Taxpayers preparing for the 2026 tax season should be aware of common tax deductions that may be under scrutiny. The IRS keeps an eye on some deductions because they have a high rate of error. So, before you file your tax return, learn about such deductions here.
The IRS regularly updates its audit priorities to avoid any suspicious and undeserving claims. When the agency finds any tax return suspicious or claiming the wrong deduction, they might audit the return, delaying your tax return and refund.
Hence, the taxpayers need to be aware of the deductions that are reviewed with close attention and avoid audits. Last year’s tax season, the agency reported that 1% of individual tax returns were audited.
What are the common 3 tax deductions under scrutiny in 2026?
Taxpayers can learn about the three common tax deductions with a high rate or error, and they can be under scrutiny for the 2026 tax season below:
- Business Loss:
- Businesses are allowed to claim a deduction when they have a loss to have some tax relief through the business loss deduction.
- However, if the business reports a loss every year, the IRS may review the return attentively to check its legitimacy through the safe-harbour rule.
- The rule says a legitimate business creates profit out of five consecutive years, so a loss every year can be suspicious.
- The IRS will check your business plan, invoices, marketing materials, and other details to determine if you are really trying to make money.
- Home Office Deductions:
- Taxpayers can claim a deduction for using their home as an office space or for business.
- The agency keeps an eye on such claims to ensure the claim is right and authentic. The audit can happen when the deduction is claimed for a multi-purpose space.
- Charitable Donations:
- The charitable donations that can be under scrutiny are charitable donation deductions, as many high-income earners use this provision to reduce their taxes.
- The IRS can be suspicious if the donation is larger compared to your salary or when the donation is made in cash.
- According to the IRS, the charities need to acknowledge donations of $250 or more with a written acknowledgment letter, and non-cash donations above $500 need Form 8283 to be included in the tax return.
What are the other deductions that can also lead to an IRS audit?
The above-mentioned are the common or most flagged tax deductions that can lead to an IRS Audit, but here are a few others that you should be aware of:
- Rental Property Write-offs: The landlord can claim the deduction on expenses related to maintaining the rental properties and others, but it can be reviewed if its mixed rental properties or rental expenses are not explained properly.
- Self-employed Business expenses: The self-employed individuals can claim a deduction for certain business expenses to run the business, but a personal expense inclusion or missing information can cause the return to be audited.
- Vehicle Deductions: The use of a vehicle for business purposes allows the taxpayers to claim the vehicle deduction by the standard mileage rate. However, improper vehicle logs or high prices, or others can lead to an audit.
- Medical Expenses: The taxpayers can claim a deduction for medical expenses when they exceed a percentage of their gross income. However, it is reviewed under scrutiny to ensure the claim is legitimate.
What if your tax returns go to an audit?
If the IRS finds your return to have missing information or improper deductions or credit claims, your return can be audited. The IRS will send you a letter or email about the audit and tell you the details of the audit.
However, do not panic; you should read the letter properly and understand what you have to do. The IRS conducts the audit through mail or in-person interview to verify or review your tax records and supporting documents related to your claim.
The mail audit generally requires some additional information, and you have to send that to the agency to clear the audit. However, if you have too much information or tax books to report, you may receive an in-person interview audit. The audit concludes either with no change, agreement between you and the IRS, or disagreement.
How should you prepare to avoid such an IRS audit?
With some tax deductions under scrutiny, taxpayers should prepare carefully to ensure they do not face an audit. You can avoid getting your return flagged if you follow these instructions:
- When you claim any tax deductions, ensure that you have all the supporting documents to prove their legitimacy. Before you file a return, check the official IRS website to know the supporting documents for a certain deduction.
- You should keep the receipt, invoices, tax records, and other documents that can come in handy to claim any deduction.
- If you have business, keep your business and personal expenses separate to file the return separately.
- The IRS has many tools to file an accurate tax return, such as the withholding estimator tool, IRS Free File, and others.
- If you need professional help, take certified tax professional assistance in filing the tax returns.
The 2026 tax season is just a month away, and taxpayers should take every precaution to file a valid tax return to avoid any delay in tax refunds and an IRS audit.
Disclaimer: The IRS alert about tax deductions under scrutiny in 2026 is for general awareness only. Official rules and enforcement are determined by the IRS.