Small business owners are always on the lookout for expenses they can deduct from their taxable income. After all, profit margins for nascent businesses are often thin and every dollar helps. One area that often comes up for discussion is whether or not you can deduct clothing and grooming items. If you need it for work, it should be a business expense, right?
Unfortunately, the answer isn't always that simple. To help you and your tax preparer decide what to deduct and what's not deductible, here are a few do's and don'ts as guidelines.
Do Deduct Unique Clothing and Accessories
The good news for many entrepreneurs is that some clothing, shoes, and wearable items are in fact tax deductible. In general, this includes anything that is essential or required for your job and is also not suitable for everyday wear. Some of the most common deductible clothing are steel toe boots, personal protective equipment, scrubs, and uniforms with the company logo.
Don't Deduct Street Wear
The second requirement — that an item be unsuitable for everyday wear — is where many business owners get tripped up. Unfortunately, an expensive suit needed to meet with clients is unlikely to fall into this category. However, a doctor's white coat generally would. Even if you purchase the items because of your business role, the items may not qualify under IRS standards.
Do Deduct Related Expenses
If your clothing or shoes are eligible for tax deduction, upkeep and repairs are also deductible. This includes things like laundry services and dry cleaning as well as re-soling or tailoring, as long as these are ordinary and necessary. Keep receipts for these smaller costs, as they tend to add up over time.
Don't Overlook Travel Expenses
When you travel for business purposes, the rules can be a little different than normal. Some expenses which may not normally be deductible can be included when they occur on a trip. If you need dry cleaning services for your business presentation in New York City, for example, you may be able to deduct these even if your suit doesn't qualify as deductible. The reasoning is that you don't have access to everything you need while traveling.
Where to Learn More
Unsure if you can deduct your particular business gear from income tax? Want help tracking expenses? Planning a change that may become deductible? Start by learning more about this unusual area by meeting with a small business tax preparation service in your state today.
