Can you deduct clothing or shoes as a business expense for taxes? One of the greatest things about being an online business owner is the wardrobe perks so I couldn't resist finding out about whether or not clothing for work could be a tax deduction.
Now, about those online business owner wardrobe perks. Can I get a holler for college hoodies, three-day-old hair, and yoga pants that have never seen the inside of a yoga studio?
Some might call me a slob; I prefer to call myself thrifty. After all, what I save in office-appropriate attire, shoes, hair products and makeup (plus the time to put it all together!) comes out to a pretty nice pile that goes straight into savings.
Of course, sometimes a need comes up to wear something a little more outward-facing. That networking event I attended last month, for example, or the talk I’m giving at the local community college. (Alas, only Mark Zuckerberg can make sweatpants look professional.)
This is the topic of this week’s deduction dilemma, which hit me square in the face this month when all my favorite online retailers started having Memorial Day Weekend sales.
So. Many. Hoodies.
If I buy them to wear while working on my couch, that would count as a business expense…right?
Before I went nuts, I decided to ask Marilyn, our CPA and Tax Pro about it all.
Can I Write It Off?
Question: Is it okay to deduct clothing purchased for work as a business expense?
Clothing you buy for work is one of those grey areas that is often not tax-deductible, unless it's a required uniform or things like that.
Basically, if you can wear the clothing for something other than your business, the IRS says it doesn’t count as a business deduction.
Example 1: When Clothing Counts as a Deduction
Say you’re a nurse who buys scrubs and those white orthopedic shoes for your job. You can deduct these clothing articles because they cannot be worn for any other purpose.
(Unless you’re planning to wear those orthopedic shoes around town. In that case, you can’t deduct them. Also, why would you do that?)
Example 2: When It Probably Doesn't
On the other hand, say you’re a tennis pro and you buy shorts and shoes for your tennis coaching business. You cannot deduct the cost of the clothing because they can theoretically be worn for other purposes than that business, like going to the gym on your own time.
Now, if the shoes are made of some special clay court-gripping material and you’ll only ever wear them while teaching tennis, then maybe they count. But you can be sure that the IRS is going to take a close look at your use of those shoes.
Example 3: When It Definitely Doesn't
I once saw a TV sitcom episode where a model was trying to get her accountant to let her write off her collection of push-up bras…because, you know, they contributed to her ability to get work.
In that case, or in my personal case (shopping for the rare occasion that I do business outside my home) buying nice clothes to wear for work-related occasions does not mean that you can deduct those clothes as a business expense.
Secret Deduction Tip (Use Carefully)
You can potentially deduct dry cleaning and laundry costs for clothes *if* you can delineate that it was for business only.
This is a very grey area, even more so than the actual clothes. The IRS will look at the character of the decision to decide whether it’s a legit deduction or not. This means you’re going to need some solid backup documentation–receipts, pictures of the clothing and notes as to the business need and purpose–to serve as an explanation in the event of an audit.
Accounting 101: How to Record Your Clothing
Most often these clothing items would be coded to its own category on your Chart of Accounts such as Uniforms or Work Clothing.
You could also push your Laundry + Dry Cleaning expenses to this same category or you might want to create a separate category on your Chart of Accounts for this as well. This makes it easier to track and consider come tax time with your Tax Preparer or Tax Accountant for deductibility purposes.
Remember, it's not a question of whether or not your business can cover the cost such as this. Your business can absolutely be the source of funds for your clothing purchases and anything else you deem personally as the owner a business expense.
The question is whether it is a tax-deductible item or not and at what percentage.
The Bottom Line
When it comes to clothing as a business expense, being a fashionista is its own reward.
So if you're in doubt about whether to purchase clothing as a “business expense,” here's a helpful rule:
Only write it off if you wouldn’t be caught dead in it outside of work…… and definitely run it all by your Tax Pro before doing so.