April 15, 2011
The Internal Revenue Code is packed with thousands of tax deductions, from write offs for unreimbursed medical expense to deductions for cheese baskets for clients. But because nobody wants to pay more than their fair share of taxes — and because the Tax Code is often dizzyingly complex — it’s the time of year when even honest taxpayers may find themselves considering “imaginative” deductions. Almost 34 percent of tax returns claimed itemized deductions for the tax year 2008, according to tax publisher CCH. Some are totally legit; others are completely ridiculous, such as when Leona Helmsley attempted to deduct the cost of underwear as a business expense.
PHOTO GALLERY: The 8 Craziest Tax Deductions Approved by the IRS
Some taxpayers find themselves in a murky legal area, such as The Marin Alliance for Medical Marijuana in Fairfax, Calif. The state of California views the alliance as a legal business; the Feds aren’t so sure. The company’s founder, Lynette Shaw, told the Marin Independent Journal in March that the IRS had audited the alliance’s tax returns for 2008 and 2009 and disallowed millions of dollars in business deductions, such as buying marijuana and renting office space, based on section 280E of the federal tax code, which deals with businesses trafficking in controlled substances.
That’s not to say that the IRS hasn’t let slide a few wacky deductions. Since it’s the last weekend before federal returns are due, we thought we’d provide a little comic relief in the form of offbeat deductions that have actually worked. Careful, though: the IRS considers each taxpayer’s situation individually — and there are many exceptions to every tax rule. If the Feds disallow your deductions you could be subject to penalties and interest charges, so consult a tax expert before you get too creative. In the meantime, enjoy these inventive deductions.
To read all of The Fiscal Times’ Tax Day Countdown Series click here.