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Tax audit warning flags, part 3: be wary of unusual tax deductions

Beauty, it's often said, is in the eye of the beholder. But that isn't really true of tax deductions. No matter how necessary a certain expense may seem to a given taxpayer, that doesn't mean the IRS will agree.

In fact, if you try to claim too many unusual tax deductions, the agency may flag your tax return for an IRS audit. Taxpayers in California and across the country need to be aware of this risk when deciding which deductions to take.

To be sure, there are documented cases of seemingly outlandish deductions being allowed. For example, a professional bodybuilder was allowed to deduct as a business expense the "posing oil" that enabled sweat to glisten so appealingly on his sculpted body during competitions. The bodybuilder took his case all the way to U.S. Tax Court and prevailed against the IRS.

Keep in mind, however, that taxpayers typically face long odds in making claims for deductions that are too far from the beaten path. In particular, it's chancy to try something like deducting a swimming pool as a medical expense. Even though laps in the pool are good exercise for people with bad backs or other medical conditions, that doesn't mean the IRS will allow the deduction.

And trying to claim a deduction that the IRS disallows could cause the agency to scrutinize the rest of your return more closely. Even the bodybuilder lost in part, when he tried to take deductions for peculiar dietary items: buffalo meat and vitamin shakes.

Indeed, even a well-known deduction like the home-office deduction can backfire. If the IRS concludes you aren't really eligible for that deduction, it could make it more likely that your tax return will be audited.

Source: "12 tax audit red flags - You claim fishy deductions," Money, 3-21-13

Additional source: Five of the Strangest Tax Deductions Ever Allowed by the IRS," Block Talk, Jenna Bromberg

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