The U.S. tax code is over 700 pages long and contains some of the most complicated sets of rules and regulations in existence, and it is filled with many contradictions and loopholes. Taxpayers often end up paying more tax than they owe because they are unaware of many of the deductions that are available. Of course, many of the lesser-known credits only apply to a very specific group of taxpayers. Here is a list of little-known tax deductions and credits that are overlooked by many filers.
Expenses For Housing Pets
If you work for a qualified 501(c)(3) charity that finds permanent homes for pets, you can deduct any expenses that you personally incur to care for the animals, such as food, cages, leashes, toys, litter and cleaning supplies. Mileage that you incur to drive to such places as the veterinarian may also be deductible if you can prove that it was used for the care of pets that are to be placed.
Alternative Medical Treatments
Although many taxpayers are aware that traditional medical expenses such as prescription drugs, doctor and hospital bills can be deductible in some cases, less common treatments such as acupuncture and herbal remedies may also be written off. Even home improvements or modifications such as a swimming pool may be deductible if they were built or installed primarily for therapeutic or rehabilitation purposes.
Alaskan Whaling Expenses
Although whaling has been largely outlawed in most American waters, there is an exception. If you happen to be the captain of a boat that hunts bowhead whales in Alaska, then you can deduct up to $10,000 of expenses incurred to pay your crew, maintain and repair your ship and distribute the whales that you catch. However, you have to be hunting primarily to provide food or other materials derived from the whale hides for your family, and you must be a member of one of a group of native Alaskan tribes that are specified by the Alaska Eskimo Whaling Commission to hunt bowhead whales. Furthermore, the hunt cannot be done for the purpose of making a commercial profit; it must be done according to the rules of cultural tradition that mandate an annual hunt that will only kill a few whales each year.
Hosting an Exchange Student
If you are hosting a student from a foreign country, then you may be eligible for a monthly tax credit of up to $50. Several conditions must be met in order to qualify for this credit. First, the taxpayer must have an official agreement with the organization that is sponsoring the exchange program, and that organization's reason for existence must be either solely or primarily to provide educational opportunities and experiences for its students. The exchange student must also be a full-time high school or secondary school student and cannot be a relative or family member of the host.
Paying Off the Deficit
Yes, if you want to help Uncle Sam climb out of debt, you can write a check that is payable to the Bureau of the Public Debt and take a deduction for your contribution in the same manner as if you made a contribution to charity. You can mail your check to:
Bodily Enhancements Related to Your Work
Although the IRS will not allow taxpayers to deduct the cost of simply staying healthy, they will allow taxpayers in certain professions to deduct expenses related to their physical appearance. The tax courts have ruled that bodybuilders can deduct the cost of body oils and other products that are used to enhance the appearance of their skin. Exotic dancers and actors and actresses in the adult film industry have also been allowed to deduct the cost of certain bodily enhancements that they may purchase in order to find greater success in their jobs.
Babysitting Expenses
While the Child and Dependent Care Credit covers the cost of child care for taxpayers who are working or looking for a job, the cost of babysitting for kids while a taxpayer does volunteer work for a qualified charitable organization is also deductible.
Plug-In Electric Vehicle Credit
Businesses that purchase and use certain types of qualifying cars and trucks that run on chargeable batteries can take a credit of up to $7,500 per vehicle. The rules for this credit are somewhat complex and are subject to a phase-out for businesses that purchase and use more than 200,000 vehicles.
The Bottom Line
Although most of these credits and deductions are not going to apply to the majority of taxpayers, filers should take care to ensure that they do receive all of the deductions that they're qualified for. If these seemingly obscure deductions exist, it suggests there's a good chance some of your unique expenses are deductible. For more information on tax deductions, visit the IRS website at www.irs.gov or consult your tax or financial advisor.
