We have been able to meet some great small business people, including those in sales or leadership positions. To do the job right, the individual needs to look their best. This may mean more expensive clothing, on-going grooming, staying fit, etc.
To look your best… to look great… can be expensive.
Since “work” requires a person to look great, the logical conclusion that many sales and small business leaders make (but incorrectly) is that the associated costs are business deductions.
I’ve had many sales and small business leaders tell me that they are able to take some expenses as “fantastic business deductions” (sometimes under the direction of their “tax adviser”), such as…
- Clothing (Often, it is, “all my clothing!”)
- Hair Cuts & Color Treatments
- Gym Expenses
- Manicures & Pedicures
- Makeup & Cosmetics
NO! PLEASE, SAY IT ISN’T SO! Only a VERY limited amount of these expenditures ever qualify.
So, what are valid deductible business expenses?
When you own your own business, you are allowed to deduct business expenses that are “ordinary and necessary”. Although there are many expenses that you may consider to be “ordinary and necessary”, the IRS has stated certain expenditures are inherently personal in nature and are not deductible.
Consider clothing… IRS Publication 529 states:
You can deduct the cost and upkeep of work clothes if the following two requirements are met.
- You must wear them as a condition of your employment.
- The clothes are not suitable for everyday wear.
The IRS Cautions…
“It is not enough that you wear distinctive clothing. The clothing must be specifically required by your employer. Nor is it enough that you do not, in fact, wear your work clothes away from work. The clothing must not be suitable for taking the place of your regular clothing.”
In other words, if you wear a business suit only for your business, the fact that you “could” wear it at another time means that the clothing does not qualify as a business expense.
Haircuts, gym expenses, manicures, makeup and the like… Some think that these expenditures should be deductible business expenses because a good appearance and professional image is “ordinary and necessary” to their business. However, it does not offset the personal nature of these expenditures.
When addressing the topic of “Appearance and Image”, the IRS states that these expenditures
“…are generally found to be personal expenses as the inherently personal nature of the expense and the personal benefit far outweigh any potential business benefit.”
There are several court cases that have established a clear position in favor of the IRS. A more recent case, Anietra Y. Hamper v. Commissioner has received a lot of attention, primarily because the taxpayer, a television anchor, has been forth-coming with her own experience. You may want to read this article to hear about her attempted deductions and her fight to keep them.
Spoiler alert… the IRS won.