…it probably is. That’s how the cliche goes, and it’s generally accurate. If someone tells you:
- If you invest $10,000 in [whatever], you magically get a $50,000 deduction;
- If you buy $20,000 of Brazilian accounts receivable, you can get a $120,000 deduction;
- Your home in the middle of the city is eligible for a conservation easement, and you can get a $100,000 deduction;
- You can get a tax credit on undistributed long-term capital gains by using Form 2439; or
- You automatically qualify for a self-employment tax credit;
Ask yourself a question, “Does this sound too good to be true?”
If you invest in something and it loses money, there is likely a loss available. But (a) passive losses are limited to passive income (until you dispose of the investment) and (b) losses are limited to the amount of your basis (your basis begins with the investment amount). Here, a $10,000 investment likely limits your loss to $10,000.
If you purchase $20,000 of Brazilian accounts receivable, there’s no way you can get a $120,000 deduction.
Conservation easements are real, but (a) your house in the middle of Las Vegas or Chicago is almost certainly not eligible for one, (b) you need a reputable appraiser, and (c) this is a very high audit area where you need bulletproof records.
There really is a Form 2439, but it’s not a magic deduction or credit. It’s simply a notice of the capital gains that a mutual fund has not distributed but paid tax on. You have to report the capital gain (and you do get a credit for the taxes the mutual fund paid). Generally, they’ll offset. (I’ve seen this form just twice during my 27 years of tax preparation work.)
Half the self-employment tax you pay is a deduction, and there were some tax credits (during the pandemic) for self-employed individuals. But (a) you need to be self-employed, and (b) there is no magic credit today. The 50% deduction of self-employed tax for the self-employed still exists, though.
I have had a client talk to me about every item I mentioned above. And the cliche held: these were too good to be true, and other than the self-employment tax deduction and the two clients who really did need to file Form 2439, there was no magic bullet for my clients.
If something fails the ‘smell test,’ it likely is too good to be true (and is, thus, false).
That’s a wrap on our Bozo Tax Tips for 2026! Please, please don’t do these. Instead, be smart and remember it’s almost always a whole lot easier to just pay your taxes correctly.
