Say what you want about the loopholes that corporations exploit to escape taxes - at least they aren't cutting off their employees' arms to do it. Though the Florida Rent-a-Cow scam might be the latest entry on the long list of ridiculous techniques people use to avoid paying taxes, it certainly isn't the dumbest way that get out of paying Uncle Sam every April.

Whether it's due to poorly worded amendments or just horribly outdated tax codes, nearly every state in the union offers some insane way for its residents to dodge paying taxes. And while many of these loopholes, like Hawaii's "Exceptional Tree" exemption, are only good for a few thousand dollars a year, some of them are costing their respective states - and the IRS - millions of dollars in revenue every year. Here's a look at some of the craziest ways people avoid paying taxes today.

SEE: A Concise History of Changes in U.S. Tax Law

The Florida Rent-a-Cow Credit
A 1959 reform to Florida's property tax codes dramatically lowered the rates for "agricultural" land in order to encourage more farmers to work within the urban-sprawl-ridden state. However, a loophole in the law meant that anyone could legally qualify their land as farmland by stocking it with a few cows. As a result, the Walt Disney Corporation and Florida's other major landowners have found a way to collectively dodge $950 million a year in county taxes by hiring "Rent-a-Cow" ranchers to let their livestock graze on soggy lots and acres of carefully-mowed grass. Even celebrities like Tom Cruise dodge property tax on their vacation homes by letting a few sheep hang out on the lawn. Though several attempts have been made to close the loophole over the years, they've been crushed by Florida's agriculture lobby every time.

Washington's DIY Cigarette Discount
Though prepackaged cigarettes sold in Washington state are subject to the same high taxes as they are in every other state, a loophole in Washington's tax rate on straight loose leaf tobacco isn't nearly so harsh. As a result, many convenience stores have opened up "Roll Your Own" stations where customers can buy the tobacco and rolling papers at a massive discount and use a machine in the store to roll a carton's worth of cigarettes - 20 packs of 20 cigarettes, 400 smokes in total - within 10 minutes for half the price of a standard carton. According to the Seattle Times, this loophole is causing the state to miss out on $12 million in revenue every year.

The Arkansas Credit for Naturally Destroyed Automobiles
If you live in Arkansas and your new car is destroyed in an earthquake or hurricane, then you're in luck. A stipulation in the state's tax codes allows anyone whose vehicle is destroyed in a natural disaster to receive a tax break. The only stipulations are that the car must be reduced to less than 30% of its retail value and the owner must have made payments on it in the last 180 days. That's hardly a replacement for the car that got swallowed by the schism in the earth, but at least the victims will have a good story to tell at their next party, right?

The Accelerated Depreciation of NASCAR Tracks
A 2008 reform to the federal bailout legislature, known as TARP, included a very generous tax break for the owners of NASCAR's racing tracks. Instead of writing off the costs of their "motorsports facilities" over the 39 years that the government estimates it will take for the tracks to depreciate, NASCAR owners are allowed to write off their properties in seven. Thanks to the accelerated depreciation, track owners dodge a collective $40 million in federal taxes every year.

The Limbless in Oregon Tax Credit
If you or your spouse have permanent and complete loss of the use of two or more of your limbs and live in Oregon, then congratulations - you've just earned $50. Under the state's Credit for the Elderly or the Disabled, any state resident with permanent and complete loss of the use of at least two limbs is entitled to a $50 tax credit every year. In order to claim the benefit, any applicant must first have an official form signed by a health official confirming the applicant's disability before he or she files his or her taxes. If anything, you would think this would be the one loophole that Oregon would make a little more lucrative, but, on the bright side, anyone without the use of two or more limbs can also qualify for the state's Severe Disability tax break.

The Bottom Line
The only certain things in life may be death and taxes, but for as long as we continue to be taxed you can be certain that some Americans will go to ridiculous lengths to avoid paying them. Whether they're blatantly exploitive or just laughably inefficient, the numerous loopholes in America's various tax codes are costing our state and federal governments millions of dollars every April. When we finally get around to closing them, people will probably just figure out another way to dodge paying their taxes.

Related Articles
  1. Professionals

    4 Must Watch Films and Documentaries for Accountants

    Learn how these must-watch movies for accountants teach about the importance of ethics in a world driven by greed and financial power.
  2. Taxes

    How & Where to File Form 1040 (And Which Version)

    All taxpayers need to know three things when filing a 1040: which form to use, how to file and where to file. After reading this, you'll know all three.
  3. Savings

    Should You Look at 529 Plans Outside Your State?

    529 savings plans are not restricted by geography. So if your in-state offering has high fees or poor investment choices, look elsewhere.
  4. Taxes

    The Purpose Of The W-9 Form

    The W-9 form provides key data your clients need if you're an independent contractor. Just be sure you're not really an employee who should fill out a W-4.
  5. Retirement

    Pros and Cons of Deferred Compensation Plans

    Learn about the pros and cons of non-qualified deferred compensation (NQDC) plans, including the flexibility of non-ERISA plans and the potential for forfeiture.
  6. Taxes

    5 States Without Sales Tax

    Learn about the five states that do not charge sales taxes and about other taxes the states levy instead in order to generate revenue.
  7. Taxes

    10 Money-Saving Year-End Tax Tips

    Getting organized well before the deadline will curb your frustration and your tax liability.
  8. Taxes

    End-of-the-Year Checklist to Save on Income Taxes

    From grouping related expenses to factoring in the alternative minimum tax, here are some things you need to keep in mind when doing tax planning.
  9. Taxes

    Before You Visit Your Tax Preparer: Do This

    The earlier you start preparing your tax records and documents, the more likely you are to have a smooth tax return experience – and all the tax benefits you're due.
  10. Taxes

    How to Pay Minimal Taxes on Retirement Assets

    Withdrawing and spending during retirement can be complicated. Here are some tips on how to manage the process in the most tax-efficient manner.
  1. Do tax brackets include Social Security?

    A portion of your Social Security benefits may be subject to federal taxation using tax brackets. Your tax bracket is determined ... Read Full Answer >>
  2. Are personal loans tax deductible?

    Interest paid on personal loans is not tax deductible. If you take out a loan to buy a car for personal use or to cover other ... Read Full Answer >>
  3. Do 401k contributions reduce AGI and/or MAGI?

    Traditional 401(k) contributions effectively reduce both adjusted gross income (AGI) and modified adjusted gross income (MAGI). ... Read Full Answer >>
  4. Are Cafeteria plans subject to FICA, ERISA or FUTA?

    Cafeteria plans are employer-sponsored benefit plans that provide both taxable and nontaxable, or qualified, benefit options ... Read Full Answer >>
  5. Are IRS audits random?

    While the U.S. Internal Revenue Service (IRS) conducts some of its tax audits using random selection based on a statistical ... Read Full Answer >>
  6. Does the IRS report to credit bureaus?

    The Internal Revenue Service (IRS) doesn't report overdue tax debt to credit bureaus. Federal law protects the privacy of ... Read Full Answer >>

You May Also Like

Trading Center