The 8 Craziest Real Estate Depreciation Tax Professionals Ever Seen – The Hamden Journal
Itemizing your deductions is much less common than it used to be, thanks to the tax overhaul signed by President Donald Trump in 2017.
But rental property owners and home business entrepreneurs always have the option to write off – and they often get creative.
Accountants all have stories of enterprising homeowners crafting their own wacky real estate deductions that, if left unchecked, could have resulted in IRS audits or worse.
Do you have your own wacky idea to lower your taxes? You’ll want to connect with a tax professional first – to avoid ending up in a room of shame like this.
1. When the accountant said, “I don’t! “
Cleveland-area CPA Elizabeth Dittrick admits that while she approved of the sentiment behind a client’s travel deduction, she wasn’t about to say yes.
“There was a guy who had a rental property and tried to deduct limo fees the year he got married claiming he took his tenants out for a night on the town, when I knew it was ‘was for her wedding, ”she said. said.
“I ended up refusing to sign the declaration.”
2. A security system with real bite
A Texas CPA had a client whose security expenses for his rental properties seemed a bit too high, but deducted them as the cost of installing automated systems at each location.
That is, until the IRS verifies the owner’s taxes.
“Turns out her security expenses were her dog – and all dog food and vet expenses,” recalls the CPA.
As for those site specific expenses? They were intended to take the dog to the various properties.
3. His tax return needed a renovation
If you work from home, you are allowed to deduct improvements to the office part itself, while improvements elsewhere can be written off based on the percentage of home office use.
But one of Dallas CPA clients Ken Sibley almost tripped.
“The most disturbing return was a self-employed woman who demanded that she be able to deduct more than $ 30,000 she paid to renovate her house,” says Sibley.
“The only problem was that the area that was remodeled did not include its actual home office.”
4. The case of costly adoption
A 65-year-old woman in Kissimmee, Florida, took such a liking to her student renter and handyman in her twenties that she decided to adopt her – at least on her taxes.
The move allowed her not to claim her rent payments as income for three years.
When the IRS found out, it slapped him with $ 7,000 in back taxes and penalties.
Ironically, because her new “nephew” had renovated part of her house, she could have offset that expense with the rental income – and found herself in better shape than claiming him as a dependent.
5. Totally ungodly travel expenses
Dallas CPA Sibley remembers a new client and henchman seeking sinful tax relief.
“The minister wanted to cover the travel and related costs incurred when the whole family was traveling the country looking for real estate investment goods,” Sibley recalls.
“But none were ever found and none had been purchased in the past few years.”
6. “And if the refrigerator broke, I would starve!” “
Ah, the old home security system ploy. We have seen legitimate home businesses trying to claim their dogs and even cats as a security expense.
But the Hunter Group in Fair Lawn, New Jersey, once recalled a client who had an even more creative reason for trying to cushion the cost of keeping her home safe.
“Reasoning? If the client’s house was broken into and she was killed, she could no longer pay taxes,” laughed the CPA.
Using this logic, we think it might write off food as well.
7. Too much luggage
Sometimes the preparation of tax returns can involve informal negotiations.
Don Meyer of the New Jersey Society of CPAs remembers when a director and a family member of a famous artist asked for an immediate and full tax deduction on a $ 2 million office building they were considering making to buy.
“At one point in the drama, a suitcase containing a very large sum of money appeared as an incentive for the accountants to ‘make it work’ in one way or another,” recalls Meyer.
So what happened?
“The suitcase full of money was turned down, and the extravagant claim was never included in the tax return – at least, not the one the accountants prepared before resigning from the account.”
8. They needed advice, not a CPA
Elizabeth Dittrick recalls a particularly uncomfortable encounter with a married couple.
The land deduction was legitimate; it was the underlying asset that turned out to be the problem.
“We were reviewing their tax information and the tax director asked the gentleman, ‘So what about the mortgage interest deduction for the condominium in Utah? »», She remembers.
Unfortunately, the guy’s wife was unaware of the apartment in Utah, as it was there that he had placed his mistress.
“It was a ‘big oops’ moment,” says Dittrick. “There was this stony silence in the room. It was absolutely horrible.
How to save money (legitimately)
You don’t need to bend the rules to lower your tax burden or get a bigger refund.
Good tax software can track down all kinds of deductions you might not be familiar with, and you can save even more money by getting it back early.
If that isn’t enough to make a difference in your budget, you can always try some of these fundamental strategies for saving and making money:
Get a better mortgage rate. Interest rates are historically low right now, but they might not stay that way for long. If you refinance, you may be able to save hundreds each month and thousands over the life of your loan.
Consolidate high-interest debt. With interest rates as low as 20% or worse, credit cards make it easy to get into debt. Combining all of your balances into one loan with a much lower interest rate can help you save hundreds and get off debt faster.
Invest in an active “good”. Banksy and Andy Warhol’s fine art returns have crushed the S&P 500 in recent years. Previously, this was only an option for the ultra-rich, but with a new investment platform, you can also invest in iconic artwork, just like Jeff Bezos and Bill Gates do.
Convert pennies into a wallet. Even if you don’t have a lot of money to spend, you can still earn big returns in today’s stock market. A popular app will help you invest your “spare part” from everyday purchases.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.