By MONEYWATCH March 28, 2013, 4:12 PM
MoneyWatch) It’s hard to think there’s anything funny about taxes when you’re under a mountain of paperwork, but CBS News contributor and analyst Mellody Hobson has a little comic relief for taxpayers. In all her research about taxes, she came across some fairly ridiculous write offs the IRS has allowed — and some crazy things people have tried and failed to slip by the IRS.
First, you’d be amazed about what people try to write off concerning their pets, and it’s no wonder why — they’re expensive. According to the ASPCA, dogs and cats both cost over $1,000 a year. There was the case of the woman who claimed an unusually high amount of medical expenses for a dependent, but she didn’t have a spouse or any children. Turns out the “dependent” was her dog. Her accountant set her straight that if it’s covered in fur, you can’t claim it as a dependent. In general, pet expenses are not deductable, but there are a couple surprising exceptions.
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For instance, you can deduct expenses related to a foster animal if the goods or services are solely for the foster pet and if the organization is a registered non-profit. That means it has 501(c)(3) tax status. Also, expenses exceeding $250 may require a letter from the organization. In a landmark tax court case, a California woman was able to deduct 90 percent of the $12,000 in deductions she claimed for the 70 cats she fostered. Seventy cats. But this wasn’t your average crazy cat lady — she was working with a legitimate charity.
Another case in which you can deduct dog expenses? If you own your own business and your dog doubles as a security system. But don’t push it: You can’t deduct expenses for your Chihuahua. If you’re going to claim you employ Fido as a guard dog, you need to be a little bit afraid of him yourself — we’re talking pit bulls and German Shepherds, not a Labrador who greets you at the door with a squeaky toy. You can’t deduct the cost of the dog itself, but related expenses — like food and medical bills — can qualify. The craziest detail? You can depreciate your guard dog over its lifespan as determined by a local breeder. Remember, as with everything tax-related, documentation and receipts are crucial.
Some people want to get paid for love, and sometimes they actually can. You know that loaf of a boyfriend or girlfriend? They could add value come tax time. To claim a nonrelative as a dependent, he or she had to live in your home for the full tax year and make less than $3,800 in gross income for 2012. You also generally must provide more than half of the person’s financial support, and he or she can’t be claimed as a dependent by anyone else.
There have been a couple of completely ridiculous claims in this arena, like the man who tried to deduct money spent on his mistress as a business expense. There is another story about a man whose accountant asked him and his wife about the mortgage interest deduction on their condo in Utah. The deduction was legitimate but his wife didn’t know about the condo, where he’d set up his mistress. It may have been the last time they filed a joint return.
We recently tied up awards season with the Academy Awards, and one thing most movie stars have in common is that they aren’t hard to look at. A lot of aspiring actors and actresses are tempted to write off plastic surgery, but just because you incur an expense for business reasons doesn’t mean it qualifies as a deduction.
Cosmetic surgery is generally not deductible because it’s for aesthetic reasons. To qualify as a medical deduction, the procedure must be medically necessary, meaning it was prescribed by a physician. So a nose job could qualify if you are repairing a deviated septum. Remember, all your medical expenses, including any allowable plastic surgeries, must come to more than 7.5 percent of your adjusted gross income before you can claim them.
To qualify as a business expense, you have to prove the surgery is related to your job performance, and there is one infamous case of plastic surgery satisfying this requirement. An exotic dancer with the stage name “Chesty Love” had her breasts augmented to a 56FF and then a 56N. After the IRS ruled that her surgeries were personal expenses, she appealed, citing her surge in income post surgery.
Four years after she filed, a judge eventually ruled that the implants could be deducted, comparing them to work clothes and uniforms, which are allowable only if they satisfy a two-step test:
1 – Required as a condition of employment
2 – Unsuitable for everyday use
Considering Chesty Love’s new assets weighed in at ten pounds apiece and she would have taken them “off” after work if possible, they were considered “props” that could, in fact, be deducted.
One final crazy write-off: A young Amish man deducted his buggy. At first blush, this seems to be a completely legitimate write-off — it’s for business purposes. But the accountant looked closer and saw that the buggy had been outfitted with a velvet interior, kick plates, dash lights, speedometer, hydraulic brakes and dimmer switches. This Amish boy had completely pimped his buggy, spending over $3,500 instead of the average of about $2,700. The accountant ended up allowing him to deduct a portion of the buggy, minus the tinted windows.