Tax advice is a common topic on social media platforms like TikTok. Influencers promise easy ways to secure tax deductions, simplifying complex ideas into bite-sized claims that gloss over important details in the process.

In this article, we’ll separate the facts from the fiction regarding these social media claims, highlighting the difference between ‘popular’ and ‘professional’ tax advice—a difference that can have profound consequences when dealing with the Internal Revenue Service.

Table of contents

  1. Can You Write Off a 6,000 lb Car as a Business Expense?
  2. Can Hiring Your Children Help You Save on Taxes?
  3. Does Remote Work Allow You to Write Off 100% of Your Rent?
  4. Are Personal and Lifestyle Expenses Deductible for Influencers and Entertainers?
  5. Can You Claim Your Pet as a Tax Write-Off?
  6. Are Capital Gains from Cryptocurrency Tax-Free?
  7. Do You Need an LLC to Claim Tax Write-Offs?

Can You Write Off a 6,000 lb Car as a Business Expense?

Section 179 of the U.S. Internal Revenue Code (IRC) allows businesses to deduct the full purchase price of certain depreciable assets, including vehicles, in the year of purchase rather than depreciating them over time. However, misconceptions about this provision—particularly regarding luxury SUVs—are commonplace on social media.  

To qualify for Section 179 deductions, vehicles must be used at least 50% for business purposes, with the deduction amount corresponding to the percentage of business use. For example, if a vehicle is used 75% for business, only 75% of the deduction applies. Vehicles must also meet specific eligibility criteria, including a gross vehicle weight rating (GVWR) of 6,000 lbs or more to qualify for enhanced deductions.  

A brief guide to GVWR limits:

Vehicles 6,000–14,000 lbs GVWR: Deduction limit of $30,500 in 2024, with bonus depreciation options available.  

Vehicles below 6,000 lbs GVWR: Limited deductions of up to $20,400, combining Section 179 and bonus depreciation.  

Vehicles exceeding 14,000 lbs GVWR: Heavy vehicles are fully deductible when used exclusively for business purposes.  

Beyond qualifying weight limits, detailed mileage logs and substantiation of business use are required for deductions. Misrepresenting deductions or inflating business use can lead to audits and penalties, so businesses should approach Section 179 with care.  

Can Hiring Your Children Help You Save on Taxes?

Hiring your children within a family business is a legitimate and potentially advantageous strategy when approached correctly. Despite social media claims suggesting it’s illegal or akin to tax evasion, hiring your children offers distinct financial and educational benefits, assuming you adhere to labor laws and tax regulations.  

The key benefits  

Reduced tax liability: So long as you’re paying reasonable wages to your child, you can lower overall tax liability. For instance, children can earn a gross income up to $14,000 (2024) tax-free under the standard deduction, shifting income to a lower tax bracket.  

Retirement contributions: Children earning wages may contribute to IRAs or Roth IRAs, further reducing taxable income while building long-term savings.  

Education credits: Shifting income to children may make them eligible for credits like the American Opportunity Tax Credit (AOTC), which can help offset the expense of higher education.  

Children under 18 can typically be paid without payroll tax implications, while older children may be classified as W-2 employees or 1099 contractors, each with distinct tax obligations. In all cases, businesses must comply with federal and state labor laws regarding young workers, pay fair market wages, and maintain accurate records.

Does Remote Work Allow You to Write Off 100% of Your Rent?

A pervasive myth suggests that remote workers can write off their entire rent or mortgage as a business expense. This misconception arises from a misunderstanding of the home office deduction. The Internal Revenue Service (IRS) only allows a deduction for the portion of a home that is used exclusively and regularly for business purposes. This area is typically calculated as a percentage of the total square footage of the home.

For example, if a home office occupies 10% of a home’s total area, only 10% of expenses such as rent, utilities, and maintenance can be deducted. What’s more, the space must be used exclusively for business—multi-purpose spaces, such as a living room that doubles as a workspace, generally don’t qualify. 

To claim the deduction, taxpayers must meet specific eligibility requirements, with self-employed workers typically benefiting more from this provision. Employees working remotely due to company policies are not eligible, as the 2017 Tax Cuts and Jobs Act removed home office deductions for W-2 employees.

Are Personal and Lifestyle Expenses Deductible for Influencers and Entertainers?

Whether it’s appearance-related costs like makeup or clothing hauls, the Internal Revenue Service has strict rules about what lifestyle expenses can be deducted. To qualify as a write-off, expenses must be both “ordinary and necessary” for your specific business and not suitable for personal use. If an item or service has everyday use, it’s generally not deductible.  

For instance, while a clothing haul might be featured in a content creator’s video, the IRS is unlikely to view the purchase as solely business-related unless it’s part of a costume or has no practical use outside of work. 

Similarly, appearance-related expenses like haircuts or makeup are rarely deductible since they can be used in daily life. The IRS Entertainment Audit Technique Guide tends to take a narrow view of what qualifies as a legitimate deduction in these industries, so it’s important to seek professional advice before making claims.

Can You Claim Your Pet as a Tax Write-Off?

The idea of writing off your pet as a work expense, such as a guard dog or a therapy animal, might sound appealing, but it’s far from straightforward. To claim pet-related expenses, you must clearly prove that the animal is used for business purposes—and even then, deductions are limited.  

For instance, a medical professional who brings their personal dog to the workplace to help calm patients may have a valid business reason for doing so. However, this doesn’t justify deducting all of the dog’s expenses, and attempting to do so may trigger IRS concerns. This myth highlights the need to be circumspect when claiming deductions, as stretching the truth can lead to costly audits or penalties. 

Incidentally, pets cannot be written off as dependents, as some TikTok videos would have you believe.

Are Capital Gains from Cryptocurrency Tax-Free?

Cryptocurrency may be a relatively new way to earn or trade money, however, the IRS has clear rules that apply to digital assets. Recent updates to the Internal Revenue Code specifically address cryptocurrencies. 

When crypto is received as payment for goods or services, it’s taxed as ordinary income, with the value determined by the fair market value of the cryptocurrency at the time of receipt. This means it must be reported like wages or business income. On the other hand, selling cryptocurrency is generally treated as a capital transaction. Gains or losses from these sales are taxed as capital gains, either short-term or long-term, depending on how long the cryptocurrency was held.  

When striving to stay compliant, it’s important to maintain detailed records of all cryptocurrency transactions, including purchase price, sale price, and dates. Additionally, understanding the specific tax implications of staking rewards, mining income, and crypto-to-crypto trades will help you avoid any unexpected liabilities. Crypto investors should consult a tax professional to ensure full compliance with IRS regulations.

Do You Need an LLC to Claim Tax Write-Offs?

No, you don’t. What’s more important is that your business is a full-time concern, not just a hobby that occasionally brings in extra cash. The IRS distinguishes between a business and a hobby based on your intent to make a profit, the time and effort you put into it, and whether you depend on the income from it. As long as your activity qualifies as a business, you can deduct eligible expenses, even without forming an LLC. 

For many small businesses or independent contractors, setting up an LLC may not actually be that helpful at all. If you earn $80,000 or less in 1099 income, an LLC might not offer major tax benefits, and in some cases, it could even create additional administrative costs. For most individuals, filing as a sole proprietor is perfectly sufficient to claim business deductions like office supplies, travel, or business-related meals.

Find your tax advisor at Harness 

While social media has its uses, tax advice may not be its forte. If you have tax concerns, it’s advisable to speak to a dedicated professional. At Harness we help clients find tax advisors with the expertise required to meet their unique needs.

Sign up for our annual tax services to book a call with one of our advisors today.

FAQs

What is the Section 179 deduction?

Section 179, part of the Internal Revenue Code (IRC), allows businesses to deduct the cost of qualifying equipment, including vehicles, in the year of purchase, rather than depreciating it over time.

What is the GVWR requirement for Section 179 deductions on vehicles?

The Gross Vehicle Weight Rating (GVWR) determines the Section 179 deduction limits for business vehicles. For 2024, the limits are as follows: Vehicles with a GVWR of 6,000 lbs or more: $30,500 deduction limit. Vehicles with a GVWR of less than 6,000 lbs: $12,400 deduction limit.

What qualifies as business vehicles for tax deductions?

Business vehicles used at least 50% for work purposes may qualify for deductions. The deduction amount depends on the percentage of business use and the vehicle’s weight, with specific limits set for each tax year.

What is the Section 179 deduction limit?

The Section 179 deduction limit is the maximum amount of equipment purchases that can be deducted in a single year. For 2024, the Section 179 deduction limit is $1,220,000. 

What tax deductions can small business owners claim?

Small business owners can claim deductions for eligible expenses, including business vehicles, business equipment, office supplies, and certain home office expenses, provided they meet IRS tax code requirements.

Is it legal to hire your kids in your business?

Yes, it’s generally legal, but you must comply with child labor laws and pay them reasonable wages.

What are the tax implications of hiring your kids?

Hiring your kids can shift income to a lower tax bracket, potentially reducing your overall tax liability.

What are the key legal considerations when hiring your kids?

You must understand and comply with federal and state child labor laws, including age restrictions and permissible work types.

Are crypto gains tax-free?

No. The IRS taxes cryptocurrency gains as either capital gains or ordinary income, depending on how the crypto is used. Make sure you keep detailed records for compliance purposes.

 

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