Expenses You Shouldn’t Claim as Tax Deduction: Nobody desires to pay more in taxes than necessary. Thankfully, there are a lot of credits and deductions that can reduce your overall tax liability.
But do not make the error of attempting to deduct any of the subsequent costs. Why? The 2017 Tax Cuts and Jobs Act eliminated a portion of these deductions. Some aren’t deductible unless you strictly adhere to specific guidelines, or they were never intended to be deductions in the first place.
Expenses You Shouldn’t Claim as Tax Deduction
If you are audited, claiming the following “deductions” can come back to bite you.
1. Unpaid work-related expenses
Prior to the Tax Cuts and Jobs Act of 2017, taxpayers who itemised could write off a wide range of ancillary costs as long as they didn’t exceed 2% of their adjusted gross income. Included in this were unpaid job expenditures.
However, the 2017 tax reform stopped this deduction. Therefore, the average worker is now unable to write off the expense of union dues, uniforms, business dinners, or entertainment. (Self-employed individuals have additional wiggle room if they include a Schedule C with their tax return.)
2. Costs associated with moving
Currently, moving costs are not deductible. The 2017 tax reform also suspended this deduction.
Active-duty military personnel who move due to a new assignment are the lone exception.
3. The work desk that is integrated into the kitchen counter
Should you be self-employed or a business owner, you can be eligible for a deduction for your home office. But if you bend the rules, you may make this reasonable deduction seem false.
Stacy Johnson, the creator of Money Talks News, states in “Do You Qualify for a Home Office Deduction?”
“Working at the dining room table alone is insufficient to meet the requirements. You must designate a portion of your house as your primary place of business and keep it clear of other uses.
Therefore, the kitchen counter where you set up your laptop in the morning and chop veggies in the evening cannot be considered your “home office.” It cannot be the desk that the children use for their homework and that you use for work.
4. Damage incurred in a home fire
The deduction for net casualty and theft losses was limited by the Tax Cuts and Jobs Act. Now, only losses attributable to a federally declared catastrophe are eligible for tax deduction by taxpayers.
5. Household coverage
As we explain in “9 Federal Income Tax Breaks for Homeowners,” the federal government graciously permits deductions for a portion of the expenses associated with homeownership. However, not all expenses related to homeownership are deductible.
For instance, unless you own a rental property, your homeowners insurance costs are not deductible.
6. Home equity loan interest
In certain circumstances, paying off higher-interest debt—like credit card debt—with a home equity loan can be a wise financial decision. However, this does not allow you to deduct the interest payments.
The guidelines for home equity loan interest deductions have been modified.As stated by the IRS:
“Unless the loan proceeds were used to buy, build, or substantially improve your main home or second home, interest paid on most home equity loans is not deductible.”
7. Local and state taxes exceeding $10,000
For many years, one of the biggest advantages for taxpayers in numerous states has been the deduction of state and local taxes on federal tax returns. However, the Tax Cuts and Jobs Act of 2017 severely reduced this deduction.
Only $10,000 in taxes paid to state and local governments are now deductible, or $5,000 if you file your taxes as a married couple filing separately, according to the IRS.
That might sound like a lot if you live in an area with low taxes, but for taxpayers in states like California and New York, where property taxes can be high, it represents a big loss.
8. Cosmetic Surgery
Although you cannot write off cosmetic surgery on your federal income tax return, it may be considered a medical expense.
However, according to the IRS, there is an exception if the surgery “was necessary to improve a deformity related to a congenital abnormality, an injury from an accident or trauma, or a disfiguring disease.”
9. A trip prescribed by a doctor
You cannot deduct a week-long vacation to the Bahamas from your taxes, even if your doctor recommends it for your health.
If you were “away from home to receive medical care provided by a physician in a hospital or a medical care facility related to a hospital, provided there was no significant element of personal pleasure, recreation, or vacation in the travel,” the IRS states that lodging costs are deductible medical expenses.
10. Contributions to politics
It is not acceptable to deduct donations made to political candidates or organisations. Your contributions are not deductible because these organisations are not tax-exempt charities.
Use the IRS’s Tax Exempt Organisation Search Tool to see whether donations to any particular organisation are deductible.
11. Charity volunteer hours
For taxpayers who itemise their deductions, the IRS permits a deduction of up to 14 cents per mile for the expense of running an automobile for charitable purposes. However, contributions of your time and skills are not deductible by the government.
12. Baby sitter for date night
It’s true that there is a credit for dependents and children. However, not every child care cost is covered.
If you meet the other requirements of the credit, you may only claim the credit for care that you received in order to work or actively seek employment.
That means you cannot subtract the cost of the babysitter from your date night budget, even if it keeps you sane enough to return to work on Monday.