The last couple of years have been even more confusing for taxpayers than usual. Thanks to major changes stemming from the 2017 Tax Cuts and Jobs Act, Americans who file their 2019 taxes this season are less likely to claim the same deductions they did in the past (and less likely to get a refund).
President Donald Trump’s tax plan reduced or eliminated several tax deductions, while also increasing the standard deduction significantly. That made it more difficult for taxpayers who usually itemize deductions to write off expenses, such as state and local taxes, mortgage interest and charitable donations.
Even so, several unusual deductions were left off the chopping block, and some were even expanded. So, if you thought you wouldn’t qualify to itemize your taxes this year, you may be able to after all by claiming one of these absurd deductions.
Private plane deduction
Always wanted your own private plane? You might be convinced to pull the trigger on a purchase, thanks to a valuable tax deduction. It does come with one catch, though.
If the plane is used for non-recreational purposes or leased to a flight school, the entire purchase price and maintenance expenses can be deducted. This deduction is part of what’s officially called “bonus depreciation,” which helps business owners invest in new equipment by providing them with a tax break.
Prior to the 2017 tax overhaul, taxpayers could deduct up to 50% of the cost of machinery, software, furniture and other equipment during the first year it was put into use. The rest of the deduction would be amortized over multiple years, based on how long that equipment was expected to last. The new tax law, however, made it possible to deduct 100% in the first year and expanded the deduction to cover used property in certain instances.
When it comes to your private plane, it needs to be used for business purposes at least 50% of the time after the first year to keep the deduction. The other half of the time, feel free to jet-set as desired.
If you’re the lucky owner of a luxury boat, there’s a chance you could score a tax deduction for it. Usually, yachts are considered leisure items and don’t qualify for tax deductions. However, if your boat doubles as your second home, you may be able to write off the interest on a loan.
This deduction falls under the mortgage interest deduction, which allows homeowners to deduct interest on loans for their first and second homes. Previously, this deduction let taxpayers write off interest on loan balances up to $1 million, but the Trump tax law cut that amount down to $750,000.
In order to qualify as a home, the vessel must have a head, sleeping berth and a galley (that’s a bathroom, bed and kitchen to you landlubbers). If any of these features are missing, you can’t claim the deduction. But any respectable yacht surely has all three, and then some.
In life, you win some and you lose some. But when it comes to gambling, losses could qualify to be deducted from your taxable income.
The key is that you also need to win some money. When calculating the taxes owed on that cash (yes, you have to claim gambling winnings as income), you are allowed to deduct any losses incurred, up to the amount of your winnings. And it’s not just chips lost to the roulette or craps table that you can write off; any other reasonable expenses incurred, such as travel to the casino, can also be included.
This tax deduction was once only available to professional gamblers, but the new tax law expanded it to cover amateurs, too. Just be sure to carefully document how much you’ve won and where the gambling took place. Also, keep in mind that you need to itemize your taxes in order to claim it.
Personal pool deduction
Thinking a pool would make a lovely addition to your backyard? If you can prove you need it for medical reasons, you may be able to write off the cost of building and maintaining it.
According to the IRS, qualifying medical and dental expenses that can be written off using a Schedule A form must be related to the diagnosis, cure, mitigation, treatment or prevention of a disease. So, your pool or hot tub needs to relieve or prevent a certain ailment. And the medical issue can’t be self-diagnosed ― you’ll need an actual prescription from a physician.
In order to qualify, the pool must be used in the capacity prescribed by your doctor. Sipping margaritas in a floatie doesn’t count as treatment. You also have to prove that there isn’t any reasonably priced pool or spa near your home that you could use instead.
If you qualify for the deduction, the amount you deduct must be in excess of 10% of your adjusted gross income (7.5% if you’re age 65 or older). You’ll need to calculate the difference between the cost of building the pool and any value it adds to your property. So, it’s important to get a home appraisal before and after the installation. For ongoing maintenance, keep detailed records of the upkeep costs so you can write them off on future returns, provided the pool is still being used for medical reasons.