Ask the Expert: Can You Deduct a Toupee from Taxes?

Q. My boyfriend, Richard, became self-conscious about his baldness last year and went out one day and purchased a toupee. We also took in a foster cat, landscaped our property, and installed an in-ground pool to help us stay fit. I know these things sound random, but I read online that you can deduct some pretty surprising things. Do you know about tax deductions we can take this year, that might appeal to seniors? Also, is the estate planning we did with you last year tax deductible?A. It sounds like 2014 was an eventful year for your family! With tax season in full swing, seniors (and most Americans) are looking to deduct all that they can. And, for those who itemize deductions for their tax returns, there are some truly surprising deductions you can take. Unfortunately, a toupee is not one of them, unless your boyfriend’s hair loss is traced to a disease. These are some others that may interest and surprise you:

• Pet Food and Veterinary Bills: You can deduct veterinary bills and pet food, only if they are for your foster pet. As an example, Jan Van Dusen, a California family lawyer, devoted most of her time outside of work caring for feral cats, 70 to 80 at one time. A tax court found that she was entitled to much of her claimed $12,068 in cat care expenses as a charitable deduction on her income taxes. In another case, Seawright v. Commissioner, a couple ran a junkyard. They put out food to attract wild cats to control snakes and rats, making the junkyard safer for customers. When they claimed the cat food as a business expense, the IRS said no way. However, the tax court disagreed.
• Moving the family pet: If you are changing jobs and meet a couple of tests, you can deduct your moving expenses–including the cost of moving your dog, cat, or other pet from your old residence to your new home.
• Swimming Pools: If swimming pools are used for medical purposes. as prescribed by a doctor, they can be tax-deductible. In Cherry v. Commissioner, the taxpayer had emphysema and installed a swimming pool after his doctor ordered an exercise regimen. The primary purpose of the pool was medical care, so he was able to deduct the pool, part of the cost of heating the pool, pool chemicals and part of insuring the pool area.
• Fitness: Fitness is tax-deductible, if your doctor signs off on it, and tells you that your life might be in danger if you don’t start exercising and lose weight. The cost for remedies that help you drop a few pounds, improve your heart rate, or reduce your cholesterol might all be deductible.
• Significant others: Couples who can claim their significant other as a dependent can also use them as a tax break. In order to do so, couples must have lived together for an entire tax year and the significant other must have an annual salary of less than $3,900. Also, the individual claiming the tax break must show they have paid for more than half of their significant other’s expenses. A total of $3,900 can be claimed if all the qualifications are met.
• Home Landscaping: Some landscaping costs, lawn care, and driveway repairs may be tax-deductible if you have a home office. Keep in mind, however, that home office deductions are scrutinized. In Langer v. Commissioner, a man regularly met clients in his home office, and kept up the place to make it suitable. It wasn’t all deductible, but the tax court allowed him to deduct part of the landscaping costs.
• Clarinet Lessons: A doctor recommended that a patient take up the clarinet because the way the instrument is positioned in the mouth lessens the pain of an overbite. The patient’s parents bought him a clarinet and paid for lessons, which they were then able to take as a deduction since it was, in fact, a medical recommendation.
• “Exceptional” Trees: If you have an araucaria heterophylla–commonly known as Norfolk Pine–in your backyard, you’re in luck. The Norfolk Pine is considered an “exceptional tree,” and you could get a $3,000 deduction to maintain the special species. (Unfortunately, this is only in Hawaii.)
• Deadbeat Friends: Did you lend a friend cash in a pinch, never to see the money again? Don’t despair–all is not lost. You can write off the unpaid amount if there’s no hope to collect payment.
• Organ Donation: Organ donors can deduct not only any medical costs associated with the donation, but also costs of transportation.
• Deep sea fishing: As long as business discussions are conducted and you are attempting to do business on the fishing trip, it would be possible to deduct this type of expense. However, these types of deductions may be heavily scrutinized.
• Bariatric Surgery: The IRS ruled that obesity is a medical disease, which means that specific treatments aimed at curbing obesity are allowable deductions, including bariatric surgery. As with all medical expenses, you can only deduct unreimbursed expenses that exceed 7.5% of your adjusted gross income (AGI).
• Addiction Treatment: Drinking, smoking, and drug abuse are serious medical hazards, so the IRS has ruled that you can write off expenses related to quitting. Eligible deductions can include the cost of any products or programs designed to help you quit, including nicotine patches or other aids. In-patient treatment at a drug or alcohol facility including meals, lodging and some transportation expenses can also be deducted as medical expenses. Additionally, transportation to and from meetings like Alcoholics Anonymous or Narcotics Anonymous, if attended based on doctor’s orders, can also be written off.
• Bingo: Bingo-playing taxpayers can deduct the amount lost in a given year, up to the amount that was won. The Internal Revenue Service (IRS) allows taxpayers to deduct losses for other types of wagering, too. To do so, they must keep a detailed diary of the kind of wager, where they placed it, who they were with, and how much they won or lost.

For more unusual deductions, please read, “Tax Day: Seven Unusual Deductions” on our blog. Please also check out our “Tax-Time Series” for deductions for caregivers, claiming a parent as a dependent, deductions for long-term care medical expenses, and more.

You asked whether estate planning is tax deductible. The answer is yes. A percentage of your estate planning expenses are tax-deductible. In both Merians v. Comm’r, 60 TC 187 (1973) (involving estate planning using an irrevocable trust) and Wong v. Comm’r, TC Memo. 1989-683 (1989) (involving estate planning using a revocable trust), the Tax Court ruled that twenty percent (20%) of a non-itemized estate planning bill was deductible as tax advice under Section 212(3).

Attorney’s fees are deductible only to the extent they exceed 2% of the taxpayer’s adjusted gross income and they are subject to a phase out when the adjusted gross income exceeds a certain amount. They cannot be taken into account in computing the alternate minimum tax. In order to take advantage of the 2% rule, the client should pay all deductible legal fees in one year.

Attorney’s fees are deductible to the extent they are incurred:

• to produce income that is includable in the recipient’s gross income;
• for the management, conservation, or maintenance of property held for the production of income;
• in connection with the determination, collection, or refund of any tax;
• to the extent they are paid for tax planning advice.

Expenses, to be deductible under section 212, must be “ordinary and necessary.” Thus, such expenses must be reasonable in amount and must bear a reasonable and proximate relation to the production or collection of taxable income or to the management, conservation, or maintenance of property held for the production of income.* When deductible, attorney’s fees are treated as “miscellaneous itemized deductions.”

Here at The Law Firm of Evan H. Farr, P.C., we suggest that 20% of the total fees that you paid to our firm can appropriately be considered deductible tax advice. Please note that getting a tax refund might affect your Medicaid or Social Security benefits. However, since everyone’s situation is different, it is wise to contact a Certified Elder Law Attorney, such as myself, to walk you through this process and ensure that you are not doing anything to affect Medicaid eligibility.If you have a friend or loved one who hasn’t had the chance to meet with an Estate Planning Attorney this year or if you or a loved one need nursing home care now or in the future, please make an appointment for a consultation by calling us at 703-691-1888 in Fairfax, 540-479-1435 in Fredericksburg, 301-519-8041 in Rockville, MD, or 202-587-2797 in Washington, DC.