With April 15th right around the corner, we thought it would be fun to take a look at ten of the strangest items that people have tried to claim as tax deductions. Not all of these deductions were approved by the IRS, but you might be surprised by the ones that actually were!
Retired lawyer William G. Halby attempted to claim $113,537 worth of “therapeutic sex,” “massage therapy,” and “pornography in lieu of Viagra” on his 2002 tax return. Halby had been frequenting illegal prostitutes and massage parlors claiming that the services provided were a medical necessity. This creative fellow claimed the sex he had with prostitutes was therapeutic in that frequent orgasms decreased his erectile dysfunction and erotic massages relieved his osteoarthritis.
The IRS disagreed, denying his claim due to the fact that soliciting a prostitute is an illegal activity in the state of New York, and you cannot deduct illegal expenses.
Turns out, lending money to people who won't pay you back can actually work out in your favor. If you lent money to someone and never received a single repayment on the debt, you are entitled to write it off on your tax return that year. These personal “deadbeat debts” are different than regular business debts because you can't go after anyone to make good on them; there is no business responsible for a noncollectable personal debt.
Professional body builders like Jay Cutler (pictured here) know that coating the muscles with oil is a necessity when competing in IFBB championship matches. The IRS recognizes that body oil is a must-have product for professional bodybuilders, which is why a tax court ruled that all oils used in competition can be deducted as a legitimate business expense. However, the IRS will not allow deductions for bodybuilder favorites like supplements or buffalo meat, so don't go too crazy with those 1099's.
4Sex Change Operation
In February of 2010 a Boston, MA court made history by ruling that Rhiannon O'Donnabhain, a woman who had been born a man, could deduct $5,000 of the $25,000 that she had spent on a sex-change operation and hormone therapy. The IRS had originally denied O'Donnabhain's claim, so she sued them with help from a legal group called The Gay & Lesbian Legal Defenders.
This is a landmark case in the transgender community; they argue that gender identity disorder is a legitimate medical condition and should be treated as a health ailment that necessitates treatment. The tax court agreed, ruling that hormone therapy and sexual reassignment surgery are the preferred treatment for gender identity disorder and should therefore be tax deductible.
After years of trying in vain to sell his failing furniture business, a Pittsburgh, PA business man hired someone to burn his store down to the ground. The store owner received $500,000 in insurance money and would have gotten away with the fraud if he hadn't tried to fool the IRS as well. When he deducted $10,000 for “consulting services” (the fee he had paid an arsonist to burn down his business) the IRS audited him and he was fined $6,000. Subsequently both he and the arsonist were sent to jail for insurance fraud.
While in some countries like Australia it is legal for prostitutes to deduct the cost of the tools of their trade, including items like make-up, sex toys, condoms, lingerie, and lubricants, it is still against the law to do so in the U.S.A. The IRS refuses to allow deductions for illegal activities such as prostitution.
If you own a junk yard, you might be used to a certain number of rats and snakes roaming around amidst the debris. However, one junk yard owner found that the vermin were negatively impacting his business, so he started putting out bowls of cat food to attract their natural predators: cats. It worked, and before long he had eliminated the problematic rodents and snakes, making his junk yard more attractive to clients who needed to find auto parts and other discarded items. Since the cat food served a purpose and made the business more viable the IRS approved the deduction.
As of 2010, you can claim $1,200 on line 38a of your tax return simply for having vision less than 20/200 or a field of vision that's less than 20 degrees. Why is that? Well, the U.S. government reasons that many war veterans are blind, and that blind people also have a higher cost of living. The blind also tend to require guides, readers, taxis, and sometimes must live in higher-rent districts to be closer to jobs and other services.
Sure, it may seem like a swimming pool is meant purely for recreation, but if your doctor tells you that swimming laps several times per day will help your health you may be able to write off the cost of installing a pool as well as the chemicals required to maintain it. The classic example is a patient suffering from osteoarthritis whose doctor told him to swim for physical therapy purposes. The patient had a lap pool with special stairs installed in his home, leading the IRS to approve the tax deduction because the pool was designed to provide the patient with medically necessary physical therapy.
In one of the most famous and oft-talked about cases of crazy deductions, stripper Cynthia “Chesty Love” Hess underwent a series of surgical breast enhancements to increase her bust to a staggering 56FF. Once Love went back to work, her massive breasts (weighing 10 lbs each) were such a huge hit with her clientele that her tips doubled. Since the cost of the implants positively affected Love's income, the IRS determined that her breast enhancement was a legitimate business expense. A few years later when one of Love's implants ruptured and required follow-up surgery she was able to deduct that surgery as a business expense as well.