KPMG Spark Blog
Now that you’re a small business owner, it’s time to step up your game when choosing clothing. After all, you can’t meet potential clients for coffee wearing break-away sweat pants. So you head out to the mall to pick up an Armani suit or two. Since you’re doing this for your business, it’s tax deductible. Right? Sadly, the IRS small business deduction for clothing doesn’t work like that.
It's true that you can deduct the amount you spent on the purchase and upkeep of work clothes, but your clothing must meet two requirements before you can claim the costs as an “other expense” on the Schedule C tax form where you report self-employment income and expenses:
• You must wear them as a condition of your employment.
• The clothes cannot be suitable for everyday wear.
Taking a look at these conditions, it looks like you won’t be able to write off those designer suits, since they wouldn’t be distinctive enough to meet these requirements. So no, you can’t write them off. Are your clothes a requirement for your job? But wait, there’s more. Just because some clothing might be distinctive, that is not enough for the write-off. Your employer must specifically require you to wear it as part of your job.
Additionally, you cannot make the claim that since you do not wear the clothing away from work, you should be able to deduct its costs. Part of the distinctiveness test is that the clothing must not be suitable for taking the place of your regular clothing. Say, for instance, that you are a real estate agent. You probably dress up a bit to show properties to your clients and to attend open houses. If you were walking down the street wearing the Armani suit you wore to a showing earlier in the day, would someone be able to tell you’re a real estate agent for a particular agency? Probably not -- so the clothing would not be deductible. But let's say you’re in the medical profession and wear scrubs. You probably wouldn’t wear your scrubs (given a choice) out to dinner or to the movies. And other people would likely identify you as a member of the healthcare field because of your clothing. So, read on… Yes, this is clothing you can deduct.
The cost of some types of protective clothing worn on the job -- like safety shoes or boots, safety glasses, hard hats, and work gloves -- can be deducted on your return. You would have to list your profession on your return as the type of work that requires this kind of clothing, such as if you were a carpenter, electrician, steamfitter, someone who works with chemicals, or a fishing boat crew member. The rules on when you can deduct the cost of work clothing can be confusing. If you do run across something that you don’t understand, check with a good accountant who can advise you. It is better to understand all your options rather than making a rash decision about a potential tax deduction.
Sign up for our newsletter
In order to run a successful business, you need to have a solid financial foundation. Planning to pay taxes is an important part of building this foundation. Join us as we discuss tax planning strategies to help your business plan for tax season.
When you first open your business, you might be able to run everything by yourself. Eventually, hiring a bookkeeper will become a vital step to help ensure continual growth for your business. Continue reading for 5 signs that indicate it’s time to hire a bookkeeper for your business.
Maintaining a healthy business cash flow is one of the most important building blocks for any business to be able to build a strong financial foundation. Continue reading for a few best practices for ensuring your organization has enough cash on hand.
Join us to learn how your bookkeeping may be holding back your business from functioning at its peak performance.
KPMG Spark works with many business owners and executives to simplify their bookkeeping. Continue reading to learn how keeping up with your bookkeeping will help you build a solid financial foundation for your business.
There are many important differences between an employee and an independent contractor that can affect the financial foundation of your business. Continue reading to learn some of the financial impacts you should consider when making this decision.
Running a successful business depends on a solid financial foundation. You can have the most sought-after products or services, a killer marketing strategy, and loyal customers, but if you don’t have a solid financial foundation to manage cash flow and support other business decisions, it can all come crumbling down. Continue reading to learn how selecting an entity structure can help build your financial foundation.
Real-time bookkeeping uses live data to give you visibility into your current income and expenses, balances, and more. The visibility that real-time bookkeeping provides allows business owners to gain valuable insight into both their finances and businesses. Continue reading for 5 valuable insights you can gain from real-time bookkeeping.
Having a personalized bookkeeper can provide valuable benefits to any business owner. A personalized bookkeeper can monitor and organize your business’s daily transactions. Not only that, they can also give you the reassurance and security you want to have about your company’s finances. Join us to learn more about the importance of having a personalized bookkeeper.