The U.S. tax code is incredibly complex, with an array of potential deductions that could make or break your return. There’s also plenty of misinformation out there about exactly what you can and cannot deduct, leaving most individual filers in a state of confusion about what’s OK to include and what might land them in the crosshairs of an IRS audit.
Can you spot what’s real and what’s not? Which weird tax breaks are enshrined in the tax code and which ones are precisely the sort of misguided advice that could land you squarely in hot water with the tax collector? From alimony payments to expensive wigs, take this quiz and see if you can spot which tax breaks are the real McCoy and which are mostly to completely made up.
Everyone has fun pursuits that they undertake in their spare time, some of which can wind up costing you a pretty penny. If you’re an avid knitter, woodworker or even a Pokemon card collector, you may have costs associated with your hobby, and you can ultimately write some or even all of them off. When you’re retired, you can turn your hobby into a paying gig.
Yes, You Can Deduct Hobby Expenses
If your hobby ends up producing income, you can then deduct your expenses up to that amount. So, if you enjoy woodworking and spend $2,000 on materials and equipment over the course of the year, but sell a handmade table for $1,000, you can deduct up to $1,000 of your expenses.
Child Support Payments
Ensuring that single parents are still able to provide material support to their children is a priority, so the IRS allows parents to deduct the cost of their child support payments from their taxes, an important consideration that helps them shoulder the costs of supporting their offspring. After all, there are lots of big tax questions for single-income families.
No, You Can’t Deduct Child Support Payments
No dice, single parents. Your child support payments aren’t tax deductible. They don’t count as taxable income for the payee, though, and non-custodial parents might be able to claim the child as a dependent under certain special circumstances, namely, if you are still the child’s custodial parent, or if the custodial parent is willing to complete paperwork allowing you to claim your kid as a dependent.
Wigs aren’t cheap, and they can serve any number of purposes. If you’ve purchased a wig for a business or medical need, hang onto that receipt because you’ll be able to deduct its cost on next year’s tax return, along with these medical expenses.
Yes, You Can Deduct Wig Costs
Believe it or not, your wig costs are deductible under certain conditions.
If your hair loss is associated with chemotherapy or other cancer treatments, your wig is a deductible medical cost provided your doctor advised you to purchase it for mental health reasons. It’s important to note, though, that you can only deduct medical expenses should they exceed 10 percent of your adjusted gross income (AGI), or 7.5 percent if you are over age 65.
Likewise, if you’re an actor or performing artist who’s an independent contractor and you need the wig for performance purposes, it may qualify as a business expense that can be deducted from income associated with performing.
Expenses Related to Your Pets
Owning a dog or cat can be expensive, with food and vet bills adding up. Fortunately, if the pet serves a specific business purpose, you can write those expenses off on your taxes.
Yes, You Can Deduct Pet Expenses
You can claim expenses associated with your pet under certain circumstances, primarily if your pet can legitimately be classified as a business expense.
For example, if your loyal canine companion also serves as a guard dog for your business or herds animals at your farm, you can deduct the costs. Likewise, if your cat is clearing your business property of rats, mice or other pests, caring for it is a legitimate business expense that you can deduct.
Traveling from your home to the office puts the majority of the miles onto your vehicle in any given year, which is why the IRS allows you to claim the mileage you drive to and from work every day. Commuting costs are another business expense, making them deductible.
No, You Can’t Deduct Commuting Expenses
There’s a difference between business-related travel, which you can deduct, and commuting, which you cannot. If you’re traveling from the office to somewhere else where you’re conducting business, that’s deductible. Travel from your home to your place of business and vice versa isn’t considered a valid business expense, though. Make sure you’re not accidentally committing tax fraud by taking inflated deductions.
If you collect a big deduction for your children once you’ve had them, it stands to reason that you would also be able to write off the expenses associated with finding out if you’re going to start, or expand, a family. Money spent on pregnancy tests is a tax-deductible medical expense.
Yes, You Can Deduct the Cost of Pregnancy Tests
Your pregnancy test is a tax-deductible medical expense, so hang onto that receipt. You’ll want it for your taxes, not to mention it could make for a great inclusion in any future baby book.
Gym Membership Fees
Regular exercise has a bevy of proven health benefits, which is why the IRS will happily help subsidize your efforts to get into better shape by allowing you to deduct your gym membership from your taxes. You can reduce your medical costs by getting more exercise, and also reap the benefits on your tax return.
No, You Can’t Deduct Gym Membership Fees
This is not the case. If you’ve been prescribed a specific form of exercise by a doctor, that may qualify as a deductible medical expense, but expect to include a letter of medical necessity with your taxes before the IRS will let this one fly. For everyone else, your gym membership isn’t deductible, like it or not. Ditch the gym completely and try one of these fitness apps instead.
If you’ve lent money to someone only to see them unable to pay you back, the government is ready to ease the sting of getting stiffed. Money lost to bad debts is tax deductible, so you can recoup some of the associated costs when it comes time to file your taxes.
Yes, You Can Deduct Bad Debts
It’s true, if your friend or business associate isn’t going to pay back your money, you might be able to take a write-off on your taxes. There are caveats, though. You must have previously reported the income and the loan on your taxes, reasonably believe that there is no chance you will ever receive payment and be able to prove that you made the loan with the intention of getting paid back.
While most of the focus is usually on the considerable emotional toll of a divorce, the ongoing financial cost can’t be overlooked. If you’re paying alimony to a former spouse, that additional monthly burden is tax deductible, so you’ll get back some of what you’re shelling out when you file your return.
No, You Can’t Deduct Alimony (Anymore)
At least, it won’t be in the very near future. While alimony was tax deductible under certain circumstances and still will be if you’re already divorced, the Tax Cuts and Jobs Act has eliminated the deduction moving forward, starting at the end of the year. Any divorce finalized after Dec. 31, 2018, will not come with the ability to legally deduct your alimony expenses on your taxes. So, if legal separation is in fact unavoidable, consider making sure it happens before the end of the year.
Pet Moving Costs
If you have to move for a job, you can deduct the cost of relocating Fido. It’s part and parcel with being able to deduct most of your moving expenses when you’re relocating for work, so take care to include those costs with any other relocation deductions you’re making.
Yes, You Can Deduct Moving Costs Associated With Your Pets
Unlike other pet-related expenses that generally require that your pet be a service animal or have a specific business-related purpose, pet moving costs are deductible even if the only service your pet provides is love. If your move meets the requirements for being tax deductible, you can include any costs associated with moving your pets as well.
Donations to candidates for political office are considered an important part of the electoral process and are therefore tax deductible just like charitable contributions. So if you donated to a favorite candidate or PAC, make sure you include that in your tax return.
No, You Can’t Deduct Political Contributions
That would be a hard no. The tax code makes no allowance for donations to political candidates or campaigns, and it even differentiates between nonprofit groups that conduct political activities and those that don’t, with donations to the former not tax deductible.
Volunteering your time to a charitable organization is considered an in-kind donation that you can deduct just like a cash donation. Just document how many hours you worked, determine a fair market value for the services provided and add that amount to your other charitable contributions.
No, You Can’t Deduct Volunteer Hours
Even if you’re doing similar duties to what you would do at work, you don’t get a deduction based on what you’re earning at your job. You also can’t deduct the value of the blood you donate to a blood bank, just in case you were thinking that might be worth trying, too.
Losses for a business or investment portfolio can frequently be deducted, so it stands to reason that you can also deduct losses in other areas, like your less-than-lucrative trips to the casino.
Yes, You Can Deduct Gambling Losses
This may come as a shock to many, but you can deduct some of your legal gambling losses. Emphasis on legal, here, as the losses need to be documented by the casino. That said, if you have reported gambling income on your return, you can deduct your gambling losses up to that amount. This way, the money you lost later in the year can potentially cover the taxes you owe on a successful Vegas trip earlier in the year — provided you’ve got detailed records on everything.
Claiming Pets as Dependents
For pet owners, your furry friend is a member of your family, just like a child or an elderly relative. That’s why the IRS lets you count them as a dependent on your taxes, making deductions just like you would associate with caring for any human relative.
No, You Can’t Claim Your Pet as a Dependent
This would definitely qualify as a bridge too far in the pet-related deductions department. No matter how much you might love your dog, cat, goldfish or parakeet, you can’t claim dependents that aren’t people.
Tax Preparation Fees
You can get a tax deduction for … doing your taxes. That’s right, any costs or fees associated with preparing your tax return, including paying your accountant, are tax deductible. Sometimes it pays to hire a professional.
Yes, You Can Deduct Tax Preparation Fees
The IRS may have an incredibly complex series of potential deductions, but they are ready to help you hire someone or pay for software that allows you to sift through them all to get your maximum legal return. Don’t forget to track how much you spend preparing your return, and be sure your accountant includes his or her own fee in your deductions.
Click through to get the list of 50 tax write-offs you didn’t know about.
About the Author
Joel Anderson is a business and finance writer with over a decade of experience writing about the wide world of finance. Based in Los Angeles, he specializes in writing about the financial markets, stocks, macroeconomic concepts and focuses on helping make complex financial concepts digestible for the retail investor.