Personal Finance

A ghost buster and other weird tax deductions people have tried to claim

Published

11 months ago

April 9, 2024

With the April 15 tax deadline closing in, let’s discuss deductions.

I’ve attended my fair share of multilevel marketing presentations where some “expert” claims you can turn a vacation into a deduction by scheduling a quick business meeting.

A trip becomes deductible only if the purpose is primarily business-related. Conducting a minor business meeting while on vacation doesn’t instantly transform what is really a vacation into a business trip, according to the IRS.

I’m always amused by what people try to deduct, so I asked a tax professional about the wackiest things she’s seen. Alison Flores, manager of the Tax Institute at H&R Block, highlighted some of the most creative and oddly legitimate attempts.

A client asked whether he could deduct the cost of different beers he’d taste-tested.

This person had found a way to monetize his peer-review process.

As it turned out, he had a blog and did make self-employment income, “so we had to determine which beer drinking was related to the blogging and which was just personal expenses,” Flores said.

This was a yes for deductibility. It was an ordinary and necessary business expense.

But Flores cautioned recreational beer drinkers not to try this on their tax returns.

“If you are doing it for fun, going out with the guys to drink beer and watch basketball, that’s personal and doesn’t look like a business,” she said. “There is a small fraction of people drinking beer who can deduct their beer.”

The mother of a TikTok star wanted to take a deduction for the toys that her child plays with off-camera because they are occasionally seen in the backdrop of her videos, Flores said.

“The toys looked like personal use,” she said. “It did not seem like a business expense.”

So, it was a no on the toy deduction.

3. Feeding the business mascot

People try to claim the darnedest deductions to reduce their tax bills, especially for business expenses.

In this case, a client who took her dog to work every day wanted to deduct the cost of doggy treats and toys that were kept for it at the office.

Is that a legitimate business expense?

The dog had a positive impact on clients, the person argued.

But, nope. Definitely not a deduction. It’s a pet and a personal expense.

Now, if it were a guard dog, expenses could be counted as a business expense, Flores said.

One client was advised by her doctor to exercise more for general health reasons, Flores said.

Could the cost of her water aerobics class be deducted as a medical expense?

By the way, to qualify for a medical deduction, your expenses have to exceed 7.5 percent of your adjusted gross income for the year.

“Most people don’t get past that threshold, Flores said.

The 7.5 percent threshold has long been a deterrent. But now coupled with the higher and rising standard deduction, this deduction is ruled out for many taxpayers, according to IRS spokesman Eric Smith. In tax year 2017, just over 10 million taxpayers claimed it. By tax year 2021, the most recent year for which data is available, that number had dropped to just under 4 million.

“Those that do have a lot of expenses and could qualify will find our IRS Publication 502 a useful reference,” he said.

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Then there’s the businessman who wanted to take a mileage deduction for his trips to and from the local pub for his afternoon cocktails.

Now, if he were going to the pub to meet a specific client and paying for drinks and a meal, that could be deductible, Flores said.

Because of the “ordinary and necessary” standard that applies to business expenses, details, facts and context matter a lot, Smith said.

“A given expense could be ordinary and necessary for a given taxpayer in one line of business but not in another,” he said.

6. Cost of hiring a ghostbuster

One woman asked whether the service she used to cleanse her home of bad spirits could be expensed as medically necessary.

“It may have made her feel better, but it’s not a medical expense,” Flores said.

7. Upgrading your vehicle

This final one isn’t unusual, but important to note.

Flores said she’s received questions about the medical deduction for upgrading a van for a disabled person.

“For anyone in that situation, it may be unlikely that they think of taking a medical deduction for the upgrade,” she said.

The challenge in many cases is exceeding the 7.5 percent of your adjusted gross income per year for medical expenses.

One strategy is to lump expenses in one year. So you might install a wheelchair lift for the van and make modifications to your home, such as putting in a ramp or renovating a bathroom to make it more accessible.

The deductible cost of renovations (such as installing an elevator) is the difference between the cost of the improvement and the added value to the home. However, many modifications such as widening doorways do not add value and are fully deductible, Flores said.

Personal Finance

Social Security plans to cut about 7,000 workers. That may affect benefits

Published

6 hours ago

March 3, 2025

Business Finance News

The Social Security Administration office in Brownsville, Texas.

Robert Daemmrich Photography Inc | Corbis Historical | Getty Images

The Social Security Administration plans to shed 7,000 employees as the Trump administration looks for ways to cut federal spending.

The agency on Friday confirmed the figure — which will bring its total staff down to 50,000 from 57,000.

Previous reports that the Social Security Administration planned for a 50% reduction to its headcount are “false,” the agency said.

Nevertheless, the aim of 7,000 job cuts has prompted concerns about the agency’s ability to continue to provide services, particularly benefit payments, to tens of millions of older Americans when its staff is already at a 50-year low.

“It’s going to extend the amount of time that it takes for them to have their claim processed,” said Greg Senden, a paralegal analyst who has worked at the Social Security Administration for 27 years.

“It’s going to extend the amount of time that they have to wait to get benefits,” said Senden, who also helps the American Federation of Government Employees oversee Social Security employees in six central states.

Officials at the White House and the Social Security Administration were not available for comment at press time.

The Social Security Administration on Friday said it anticipates “much of” the staff reductions needed to reach its target will come from resignations, retirement and offers for Voluntary Separation Incentive Payments, or VSIP.

More reductions could come from “reduction-in-force actions that could include abolishment of organizations and positions” or reassignments to other positions, the agency said. Federal agencies must submit their reduction-in-force plans by March 13 to the Office of Personnel Management for approval.

Cuts may affect benefit payments, experts say

Former Social Security Administration Commissioner Martin O’Malley last week told CNBC.com that the continuity of benefit payments could be at risk for the first time in the program’s history.

“Ultimately, you’re going to see the system collapse and an interruption of benefits,” O’Malley said. “I believe you will see that within the next 30 to 90 days.”

Other experts say the changes could affect benefits, though it remains to be seen exactly how.

“It’s unclear to me whether the staff cuts are more likely to result in an interruption of benefits, or an increase in improper payments,” said Charles Blahous, senior research strategist at the Mercatus Center at George Mason University and a former public trustee for Social Security and Medicare.

Improper payments happen when the agency either overpays or underpays benefits due to inaccurate information.

Top Social Security official exits after refusing DOGE access to sensitive data

With fewer staff, the Social Security Administration will have to choose between making sure all claims are processed, which may lead to more improper payments, or avoiding those errors, which could lead to processing delays, Blahous said.

Disability benefits, which require more agency staff attention both to process initial claims and to continue to verify beneficiaries are eligible, may be more susceptible to errors compared to retirement benefits, he added.

Cuts may have minimal impact on trust funds

Under the Trump administration, Social Security also plans to consolidate its geographic footprint to four regions down from 10 regional offices, the agency said on Friday.

Ultimately, it remains to be seen how much savings the overall reforms will generate.

The Social Security Administration’s funding for administrative costs comes out of its trust funds, which are also used to pay benefits. Based on current projections, the trust funds will be depleted in the next decade and Social Security will not be able to pay full benefits at that time, unless Congress acts sooner.

The efforts to cut costs at the Social Security Administration would likely only help the trust fund solvency “in some miniscule way,” said Andrew Biggs, senior fellow at the American Enterprise Institute and former principal deputy commissioner of the Social Security Administration.

What President Donald Trump is likely looking to do broadly is reset the baseline on government spending and employment, he said.

“I’m not disagreeing with the idea that the agency could be more efficient,” Biggs said. “I just wonder whether you can come up with that by cutting the positions first and figuring out how to have the efficiencies later.”

Personal Finance

Student loan borrowers pursuing PSLF are ‘panicking.’ Here’s what to know

Published

7 hours ago

March 3, 2025

Business Finance News

Students walk through the University of Texas at Austin on February 22, 2024 in Austin, Texas.

Brandon Bell | Getty Images

As the Trump administration overhauls the student loan system, many borrowers pursuing the Public Service Loan Forgiveness program are worried about its future.

“There’s a lot of panicking by PSLF borrowers due to the uncertainty,” said higher education expert Mark Kantrowitz.

PSLF, which President George W. Bush signed into law in 2007, allows certain not-for-profit and government employees to have their federal student loans canceled after 10 years of payments.

Here’s what borrowers in the program need to know about recent changes affecting the program.

IDR repayment plan applications down

Some borrowers’ PSLF progress has stalled

While the legal challenges against SAVE were playing out, the Biden administration paused the payments for enrollees through a forbearance, as well as the accrual of any interest.

Unlike the payment pause during the pandemic, borrowers in this forbearance aren’t getting credit toward their required 120 payments for loan forgiveness under PSLF. It’s unclear when the forbearance will end.

But while the applications for other IDR plans remain unavailable, borrowers in SAVE are stuck on their timeline toward loan forgiveness, Kantrowitz said. If you were on an IDR plan other than SAVE, you will continue to get credit during this period if you’re making payments and working in eligible employment.

The Education Department is now tweaking the applications to make sure all their repayment plans comply with the new court order, an agency spokesperson told CNBC last week.

It will likely be months before the Department has reworked all the applications and made them available again, Kantrowitz said.

Those who switch to the Standard plan will continue to get PSLF credit, but the payments are often too high for those working in the public sector or for a nonprofit to afford, experts said.

‘Buy back’ opportunity can help

While it’s frustrating not to be inching toward loan forgiveness for the time being, an option down the road may help, said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.

The Education Department’s Buyback opportunity lets people pay for certain months that didn’t count, if doing so brings them up to 120 qualifying payments.

For example, time spent in forbearances or deferments that suspended your progress can essentially be cashed in for qualifying payments.

The extra payment must total at least as much as what you have paid monthly under an IDR plan, according to Studentaid.gov.

Borrowers who’ve now been pursuing PSLF for 10 years or more should put in their buyback request sooner than later, Kantrowitz said.

“The benefit is likely to be eliminated by the Trump administration,” he said.

Keep records

Borrowers have already long complained of inaccurate payment counts under the PSLF program. While the student loan repayment options are tweaked, people could see more errors, Kantrowitz said.

“A borrower’s payment history and other student loan details are more likely to get corrupted during a transition,” he said.

As a result, he said, those pursuing PSLF should print out a copy of their payment history on StudentAid.gov.

“It would also be a good idea to create a spreadsheet showing all of the qualifying payments so they have their own count,” Kantrowitz said.

With the PSLF help tool, borrowers can search for a list of qualifying employers and access the employer certification form. Try to fill out this form at least once a year, Kantrowitz added.

Personal Finance

Treasury Department halts enforcement of BOI reporting for businesses

Published

10 hours ago

March 3, 2025

Business Finance News

The US Treasury building in Washington, DC, US, on Monday, Jan. 27, 2025.

Stefani Reynolds | Bloomberg | Getty Images

The U.S. Department of the Treasury on Sunday announced it won’t enforce the penalties or fines associated with the Biden-era “beneficial ownership information,” or BOI, reporting requirements for millions of domestic businesses.

Enacted via the Corporate Transparency Act in 2021 to fight illicit finance and shell company formation, BOI reporting requires small businesses to identify who directly or indirectly owns or controls the company to the Treasury’s Financial Crimes Enforcement Network, known as FinCEN.

After previous court delays, the Treasury in late February set a March 21 deadline to comply or risk civil penalties of up to $591 a day, adjusted for inflation, or criminal fines of up to $10,000 and up to two years in prison. The reporting requirements could apply to roughly 32.6 million businesses, according to federal estimates.

The rule was enacted to “make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures,” according to FinCEN.

In addition to not enforcing BOI penalties and fines, the Treasury said it would issue a proposed regulation to apply the rule to foreign reporting companies only.

President Donald Trump praised the news in a Truth Social post on Sunday night, describing the reporting rule as “outrageous and invasive” and “an absolute disaster” for small businesses.

Other experts say the Treasury’s decision could have ramifications for national security.

“This decision threatens to make the United States a magnet for foreign criminals, from drug cartels to fraudsters to terrorist organizations,” Scott Greytak, director of advocacy for anticorruption organization Transparency International U.S., said in a statement.

Greg Iacurci contributed to this reporting.