Proceed with caution if you intend to deduct the cost of your business attire on your tax returns. While most business owners take advantage of every deduction available, deducting your clothing might trigger an audit and the Internal Revenue Service might disallow your deduction. If you deduct your business attire, make sure you follow the IRS guidelines to ensure compliance with the regulations.
The IRS knows that, as the employer, you set the dress code for your business. However, requiring any employee -- including yourself -- to wear blue jeans is not enough to allow you to deduct their cost. You can deduct the cost of any protective clothing such as steel-toed boots, hard hats, safety glasses and work gloves as long as their use is necessary and ordinary for the type of business you have.
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Not Everyday Wear
While the IRS allows you to deduct expenses that are necessary and ordinary for your business, there is an additional requirement for clothing before you can take the deduction. According to the IRS, the attire cannot be worn outside of work during everyday activities if you deduct its cost. For example, a physician with his own practice can deduct the amount he pays for lab coats, but he cannot deduct the costs of his suits.
Clothing purchased for work-related formal occasions is typically deductible as long as you can prove it is never worn for anything else. For example, if you purchase a tuxedo for a charity dinner hosted by your company, you can deduct its cost. However, if you purchase a tuxedo for your daughter's wedding and then wear it to a company event -- or vice versa -- you cannot deduct its cost from your taxes.
If your business attire fulfills IRS deduction requirements, you can deduct any associated dry-cleaning expenses. If you take all your clothes to the cleaners at once, however, you can only deduct the portion of your bill for your deductible attire. You cannot deduct the cost of washing your work uniforms at home, because the IRS assumes that you can wash other clothing at the same time.
Donating Used Business Attire
You can deduct the fair market value of business attire that you donate to a charity as long as you receive a receipt from the recipient. This value is the amount you could reasonably expect to receive if you sold the clothing on the open market. To help assist donors in determining what their business attire is worth, the Salvation Army publishes a valuation guide that provides high and low values of used clothing.
2 Percent Limit
The IRS considers business attire a miscellaneous expense; as such, your expenses must add up to more than 2 percent of your adjusted gross income (AGI). If your AGI is $100,000, your miscellaneous expenses must total more than $2,000 before you can claim a deduction. Even then, you can only deduct the amount over $2,000. For example, if your clothing costs, notary fees and tax preparation expenses total $2,500, you can only deduct $500 on your tax form.