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Can I Deduct That? Mastering Tax Lingo to Sound Like a Pro

July 26, 2012
Taxes
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You don’t need to be a CPA to impress your friends with your knowledge about taxes—even if you don’t know much! While tax laws can be complicated and overwhelming, here’s a cheat sheet with some lesser-known deductions that can significantly fatten your wallet.   If you learn just a little about the tax laws that affect you and your friends, they might just thank you by buying the next round! (You can tell your teetotaling pals that trips back and forth from AA are deductible as medical expenses).

1. Feel like partying? You can deduct the cost of a shindig as long as you talk about business—so make sure to ask everybody “Working hard, or hardly working?” while you set out those tiny quiches. And tell your guests you’ll be deducting that shrimp cocktail they’re guzzling down—they’ll be jealous of your hosting skills and your tax savvy. You’ll have to show that you engaged in business, so make sure to swap a few business cards.

2. When your galpal loans money to her deadbeat boyfriend, tell her to get a promissory note. When he can’t pay her back because he spent it all on a guitar and “this really sweet bike,” she can deduct the loan as bad personal debt—as long as she can prove to the IRS that it was a loan and why she’s sure it won’t be repaid. (Just keep in mind that “He’s a stupid jerk” probably isn’t enough for the taxman).

3. Taking a billiards or hip-hop course at your community college? Work sending you to continuing education classes? Learning French while you save up for that trip to Paris you’ve been dreaming of? Save your receipts—you’re eligible for up to $2,000 in Lifetime Learning credit.

4. How about your roommate’s deck of Pokémon cards or your brother’s mint-condition comic book collection? If they make a profit on their hobbies, they can deduct their earnings—even if it’s just $200 for that old coin your cousin found with her metal detector.

5. The Saver’s Credit is specifically for American couples who earn less than $57,500 a year and individuals who earn less than $28,750. If you sock your savings away in a retirement account like a 401(k) or an IRA, you can receive a credit of $1000—or $2000 if filing with a spouse. Only 21% of taxpayers who qualify for the Saver’s Credit know about it—so tell all your friends!

6. Call your parents right now—there’s a new rule that makes it even more important for you to beg for their help paying off your astronomical student loans. Even if they make the payments, you still get to claim the tax deduction, as long as they don’t claim you as a dependent.

There’s some precedent for even wackier deductions, but make sure you tell your friend who looks suddenly…bustier…that breast implants can only be deducted if you can prove they’re a business expense. So unless she works at Rack City, she won’t be able to get tax credit for them. And you might want to remind your single friend with the seven cats that even though she calls them her children, they’re not—even though every year hundreds of taxpayers try (and fail) to write off their pet cats, dogs, and pigs as dependents. But if you can convince your neighbor to build a pool, he might be able to deduct those expenses—as long as his doctor says a good swim will help his arthritis. The IRS doesn’t have to know that you’ll be dipping your toes in, too.

Remember to check out all the info on the IRS’s site, as well as consult with an accountant, if you intend to actually do any of these with an eye towards the tax benefits. As noted above, tax law is picky and complex—these are things you can claim in some circumstances—so watch out when you put your flashy knowledge to work.

 

Clueless image via Shutterstock