Tax Insights

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Minnesota CPAs’ List of Outrageous Tax Deductions

For some reason CPAs are not known for a great sense of humor. So it’s refreshing to see the Minnesota Society of Certified Public Accountants (MNCPA) release an annual list of the most outrageous tax deductions clients tried to take on their tax returns.

“Creativity is rewarded in many parts of society, but not by the IRS,” said MNCPA Chair Bob Sannerud. “While there can be some exceptions, many of the deductions our members identified would’ve raised red flags from the IRS. A CPA can best advise clients on whether a deduction should be removed from their tax returns.”

While it is sometimes hard to apply the tax law, these deductions from their list would seem over the top!

  • A daughter’s wedding: Sure, weddings are entertaining. But deducting the full cost as an entertainment expense does not make for a good relationship with the IRS.
  • The cost of speeding tickets: Even if it’s because you were late for a business meeting, speeding tickets are fines and therefore, not deductible on your tax return.
  • Misinterpretations of charitable donation: Charity can take on many forms. But for one CPA’s client, a vehicle that was impounded by the police was not deemed a qualifying deduction.
  • Boats: Want smooth sailing on your tax return? Then you should not deduct your boat as a “water computer,” as one CPA had to inform their client.
  • A fur coat worn to promote a cleaning business: As one tax filer learned, you’ll never outfox the IRS. And, we can’t help but wonder, what would the fox say?
  • A wedding ring: A diamond is forever, and so is a taxpayer’s inability to deduct the cost of a wedding ring.
  • An ATV as a medical deduction for stress relief: No doubt, it’s fun to go out and let ‘er rip on the trails. But, the CPA and the IRS weren’t buying the ATV as a medical deduction in this case.
  • Infant “employee”: Sure, you can bring your children into the family business and count them as employees. But, as one business owner discovered, children who can’t yet walk or talk rarely qualify. Plus, they want everything handed to them.
  • School lunches as a business expense: As one business owner learned, unless her child is closing business deals with other first-graders at the school, these lunches aren’t deductible.

Contact your CPA for the best advice on deductions allowed under the law!

By Melinda Nelson, CPA