Early spring is often a time of reflection and a time to get your financial affairs with a tax accountant in order so you can enter the new financial year with your best foot forward.
This allows you to look carefully at your business and see whether there are ways to reduce your tax bill by determining your allowances and deducting expenses.
Most of these allowances are reasonable business expenses that are necessary for organisations big and small to keep themselves running, but in some cases, some rather bizarre and baffling tax loopholes have been (or in some cases still are) on the books in different countries.
Here are some of the most ridiculous loopholes that have existed at one point or another in the world.
The Yacht Tax Deduction
The American tax system has several ostensibly sensible deductions on it that have been creatively used to reduce tax on the most ridiculous items, and one of the most infamous of these is the use of the mortgage interest deduction to deduct taxes on luxury yachts.
Essentially the loophole stems from how the US tax code defines a ‘home’ for the purpose of deducting up to $750,000 of mortgage debt. So long as the ‘home’ has bathroom facilities, cooking facilities and a bed, it is a home, which includes many yachts.
So if your home is paid off, you can deduct that interest on any second home, which includes trailers, boats and mobile homes.
Kidnapped Child Tax Benefits
According to the US IRS, if a child has been kidnapped by someone other than a family member, that child can still be named as a dependent for the purpose of tax deduction and child tax credits.
Whilst it is somewhat ridiculous that such a specific tax decision has been made, the empathetic decision is in part to not add any additional pain to an already traumatic situation.
No Tax For Centenarians
Whilst people who love to the grand old age of 100 years old receive a letter from the Queen, in New Mexico a person who reaches a three-digit age does not have to pay personal income taxes, although they cannot claim this break if they are registered as a dependent.
Pool Deductions
There are some cases where swimming or spending a lot of time in water is necessary to treat certain medical conditions, but whilst the WaterSure scheme is somewhat restrictive in its eligibility criteria, this was not the case for one person suffering from bronchitis.
After being prescribed a swimming regime by his doctor, he built a swimming pool and due to it being seen as a medical necessity, he could write off the cost of its construction, so long as he deducted the amount his home increased in value because of the new pool.
He could even write off the costs of upkeep.
A similar loophole in 1962 allowed a taxpayer to write off the cost of their child’s clarinet lessons as they were prescribed by an orthodontist.