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As individuals and small business owners prepare for tax season, it's a good time to review some of those weird and wacky deductions that small business owners and professionals have tried to squeak in. From concealed weapons to petting zoos, what can be considered a deductible business expense is rightfully considered a rather large moving target, with some items being easier to hit than others.
What an individual or small business owner can deduct will generally depend on the nature of their business, and whether the expense is necessary and ordinary for the business. While a necessary expense is not required to be an essential expense, at the end of the day, deductions need to make sense.
From Erotic to Exotic
While it may be difficult for you to distinguish between your personal life and business, the IRS will have no problem drawing the line. If an expense is paid by the business but appears to be a personal expense, it could raise red flags. For example, an attorney recently found himself in legal trouble after attempting to deduct expenses incurred on prostitutes under the guise of receiving necessary health benefits from sex.
Another example of an odd expense includes pornography magazines, which oddly enough can be deductible. While a dentist might be hard pressed to show that these are necessary or ordinary for his business, a boudoir photographer could easily deduct these as a business expense necessary to keep up with the trade publications.
Similarly, deductions for clothing, shoes, personal hygiene, and even elective medical procedures, generally are not deductible as business expenses. However, like the pornography example above, depending on your industry, this may not be the case. For example, an exotic dancer may be able to have a breast augmentation deducted as a business expense, or a fashion consultant will be able to deduct the purchase of apparel.
Promotion or Invitation to Audit
While sponsoring a local bowling team, or other group or event, may sound like a great way to get some exposure, not all promotional activities are deductible. Typically, the less related the sponsorship is to the type of business you run, the less likely it will be considered a deductible expense. This commonly comes up when small business owners attempt to deduct their sponsorships of their children's sports team.