Tax Deductions out of the Ordinary

In listing business deductions unusual items might be included, but they must fall under some general accepted tax deduction. Don’t listen to a neighbor brag about how they passed off their vacation as a business deal and got by with it and expect to cash in on that information. It’s best you don’t try to pass off your trip to the Bahamas or elsewhere as a deduction unless it was a legitimate business trip. In the United States the government is not going to reward anyone for frolicking in the sunshine at their expense; it wouldn’t be fair to other tax payers.

Legitimate business deductions

The taxable amount of goods sold, if your business is buying and selling for a profit, will be simple arithmetic: You deduct the price you paid for the items when buying against what you made when you sold them. The arithmetic stops being simple and gets complicated when you must determine an item for item profit margin. It would’ve been simple had you bought a certain amount of items for a certain price and sold them all within the year in which you’re computing your owed taxes. In business that’s seldom the case.

Some of the items will be held over and won’t be sold until the next year. If you’re storing them elsewhere and rent that space, then the cost of storing is deducted from the amount earned thus the amount of taxes owed will be lower. That also goes for any item stored and the accurate amount of time stores will figure into the amount of deduction when totaling what taxes is owed. You must be accurate within a reasonable margin for error, otherwise you’re cheating yourself or the IRS.

Unusual deductions

Unusual deductions can be anything that costs you money and took away from what you would have made in the tax year had these unusual incidences not have occurred. E lists examples of documented cases where ‘swimming for rehabilitative purposes, breast pumps, personal jet expenses and baby sitter fees’ have factored into tax deductions.

Tax deductions are different from tax exemptions. Deductible items relate to the amount that can be deducted from the amount of taxes owed because of some extraordinary happening, long travel expenses, storage fees, etc., and is different from money that is exempted from being taxed. Legitimate medical expenses are exempt, money donated to charity is exempt and there’s more.

Once you’ve figured up the amount of money made from your job or your business, subtracted the deductions then you list and subtract the amount of money you’ve given to charity—in goods, services, time, whatever— and the amount owed is the remaining digits. Of course if you’ve been overly generous on paper and not necessarily so with your wallet, you may be in for a few surprises. And likewise, you don’t want to cheat yourself, therefore if your business is rehabilitative and swimming is part of the program, then it’s understandable that what your clients paid you for swimming lessons in order to get them back to work sooner and able, will be a legitimate deduction for them.

You can list as an exemption the cost of free rehabilitative services for senior low income citizens. But don’t take this author’s word as facts, check out the IRS and see for yourself. Not everything in the tax world is in black and white nor is it as simple as addition, subtraction, multiplication and division at an elementary level. Just think what a wonderful economy the world would have if no one lied about their deductions and their exemptions, and those that didn’t could add and subtract correctly and had better memories.