Calling all aspiring filmmakers, business owners with big dreams of a Caribbean cruise and people with, er, a deadbeat friend: We might have a way for you to save some loot. Here are ten tax credits and deductions that, though unconventional, might save you a pile of money at tax time.
The "Silver Screen" Deduction
Lights, camera, (tax) action! Section 181 of the tax code states that filmmakers may deduct the first $15 million to $20 million in production costs the moment they begin shooting principal photography. The law is aimed at encouraging filmmakers to work in the United States and contribute to local economies, and it has helped jump-start a number of documentary films.
The "Bad Friend" Deduction
If you've ever loaned money to someone who didn't honor the debt, you can deduct that amount under what's called a "bad debt deduction," assuming you can prove there was a loan agreement in place and that you tried unsuccessfully to collect on the loan. This deduction also applies if your business lent money to clients or suppliers or allowed sales on credit that your customers then didn't repay.
The "It's Not a Car" Tax Credit
If you own a two- or three-wheeled plug-in electric vehicle, you can get a tax credit worth 10 percent of the cost of the vehicle, not to exceed $2,500, notes Scott D. Kadrlik, a Minnesota accountant. The law is retroactive to the start of 2012 and is in place until the end of 2013. The vehicle must weigh less than 14,000 pounds, be made for use on public streets and travel at least 45 miles per hour. It must have been purchased for personal use.
The "Cruising Convention" Deduction
If you long to conduct business meetings from the deck of a cruise ship, the IRS has your back. The agency allows you to deduct up to $2,000 a year in business expenses if attending a business-related event on a cruise. The agency requires you to document the hours spent on business activity and provide the event agenda and a statement signed by the convention's sponsoring group. All ports on the cruise must be in the United States or a U.S. possession like the U.S. Virgin Islands.
The "Banana Republic" Deduction
If you're looking to deduct an exotic business getaway that isn't a cruise and want to travel outside of the U.S., you're in luck. The IRS allows individuals to deduct travel expenses for meetings in the North American area, which includes popular tropical destinations such as Aruba, the Bahamas, Bermuda, Costa Rica, the Dominican Republic and Jamaica. You must show that your attendance at the convention benefits your trade or business and provide documentation such as a convention agenda.
The "Algae" Tax Credit
While most of us find algae a yucky annoyance, for alternative fuel producers, it's a money-saver. If you use algae to make fuel, you can qualify for a biofuel tax credit: For every gallon of algae fuel produced in 2012-'13, producers can get a $1.01 nonrefundable income tax credit, say officials at the Biotechnology Industry Organization, the largest biotechnology trade association headquartered in Washington, D.C.
The "Wholesome Food Donor" Deduction
Companies that donate food to charity can get a larger charitable deduction than typically allowed, if the food they donate is "apparently wholesome food." The law defines "wholesome food" as food that meets a set of defined quality and labeling standards, "even though the food may not be readily marketable due to appearance, age, freshness, grade, size, surplus or other conditions."
The "Ottoman Empire Redress" Tax Exemption
In 2005, California lawmakers passed a provision that allows those receiving settlement payments for being persecuted by the Ottoman Empire between 1915-'23 to exclude such payments from their income. The payments are from a $20 million life insurance benefit settlement between Armenian survivors of persecution, their families, Armenian community groups and the New York Life Insurance Company.
The "I'm Glad I'm a Foreigner Who Gambles" Tax Break
Some foreign nationals are exempt from paying taxes on gambling winnings thanks to tax treaties between the U.S. and those countries. If you hail from Austria, Bulgaria, the Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, the Netherlands, the Russian Federation, the Slovak Republic, Slovenia, South Africa, Spain, Sweden, Tunisia, Turkey, the Ukraine and the United Kingdom, party on (tax-free). All other nonresident aliens must pay a 30 percent tax on gambling income with the exception of these specific games: blackjack, baccarat, craps, roulette or the Big 6 wheel.
The "It's Good to be 100 in New Mexico" Deduction
Chances are, you don't quite qualify for this one -- but if you've lived to the ripe age of 100 and you're a resident of New Mexico, you're exempt from personal income tax. The exemption is only allowed if no one claims you as a dependent. However, state documents note that if a centenarian happens to be married to a non-centenarian, he can deduct all of his personal property income, but only half of his community property income.