Men & Money

Beware of These Red-Flag Deductions

It’s tax time again, and according to the IRS, about one-third of all taxpayer’s will itemize deductions on their tax return this year. Done right, itemizing certain home, health, or business expenses could save you money! Beware: There are some red-flag deductions which could easily trigger an IRS audit, a fine, or even jail time! So here are four deductions to avoid, according to tax planner Jeff Schnepper and MSN Money.

• Tax red-flag #1: Your pet. A basic rule of thumb is this: If it has four legs and no Social Security number, you can’t deduct it! Because no matter how much your pet “depends” on you for food, care and shelter, they’ll never qualify as a dependent in the eyes of the IRS. People try this all the time!
• Another deduction which screams “audit me”: Your car. Some people think they can write-off all their car expenses by simply painting the name of their business on a car, and declaring it a “business vehicle.” The reality is that you’ll probably only be able to deduct the cost of the paint you used – as an advertising expense! So, unless the business you own actually paid for the car and you only use it for business purposes, you can’t deduct it.
• A 3rd audit-trigger: Your house. The rules for deducting a home office are very clear: You can only claim a room used exclusively for business purposes. Unfortunately, some people overlook the “exclusive” part and try to write-off a room with a computer that their kid does homework on! Others have even tried to claim the full value of their house as a “home office!” Good luck explaining that one when the tax auditor calls.
• Here’s one last tax deduction which will easily trigger an audit: Body parts. Believe it or not, some organ donors have tried to claim the ultimate gift of life as a tax-deductible charitable contribution! As much as we love the idea of helping save someone’s life, the IRS generally defines “charity” as giving away “Your entire interest in the property.” In other words: Unless you donate your entire body, you can’t deduct the value of a single body part.