about taking business deductions a wee bit too far! Let’s just say this woman stretched boundaries tighter than the fancy lingerie she loved so very, very much.
Deduction #4: A Swimming Pool
Summers get hot for this medical company’s senior management team in humid Houston, Texas. To provide some much-needed relief for executives tuckered out from long days serving patients, the business installed an in-ground swimming pool for…employee wellness purposes?
Sure, de-stressing doctors can improve healthcare quality. But quite the slippery slope here. Where does the line blur between refreshing downtime versus a fancy country club lifestyle?
Despite executives claiming “it’s a morale booster!” and likening pool access to team yoga classes, the IRS instantly recognized the swimming asset for what it was – tax avoidance for the rich company big wigs to enjoy margaritas poolside after filing patient paperwork.
This cool waters tax deduction ultimately evaporated. So much for beating the southern heat at work!
Deduction #5: Vacation Properties
Spearheading a growing company is an endless grind most can scarcely comprehend. Burnout and anxiety are inevitable. Knowing this, businesses often own tranquil vacation homes or ski lodges allowing completely tapped out executives to occasionally relax and recharge.
But when partners at one prominent law firm attempted deducting 100% of enormous lakefront and mountainside vacation homes in places like Lake Tahoe and Vail, Colorado, the IRS challenged it.
They contended serving clients near these regions justified writing off the million dollar second properties. But the government noted that less than 2% of annual firm profits originated at the vacation homes, rendering that point gloriously moot.
This flagrant deduction was sunk faster than partners raced their sailboats across the placid blue waters of Lake Tahoe. And peacefully getting away from it all got a lot less peaceful when the IRS had their say.
Deduction #6: Football Skyboxes
America’s rabid obsession with football crosses socioeconomic boundaries. So to entertain wealthy clients, one sneaky Los Angeles area brokerage firm leased an extravagant stadium skybox for LA Rams games throughout football season.
Expensed as 100% deductible business development, company partners reveled in the luxury, schmoozing potential big investing fish between thrilling plays on the field below. But a skybox loaded with sumptuous food, top-shelf drinks and A-list celebrity sightings seems awfully indulgent.
When IRS agents reviewed entertainment expenses and noted skybox rental far outpaced any measurable new business revenue generated, this excessive tax deduction was tackle quickly for a big loss. Stick to cheap seats MBAs.
Deduction #7: Pet Horses
A prosperous Texas rancher racked his brain for new ways to trim annual tax obligations for his cattle and grains operation. Aha! What part of the farm couldn’t function without daily attention, care and grazing land? Why his expensive show horses of course!
Attempting to classify his award-winning stable as “critical working animals” representing the brand at Midwest rodeos was admittedly creative. Alas, transparent desperation smells stronger than livestock barn odors wafting across dusty Texas ranchlands.
This blatant attempt at dodging taxes failed spectacularly. Lasso another deduction idea cowboy. The horses can stay in pastures instead of deductible pens from here out!
Deduction #8: Home Office Renovations
When the pandemic forced white-collar workers everywhere to shelter in place beginning in early 2020, professionals struggled adjusting to the ultra-close quarters of a semi-permanent home office.
Knowing a designated workspace with enough room for files, devices, supplies and sanity was paramount, one California accountant lined up contractors for an extensive home remodel totaling tens of thousands in kitchen, bedroom and basement renovations.
The goal? Reinforcing modular office-friendly building additions that facilitated continuing his CPA work comfortably. Unfortunately, poorly-kept records didn’t provide the proof needed linking specific parts of the renovation to direct business use. And so yet another brazen deduction crumbled like inferior drywall under scrutiny.
His business infrastructure enhancements seemed reasonably related to professional duties in the adjustment period. But this gentleman pushed boundaries way too far listing the costs as 100% business expenses. Maybe invite less household guests to the office going forward!
Conclusion to Tax Deductions
While death and taxes share the certainty so aptly described by Founding Father Benjamin Franklin, the outcome for outrageous tax deductions like these highlighted is far less guaranteed.
As the IRS intensifies investigations after continued abuse and questionable write-offs, know that fuzzier accounting means bigger chances of getting caught and paying financial penalties. When in doubt, honest and reasonable is the best policy!
What’s the craziest tax deduction you’ve ever heard of? Share your stories with me on social media!
Commonly Asked Questions and Answers About tax deductions:
Q: What are some examples of crazy tax deductions people have tried to claim?
A: As highlighted in the article, some pretty outrageous tax deduction attempts over the years have included things like pet cats, landscaping, designer underwear, swimming pools, vacation properties, football skyboxes, pet horses, and home office renovations. People try to claim these personal expenses as legitimate business write-offs.
Q: Do people ever get away with these crazy tax deductions?
A: Occasionally a questionable deduction does slip through the cracks or tax court rulings have allowed some pretty fringe deductions. But in general, the IRS scrutinizes returns very closely specifically looking for excessive, improper deductions that flagrantly violate tax codes. Often the deduction attempts outlined here were denied.
Q: What are some key tips to avoid issues with my tax deductions?
A: Keep meticulous records proving expenses directly relate to operating your business, organization or job duties. Be conservative in what you claim, never misleading or fudging numbers. Have evidence like receipts and written justification for larger write-offs. If unsure, consult a tax professional before filing your return.
Q: What happens if I’m audited by the IRS?
A: First don’t panic! Just 10-12% of returns per year are audited. If selected, have your documentation ready to respond to IRS requests timely. If deductions are deemed valid, you simply carry on without ramifications. If some are denied, you’ll pay additional tax plus interest and penalties in some cases. Serious fraud can trigger criminal charges.
Q: What are red flags that may increase audit chances?
Reporting self-employment business losses year after year, taking the Earned Income Credit frequently, math errors on returns, or income reported not matching 1099 or W2 forms can all raise audit risk. Very high charitable gifts compared to income level often draw scrutiny as well. But having lots of write-offs alone generally won’t trigger an audit if they are legitimate business expenses.
