35 quirky tax facts for this tax season
35 quirky tax facts for this tax season
The dreaded tax season is upon us again. While the countdown is worrisome for many taxpayers who despise working on their taxes or even preparing their documents to take to a CPA or preparer, learning more about the arcane system is helpful.
To brighten up this tax season (and hopefully teach you a thing or two), here are 35 quirky, wacky, and sometimes weird facts about taxes in the U.S. We compiled our list by consulting finance professors, tax service companies, CPAs and business leaders on the unusual tax situations they have encountered. They cover the spectrum from your personal taxes to ones suited for entrepreneurs and small businesses. Check to see if you qualify for any of these deductions since they can add up quickly and potentially save you thousands of dollars, (not to mention give you a head start on next year’s taxes). Enjoy!
#35. Parking tickets
The fee for parking tickets is not deductible, even if you incur them while you are working, said Abby Eisenkraft, CEO of New York-based Choice Tax Solutions Inc., an IRS Enrolled Agent (EA) and author of 101 Ways to Stay Off the IRS Radar.
The benefits you receive while you are unemployed are taxable. In some states, you will be taxed also, Eisenkraft said.
#33. Debt elimination
While you might be happy that your credit card company reduced or eliminated your balance, the difference is considered income and is in fact taxable. Be prepared to receive a Form 1099-C from the credit card company which is also sent to the IRS.
#32. Raffle Tickets
The raffle tickets you bought at a charity dinner or from a neighbor are not considered deductions, Eisenkraft said.
#31. Donating time to a non-profit
While you cannot deduct the time you spend helping out a non-profit, even if they are professional services such as writing or legal work, you can, in fact, deduct the travel expenses such as mileage or costs incurred for meals.
#30. Clergy and tips
People who work full-time or part-time to conduct weddings, baptisms or even funerals need to declare the tips and income received, said Eisenkraft.
#29. Tax preparer
People who itemize their deductions can deduct their tax preparation fees, said Eisenkraft. This includes the fee for a professional tax preparer like a CPA, software and electronic filing fees.
#28. Trade shows
The amount you pay to participate in business seminars or trade shows or the renewal of a professional license or membership of a professional association are qualified deductions, said Stephen Sheinbaum, founder of Bizfi, the New York-based small business lender.
#27. Online Classes
Entrepreneurs and their employees who take an online class or one to be certified for a certain skill can deduct the cost of the classes, said Sheinbaum.
#26. Mowing your lawn
Small business owners who meet clients or customers at their home on a regular basis can also include a portion of their lawn care expenses, said Rebecca Pavese, a CPA and financial planner with Palisades Hudson Financial Group, the Scarsdale, N.Y.-based financial planning firm.
#25. Shoveling snow
Small business owners who have a home office and had to cope with the hassle of purchasing de-icing salt or hiring a company to shovel around their offices can deduct the expenses based on the percentage of the home that is used for the business, Pavese said.
#24. Home Country
The U.S. is one of only a few countries that taxes its citizens on all their income even if they do not live in their home country, said Stan Veliotis, an associate professor at the Gabelli School of Business at Fordham University in the Bronx, N.Y.
#23. Mistakes from your spouse
If you file a joint tax return with your spouse, you can be held responsible for the errors and omissions that your spouse makes, said Veliotis.
#22. Non-taxable interest income
Non-taxable interest income can actually make your taxes go up, said Bonnie B. Holloway, a CPA and a visiting lecturer in accounting at Stetson University. Municipal bond interest is excluded from taxable income, but it is included in the computation of how much of Social Security benefits received is taxable. If you are retired, receiving non-taxable income can actually increase the amount of your income tax bill.
#21. Toilet Paper
You can deduct toilet paper if you are a landlord and need to show your property, said Sarnen Steinbarth, CEO of TurboTenant. Since you need to have toilet paper in the bathrooms, the cost can be deducted.
#20. Casualty loss from natural disaster
People who suffered a casualty loss in 2017 from hurricanes can get help from the government which will help taxpayers estimate the loss so that you don’t have to find all of your receipts, said Valrie Chambers, associate professor of taxation and accounting at Stetson University in Deland, Fla. This is especially helpful since the receipts may have been blown away or washed away in the hurricane and ensuing floodwaters. Revenue Rulings 2018-8 and 2018-9 detail the standard amounts that you may deduct as a safe harbor in lieu of your actual, individually-accounted-for damages.
#19. Stocks and accounting fraud
If two people buy the same amount of stock from the same company and the company is later convicted of an accounting fraud, they may not get the same deduction, said Chambers.
“Someone buying that stock directly from the company gets the full amount of the fraud loss, whereas someone buying that stock through the market or through a stockbroker gets a capital loss, limited to $3,000 a year in excess of capital gains,” she said. “This is because for a theft to exist, most state laws require ‘privity’ or an intent by the seller to defraud the buyer and the stockbroker or market did not intend to defraud the buyer, they were just an unwitting enabler.”
If you’re a fan of Bitcoin and fell prey to volatility, your losses are treated similarly as stocks and can be deducted. However, if you sell bitcoins for another cryptocurrency, the sale must be reported and you have to note the taxable gain or loss, said Eisenkraft. Gains in stocks and cryptocurrencies are taxable and treated as income. “Many people mistakenly think the exchange of one type of cryptocurrency for another isn't a sale but a transfer, but that's not how the IRS sees it,” she said.
Casinos will issue you a W-2G if you win a significant amount. (fingers crossed!)
The pit boss can help track your losing bets and if you keep a contemporaneous log and receipts, you will satisfy IRS requirements.
#16. Lottery Tickets
No need to throw away the disappointing lottery tickets. Keep them so you can deduct losses as an itemized deduction, up to the amount of your winnings, said Eisenkraft.
#15. Swimming Pool
You can deduct the construction and maintenance of a swimming pool only if you have a medical condition and your doctor prescribes it. You can also deduct the pool care supplies, said Eisenkraft.
#14. Fostering Animals
If you foster animals and work with a 501(c)3 charity, you can deduct your expenses such as food, treats, litter, crates or charitable miles driven to a vet or adopter, said Eisenkraft.
#13. Animal Lovers
People who make donations to animal charities can deduct their contribution to the non-profit organization, said Eisenkraft.
#12. Marijuana grow house and sales
Taxpayers can deduct the income they earn from growing marijuana, distribution or sales, said Mark Steber, chief tax officer at Jackson Hewitt Tax Service. The catch is that they can not claim any expenses since the federal government still hasn’t legalized marijuana.
#11. Whaling captains
Alaskan whaling captains are permitted a deduction of up to $10,000 a year for their sanctioned whale hunting activities, Steber said.
#10. Pole Tax
Texas has a “pole tax” which is a tax on strip clubs, peep shows, and nude dancing, said Steber. The revenue from the tax goes to sexual assault victims and health insurance for the poor.
#9. Business Gifts
The IRS considers business gifts under $25 to be tax deductible for any individual, said Steber. The IRS allows you to widely distribute gifts under $4 that feature your name and not include them in the $25 per person annual total for gifts. For example, if you buy pens with your business name and contact information for $0.50 cents a pen and you buy a $25 housewarming gift for your client, you can deduct the full cost of the pens you give away and the $25 for the housewarming gift even though your client got four of your pens.
#8. Cosmetic Surgery
Taxpayers are only able to write off cosmetic surgery as a result of specific circumstances like injuries, said Steber.
If your doctor recommends that you wear a wig, you can deduct the total cost of one, said Steber. The actual reason for the hair loss is not important. Unfortunately, deductions for hair transplants do not qualify right now since the IRS categorizes them as cosmetic surgery.
#6. Weight Loss Programs
People who are enrolled in weight-loss programs can deduct the amount of fees paid only if it was to treat a specific condition that has been diagnosed by doctors, Steber said. Expenses such as the cost of swim lessons, dance lessons, and fitness clubs are not tax deductible even if your doctor made the suggestion.
If your job requires you to wear a uniform, you can deduct the cost of them. This applies to people such as firefighters, healthcare workers, delivery workers, transportation workers and letter carriers, said Steber.
#4. Pet Moving
People who must ship their pets during a move can deduct this cost when they make a move themselves. Steber said they are considered personal effects.
#3. Pet Care
While pets or their vet expenses are still not considered as dependents, if you are the owner of a guard dog or therapy dog for the blind or individuals with PTSD, you can deduct the cost of their care, said Steber. The deductions include food, treats, vet visits, grooming and other related expenses.
#2. Clarinet Lessons
Since a clarinet can yield financial and dental benefits to those who practice the instrument, the lessons and the instrument are considered tax deductible when a doctor recommends playing the instrument in an effort to correct an overbite, said Steber.
Avid fans of bingo can deduct their losses, up to the amount that has been gained. To take advantage of this deduction, you must have a detailed list of wins and losses, said Steber.