Taxpayers have been known to have some of the most inventive and abundant sources of imaginative deductions, all usually based upon the
slimmest threads of reality.
"such stuff as dreams are made on..."
Here is a list of common deductions taken over and over again by taxpayers when they shouldn’t even be considering them. Alothough we have probably highlighted most of them on other pages in this websie, we thought we might compile a number of them on one page here.
The following items are NOT deductible:
Fines and Penalties. If you can’t afford to break the law, then don’t bother trying to deduct the costs you may have for any illegal business activity, big or small. You might be late to a business meeting but the ticket for speeding ticket and/or parking illegally is not deductible.
Consider if you were in the business of selling marijuana. It may be legal in your state to sell it but because it is still against Federal laws to do so, any of the costs that you would normally be allowed to consider writing off as a business expense are a non-starter-payroll, rent, utilities…everything. You would end up having to pay taxes on 100% of your income.
Apparently there is one story out there about a man who paid an arsonist to burn down one of his buildings and then was dumb enough to send him a 1099-MISC because he wanted to write off the expense. He lost the deduction and more than a few years in jail.
Tax Penalties as well That’s for any reason and any jurisdiction, state, local or otherwise; including tax penalties sustained with sales tax, excise tax, and payroll tax returns.
Commuting Mileage Just because you drive your car or spend money getting to work doesn’t mean every mile is a deduction. Yes, the specific business usage is OUTSIDE of commuting, along with charity miles and moving from one location to another when necessary. But commuting to work and back is not. By that we mean driving/commuting each day from home to work and back.
Life or Disability Insurance Premiums on a personal tax return, even if you believe they should be a business expense.
Business clothing, or any other clothing that can be worn on the street If your employer demands that you buy a uniform as a condition of employment (i.e. one that displays their logo) you can probably get away with the cost. If it is an obvious costume then too an examiner will usually allow it but be prepared to show pictures to demonstrate the expense.
Membership in a gym, country club or any other organization whose main purpose is to provide entertainment or exercise to its members or provide entertainment facilities for its members - is not deductible. It’s an uphill battle on this one so don’t think you can prove the value of the expense just because you just happened to get some new business out of the participation.
Personal Living Expenses of any kind. You know this but somehow they keep sneaking into your list of deductions. Suddenly your children are included as employees and their expenses for “Business Trips” are listed as deductions along with your own.
Charity Deductions of Time you contributed. This is usually not your fault but caused by charities who need your services and who try to convince you that they can write a letter allowing you credit for the hours of service you contribute to assist them. Even if it is a valid charity, your time alone is not deductible. You can, however, deduct out of pocket costs that you incur while performing those services.
Reimbursed Job Expenses. If your company has already paid you for expenses you incurred working for them, do not try to also include them on your return as well. That will only get you into trouble. That’s why the form you use to write off your acting deductions is titled “UNREIMBURSED Employee Expenses.” Don’t get greedy, the company has already paid you back, so it hasn’t cost you anything.
The costs of hair, make-up and nails, in general. Unless you can tie the expense directly to a job, it will get tossed if the IRS chooses to audit your return. Don’t try the argument that you have to match your head shots because the auditor will probably suggest you go re-shoot your headshots. We know actresses like to claim they have to pay more for these beautification costs because it is their job to look good, but try to convince every “civilian” woman in business that dresses well and is concerned about her professional appearance that you are entitled to these deductions while they aren’t.
That said, if you can prove an expense was the result of a job, then those specific circumstances may allow the costs. One young lady who was allowed a facial treatment because she had been forced to wear excessive makeup for several days as a Star Trek alien. Another actress had syrupy goop poured over her head which forced the hairdressers to wash and restyle her hair for numerous takes. She too was allowed a deduction for a hair treatment appointment. These exceptions allow a deduction directly connected to an acting job, but not the maintenance of that look.
Home Improvements. At some point, almost every homeowner spends money for some kind of improvements to their home. Most home improvement are not deductible although they may, if they are major improvements, add to the basis of your house (increase the overall value) and therefore assist you in lowering your capital gains when you sell the home. Some improvements, such as energy efficient improvements, may generate tax credits at various times under the law. You should investigate the tax breaks BEFORE you make the investment and make sure you fulfill all of the qualifications required before you make the purchase.
Investment related seminars Even if the purpose is to invest company funds, the expense does not qualify as a tax deduction. Travel, meals and cost of the seminar are also not deductible.
Campaign Expenses. Contributions to any public campaign are not deductible, whether it is yours or anyone else on any level, local, county, state or national.
Professional Accreditation Fees such as those incurred to take the bar exam, get your accounting license, medical or dental license are not deductible. Why? Because you are not already involved in the business so how can you take a deduction for a business you have no income from? However, continuing education fees once initial licensing has occurred are allowed to be deducted.
Pet Care. They may seem like family but the expenses are not deductible unless they are service animals. In that case you can include the costs of buying, training and maintaining those animals as part of your deductible medical expenses. In this industry it is possible you could be an animal trainer and use your “pets” for income purposes and in that situation you could be able to expense the costs of upkeep as well but only if you can prove the business value of the animal.
Attorney's Fees As a general rule, taxpayers cannot deduct most legal fees including fees related to divorces, disputes over property boundaries and personal injury cases. However, you can deduct personal legal fees that you paid to determine, contest, pay or claim a refund of any tax (including tax advice). Business related legal expenses are deductible, as well as those legal fees related to producing or collecting taxable income.
(This one can be a bit confusing so read carefully.)
Weight-Loss Program You cannot include in medical expenses the cost of a weight-loss program if the purpose of the weight loss is the improvement of appearance, general health, or sense of well-being. BUT you can include in medical expenses amounts you pay to lose weight if it is a treatment for a specific disease diagnosed by a physician (such as obesity, hypertension, or heart disease). This includes fees you pay for member-ship in a weight reduction group as well as fees for attendance at periodic meetings. However, as always, your total medical costs have to exceed 10 % of your AGI before they start to be counted.
You cannot include amounts you pay to lose weight UNLESS the weight loss is a treatment for a specific disease diagnosed by a physician (such as obesity, hypertension, or heart disease). If the weight-loss treatment is not for a specific disease diagnosed by a physician, you cannot include either the fees you pay for membership in a weight reduction group or fees for attendance at periodic meetings.
However: You cannot include the cost of diet food or beverages in medical expenses because the diet food and beverages substitute for what is normally consumed to satisfy nutritional needs. In other words, you cannot write off the food because you would have had to eat something any way and since that food wouldn’t have been deductible, this expense can’t be deductible. (It really is fair.)
As always, you cannot include membership dues in a gym, health club, or spa as medical expenses, but you CAN include separate fees charged at the same location for specific weight loss activities (again if you have a diagnosis from a physician), just not the cost of joining to be able to participate in the wieght loss activities.
Medical expenses paid for unnecessary cosmetic surgery. This includes any procedure that is directed at improving the patient's appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease. You generally cannot include in medical expenses the amount you pay for procedures such as face lifts, hair transplants, hair removal (electrolysis), and liposuction.
There are always exceptions to cosmetic surgery, but usually only when they become medically necessary. Breast reconstruction after breast cancer mastectomy can be allowed. The exception to that might be if you make your living in the adult film industry or as a stripper (If your tips and level of income are directly proportional to your after-market proportions, you could argue that the enhancements are business expenses.) An eyelid lift allowing you to play ten years younger would be a nope, but eyelid lifts because your lids are drooping over your lashes and impeding your vision – yep. Chemical peel (even when done in a dermatologists office) – nope, but burning skin cancer off your face – yep.