Could these 12 odd tax deductions save you money?
This year, thanks to a little extension from the federal government, we all get until April 18 to file our taxes. That gives us three full days more to ponder the deductions we deserve -- or are at least allowed -- to boost those refunds or cut our tax bills.
Did you put in a pool? Captain a whaling ship? Go on a safari? To get you thinking, here are 12 of the oddest allowed deductions according to the IRS, the U.S. Tax Court and other sources. Most apply only if you itemize deductions, and some must meet thresholds, such as miscellaneous business expenses that only count when they exceed 2 percent of your adjusted gross income.
Read on to see which ones you can take. (And, if in doubt, be sure to contact a tax professional.)
1. Cruising, as a business expense
Aruba, Jamaica, ooh, I want to take you and write off the trip -- or at least part of it. Your luxury cruise to a business convention in, say, balmy Bermuda, qualifies as a business expense within limits that vary by the time of year, the IRS says. In one example, the agency illustrates how a $5,200 trip could result in a deduction of $3,650. If the convention is on the ship, you can only deduct up to $2,000.
2. Whale of a break
When was the last time you went whaling? (And we don't mean just watching the magnificent sea creatures.) Acquiring and maintaining whaling boats, weapons, gear and food for your crew used in sanctioned whaling activities may be deductible up to $10,000 a year, the IRS says. The catch, so to speak: To claim the deduction, you must be recognized by the Alaska Eskimo Whaling Commission as a whaling captain.
3. Historic preservation can also conserve on taxes
Do you own an old house or other building in a historic district? Your agreement with, say, a city or preservation group to leave its look alone could qualify for a tax deduction as charitable donation, but don't overstate your case. Many considerations determine the value of a conservation easement, says the U.S. Tax Court.
In one case, the owners of a $5.2 million home in New York City's Carnegie Hill Historic District in Manhattan deeded away their rights to change its façade. On their tax returns, they valued their donation at $605,000. Oops! While the court decided they could take a deduction, it also decided the donation was worth only $104,000, or 2 percent of the home's value. The homeowners had to pay not only more taxes but also a penalty of 40 percent of the additional tax.
4. Sprucing up your appearance
Your lawn care expenses might be deductible if you work from home and the state of your lawn matters to clients who meet you in your home office. A business owner may feel the need to keep up appearances, especially if the business is, say, a landscaping company.
5. Pools -- and more -- as medical expenses
It may sound far-fetched to claim a new swimming pool as a necessary medical expense, but it may be deductible, along with chemicals, heating, cleaning and other spending on general upkeep. The IRS puts it this way: "The cost of permanent improvements that increase the value of your property may be partly included as a medical expense." Among the other improvements that may qualify as deductions include widening hallways, upgrading smoke alarms, adding handrails and more.
6. Fostering furry friends
Volunteers cuddling cats or pampering pooches under foster care in their homes on behalf of legitimate, nonprofit animal charities -- look for the 501(c)3 designation -- may deduct unreimbursed expenses directly related to animal care. Some restrictions apply and you must be ready to substantiate your claim, but, as the tax court ruled for Jan Elizabeth Van Dusen of Oakland, California, pet food, medicines, veterinary bills and crates could all be deductible.
7. Cat patrol deduction
In another cat food fight, the IRS conceded in tax court that Samuel and Carol Seawright incurred a legitimate business expense coming up with a creative way to solve the problem of snakes and rats infesting their Columbia, South Carolina, junkyard. The couple spent $300 on cat food left out to attract wild cats that ran off the vermin. It was a small victory in a larger, lost battle that left the Seawrights owing thousands over how they determined other expenses.
8. Grab this sports donation deduction
If you're into college sports and you pay a school for the right to buy tickets to athletic events in its stadium, you could score a deduction of 80 percent of the payment, says the IRS, as long as it's not the ticket to the game. In an IRS example, you pay $300 a year for membership in a university's athletic scholarship program. Your only benefit is that you have the right to buy one season ticket for home games. You can deduct $240 (80 percent of $300) as a charitable contribution. However, if your $300 payment includes a season ticket for, say, $120, subtract the ticket price from your $300 payment; you may deduct $144, or 80 percent of the remaining $180 value of your rights payment.
9. Hosting a foreign student
If you put up a foreign exchange student in 12th grade or below, you may be able to deduct up to $50 in nonreimbursed expenses for each month he or she stays in your home, the IRS says. You'll need a written agreement with a nonprofit or government group making the arrangement, and the student can't be your relative or dependent. Otherwise, what you shell out for books, tuition, food, clothing, transportation, medical and dental care, entertainment and items for the student's well-being counts toward the $50-a-month limit. The deal is off, though, if your child will live with a family in a foreign country as part of a mutual exchange.
10. Pets on the move
If you meet the IRS rules for deducting moving expenses because you're taking a new job, don't forget to include the cost of shipping Fido and Fifi to your new home. The IRS says you may deduct the cost of packing, crating and transporting your household goods and personal effects -- and your pets, too. If your new employer is reimbursing you for the move, these won't apply.
11. Gambling ups -- and downs -- count
You want to bet that your lost wagers are deductible? What happens in Las Vegas doesn't necessarily stay in Las Vegas when you win big at the tables or slots. Gambling income counts when it's from lotteries, raffles or horse races, too. Fortunately for most gamblers, the IRS also recognizes losses -- allowing them to be deducted up to the amount of an individual's winnings.
But it's tricky. Winnings go on "other income" on line 21 of Form 1040; enter losses on "Other Miscellaneous Deduction" (line 28) Schedule A. Keep good records, says the IRS.
12. Safari write-off … perhaps?
Way back in 1950, O. Carlyle Brock, president of the Sanitary Farms Dairy in Erie, Pennsylvania, and his wife, Emily, took a six-month hunting trip to Africa and, after a U.S. Tax Court fight, were allowed to write off the safari as part of the dairy's advertising expenses.
But the case illustrates that you need to make a business argument for your exotic travels. The dairy had an ongoing wild animal campaign, often inviting customers to dine on game and watch hunting films. The Brocks filmed their adventure. Photos they took were used in advertising and local newspaper articles while they were gone. Upon their return, the animals they killed were displayed in museums, and the dairy even gave two live leopards and a tiger that the Brocks brought back to the Erie zoo and conducted a "Name-the-Tiger" contest.
"There is a little bit of the hunter in all of us, a little of the adventurer," said the Tax Court judge, quoting an advertising agent.