Social media is full of quick tax tips, but many of them leave out important rules. Following incorrect advice can lead to penalties, back taxes, or audits. Here are 10 common social media tax claims and the truths behind the ideas.
1. “Write Off Everything If You Have an LLC”
Truth: Having an LLC can open the door to valuable tax deductions, but only for expenses that are ordinary and necessary for your business. Think of costs like equipment, supplies, or marketing. Keeping personal spending separate helps you get the full benefit of legitimate write-offs while staying compliant.
2. “Everyone Should Claim the Home Office Deduction”
Truth: The home office deduction can be a great opportunity if you use a space exclusively and regularly for business. It’s especially useful for self-employed individuals. Be sure your workspace and records meet IRS guidelines so you can claim it with confidence.
3. “Hire Your Kids to Avoid Taxes”
Truth: Involving your kids in your business can be a smart move — and tax-efficient too — when handled properly. Pay them a fair wage for real work and maintain good records. Done right, this strategy teaches valuable skills while keeping your business documentation solid.
4. “Change Your Residency Easily”
Truth: If you’re thinking about changing your tax residency, consider the full picture: where you live, work, and have financial and family ties. Taking the time to plan carefully can help you establish the right state residency and avoid surprises later.
5. “Trusts Make Income Tax-Free”
Truth: Trusts can be powerful tools for estate planning and asset protection when used correctly. Work with a qualified professional to understand their rules and tax effects; that way, your trust structure supports your long-term financial goals.
6. “Everyone Qualifies for These Credits”
Truth: Tax credits are one of the best ways to lower your bill. Just make sure you meet the eligibility requirements for credits like the Earned Income Tax Credit or energy-related incentives. Double-checking qualifications ensures you maximize savings and keep your filings error-free. If you are considering using the gas credit know that the IRS is watching these closely.
7. “The IRS Doesn’t Audit Small Businesses”
Truth: Audits can happen to anyone, being prepared is the best defense. Keep clear documentation, file accurately, and seek advice when needed. With organized records, you can approach tax season confidently and stress-free.
8. “You can Avoid Taxes When You Invest in Short-Term Rentals like Airbnb and VRBO”
Truth: Most long-term rental properties are considered passive investments for tax purposes; meaning losses generally can’t reduce your regular income. But short-term rentals often qualify as a business, especially when the average stay is seven days or less (or up to 30 days if you provide extra services, like cleaning or guest support). To use losses from a short-term rental to offset other income, you need to show that you’re actively managing the property — not just collecting rent and paying bills. This means spending a meaningful amount of time on things like guest communication, cleaning coordination, repairs, and marketing.
9. “Buy a Luxury Car Under Your Company and Deduct it as Business Expense.”
Truth: The vehicle must be used for business purposes at least 50% of the time. You need to keep detailed records (mileage logs, dates, purposes) to prove this percentage. You cannot deduct the portion of the vehicle’s cost or expenses related to personal use (including commuting from home to your workplace).
10. “If You’re Self‑Employed You Can Deduct Everything and Pay Zero Taxes by Using a SEP IRA or Solo 401(k)”
Truth: Contributing to a 401(k), or SEP IRA can reduce your taxable income today (or defer tax) and help build long‑term wealth. Since retirement contributions do not reduce self-employment taxes and you must have net income to contribute you are unlikely to ever reduce your total taxes to $0.
How to Check Information Safely
- Beware of any claims that a tax tip is Every, Always or Never.
- Look at verified IRS social media accounts (linked from IRS.gov).
- Use IRS Free VITA tax preparation services if eligible (VITA).
- Contact a Low Income Taxpayer Clinic if you have a tax dispute (LITC).
- Work with a qualified tax professional or CPA firm (like Greenwood Ohlund).
Conclusion
Social media can be helpful for learning general concepts, but tax situations are personal. Before acting on advice from the internet, verify the details with a licensed tax professional who can help you apply the rules correctly to your situation.
Stacy Rose – Senior Tax manager
