Jimmy Menegakis, a chartered accountant in Montreal, says that while the Canada Revenue Agency offers many unconventional ways to avoid taxes, there are also many pitfalls. Some Canadians mistakenly believe that strange tax shelters are legitimate ones, and in recent years some people have been claiming tax credits for parties, retreats and even haircuts. This highlights the importance of knowing what is a legitimate tax deduction. Here are some unconventional tax deductions, as well as some that don't work.
Unconventional Tax Deductions
Pet Food. Farmers can claim cat and dog pet food expenses because these animals are outdoor pets, and the Tax Court has found that they are used to repel wildlife and protect crops.
Plastic surgery. Breast augmentation and other plastic surgery procedures can be claimed as tax credits if they are beneficial to mental as well as physical health.
Hair transplants. This procedure is classified as a medical expense because it is considered beneficial to the patient's health.
Bad debts. If a small business owes a tax filer a ? bad debt? , that can be treated as a ? allowable business investment loss? claimed as a tax credit. If the tax filer owns stock in a small company that is bankrupt or insolvent it can also be claimed as such.
Mealtime child care expenses. Lunchtime childcare expenses can be considered childcare expenses and are therefore allowed by the Canada Revenue Agency as a tax deduction.
Haircuts, dry cleaning, and clothing. These expenses can't be used as a tax deduction, but those with a T-4 form can get a combined tax credit. It provides about $150 per year for expenses such as dry cleaning as well as haircuts, and tax filers don't need to make a detailed list of such expenses; they can simply fill out the form and file to get it.
Unavailable tax credits
Healing vacations. Every year, many Canadians take a tax deduction for vacation travel expenses with a doctor's note, but expenses such as a sea trip, a trip to Mexico, or a vacation to Florida are not tax deductible, even if a dermatologist or doctor certifies that it will help with the health of a person's skin or treatment of an illness.
Soccer. If a soccer player celebrates a goal by throwing the ball into the crowd and then claims a tax deduction for it, the tax court will say no.
Party.
Parties. An actor who attended a post-production party to celebrate the completion of a movie and claimed a tax deduction for the money spent on it was denied by the court. The judge said the actor could not prove that he attended the entire post-production of the movie.
Gambling losses. A gambler cannot take a tax deduction for gambling losses, and the court explained that the gambler did not have a ? reasonable expectation of profit?