by Michael Lodge
Clothing is always a discussion on tax returns every year with clients. What is deductible and not, especially when they are high priced ticket items. The following article is by Julian Block who writes really great articles on taxation. If you need tax help, call our office at: 877.778.1770
Payying the shirt off your back at Form 1040 time? Forget about any deduction for what you wear to work from what you make at work.
The first stipulation is that they must be required as a condition of employment. The second one is that they aren’t suitable for everyday use. Some examples of items that readily pass IRS muster are uniforms worn by ballplayers, firefighters, police officers, letter carriers, nurses, and jockeys, as well as clothing that protects workers from injuries, a category that includes safety shoes and glasses, hard hats, and work gloves.
An often-overlooked point is that the deduction is allowable only if bothconditions are met, cautions the IRS. It’s not enough that your employer requires you to wear special clothing.
Sandra claimed a business-expense deduction for the cost, plus cleaning expenses, of the apparel she was expected to purchase and wear at work. She was backed by the Tax Court, which used a subjective test to justify the write-off. The court reasoned that whether the garb in issue is suitable off the job must be determined by a worker’s particular lifestyle.
What clinched the case for Sandra was her unchallenged testimony that she was on a lower social and economic level than the women who patronized her boutique. She couldn’t easily afford St. Laurent creations – even with her discount – and never wore them away from work, except to commute. The chic clothes were inappropriate for the “very limited and informal” outside-of-work socializing by Sandra and her husband, who was partially disabled as a result of a severe heart attack.
But the IRS persevered, just like the Little Engine That Could, described in the New York Times as “that stalwart mechanical hero of childhood lore that defied the odds of physics and huffed and puffed to the top of a very steep hill.”
The unsympathetic tax collectors told an appeals court that the store manager’s way of life made no difference. Sandra shouldn’t be entitled to take the expensive outfits off her taxes just because she took them off after work. The clothes suited lots of other women who wore these outfits outside of work; that made them unsuitable personal expenses that are never deductible.
Unfortunately for Sandra, the Tax Court’s subjective-test approach was overruled by an appeals court, which held that an objective standard should be used. Under an objective test, the cost is never deductible as long as the clothing is suitable off the job. Objective rules, the appeals court noted, are easier for IRS examiners to apply than subjective rules, which require the feds to figure out when either price or style causes clothing to become inappropriate to a worker’s lifestyle. Price and style are personal choices, governed by taste and fashion.
Another drawback is that the Tax Court’s approach could cause unfair results. The tax tab, said the appeals court, might vary for two boutique managers with identical wardrobes, but differing “lifestyles and socio-economic levels.”