Personal expenses are not deductible. However, the Internal Revenue Code allows a deduction for all ordinary and necessary expenses incurred while carrying on a trade or business. A trade or business includes the trade or business of being an employee—meaning unreimbursed expenses of an employee are deductible as an itemized deduction subject to the extent they exceed 2% of adjusted gross income.
Expenses for purchasing and maintaining clothing are generally nondeductible personal expenses even though the clothing may be worn by a taxpayer in connection with his or her trade or business.
Clothing expenses may be deductible if:
- The clothing is required or essential in the taxpayer’s employment or business
- The clothing is not suitable for general or personal wear
- The clothing is not actually worn outside the taxpayer’s trade or business
All three requirements must be met for the clothing to be deductible. Whether the clothing is suitable for general or personal wear is an objective test—meaning a reasonable person would not wear the clothing outside of her trade or business (the taxpayer’s personal belief about whether the clothing is suitable for personal wear is irrelevant.)
The third requirement basically means that even if the clothing is not suitable for general wear, if the employee actually wears the clothing in his personal life, the clothing expenses are not deductible.
Example: In a recent Tax Court case, a sales person for Ralph Lauren was required to wear Ralph Lauren clothing in his job. The sales person attempted to deduct the cost of this designer clothing, but the deduction was disallowed. Even though he was required to wear the Ralph Lauren clothing, the clothing was suitable for general/personal wear, so the deduction was disallowed.
Example: John is an attorney who purchases expensive suits to impress potential clients. Again, because the expensive suits are suitable for personal wear, the suits are not deductible.
Example: Terry is a flight attendant. Since his flight attendant uniform is not suitable for general wear, the cost of his uniform is deductible.
Example: Tina works at a fast food shop and is required to buy her uniforms. Again, since these uniforms are not suitable for personal wear, the uniforms are deductible.
Example: Same as example 3 except that Tina actually wears her uniform to social functions. Since she wears the uniform personally, the uniforms are no longer deductible.
To see how this applies to you, give us a call at 248-538-5331.
Buzzkill Disclaimer: This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.