Is business dress clothing tax deductible?

[marc237]

How about starting a clothing "business" -- an EBay "business" perhaps -- in which you have to buy clothes to re-sell on EBay, etc.  Those business expenses could arguably be tax deductible; who's to know if you happen to wear some of the clothes while waiting for someone to buy them in an EBay auction.  As long as you can show an actual profit motive and records of a decent number of sales, it at least wouldn't look too outlandishly fishy from the perspective of an IRS auditor.  {Just a wild thought.}

Well, thank you very much for giving away my little scheme. Now, I have to come up with something fresh.

 

[banksmiranda]

I've been told that employees at high-end boutiques often get huge discounts on merchandise, and even get some stuff free.
One thing which is probably a legitimate tax deduction: the cost of having work clothing cleaned.

 

[kabert]

Employee discounts are one thing; free clothes = taxable compensation (except for a free article of clothing or two that is akin to getting an inexpensive gift of a turkey or ham at Christmas from one's boss). Now, how traceable are the free clothes on the company's books? Not very I suspect in most cases.

 

[johnnynorman3]

How about starting a clothing "business" -- an EBay "business" perhaps -- in which you have to buy clothes to re-sell on EBay, etc.  Those business expenses could arguably be tax deductible; who's to know if you happen to wear some of the clothes while waiting for someone to buy them in an EBay auction.  As long as you can show an actual profit motive and records of a decent number of sales, it at least wouldn't look too outlandishly fishy from the perspective of an IRS auditor.  {Just a wild thought.}

This is a good thought, but it is actually incorrect, and indeed largely irrelevant.  Technically, if you are an Ebay seller you should be reporting your earnings as income.  You would deduct from your earnings the cost of goods sold.  The cost of goods sold is not an operating expense -- you only deduct the cost of goods sold when you actually sell the goods.  That then leads to how to do the deductions, which is explained below.

Let's say you bought a suit for $100, and then sold it for $150.  You would report $50 of income to the IRS (150 minus 100).  This is the case regardless of if you previously wore the suit.  This does, however, show an anomoly in the tax code -- since you don't depreciate goods used for personal use, you actually end up with a windfall by depleting goods purchased for personal use and then selling them.  The reason is simple.  Let's say you wear out half the life of the suit when you wear it for personal reasons.  Theoretically, the suit is now worth $50.  Thus, in a perfect tax world, you should only be deducting $50 from the cost of goods sold, leading you to report income to the IRS of $100 (if indeed you can still sell the item for $150).  But, because of the IRS anamoly, you don't do that.  You still deduct $100 as the cost of goods sold.

 

[johnnynorman3]

Employee discounts are one thing; free clothes = taxable compensation (except for a free article of clothing or two that is akin to getting an inexpensive gift of a turkey or ham at Christmas from one's boss).  Now, how traceable are the free clothes on the company's books?  Not very I suspect in most cases.

You've found out the IRS's little secret -- fringe benefits are impossible to track, regardless of whether they are deductible or not.

Oh, and Banksmiranda, cleaning work clothes might be deductible, but you would have to prorate it. In other words, if you spend $12 on dry cleaning, but wore the work suit for personal reasons for 50% of the wearings, you could only deduct $6.

 

[Drifter]

How does clothing differ from other goods used for display. I have a friend who decide he wanted to find a way to buy a Lotus. when he asked his accountent "how to do this" she explained that he would need to have a reason for the car. We worked out a deal for a small car audio shop here in chicago and bought controlling interest in the shop. Bought the car in the shops name and drive it to this day as a display car for the shop. If you own a clothing company, you would lose respect for your product fi you didn't stand by it (wear it)... Just looking to have the difference explained by someone who knows better then me... the quest for knowledge...

 

[HitMan009]

Hey,

Don't mean to hijack this thread but I must say this thread is highly entertaining to read especially when gentlemen with an abundance of knowledge discuss pressing matters such as deducting expensive clothes..... Bravo. Keep up the good work.

-HitMan009

 

[Alias]

Hey, Â Â Don't mean to hijack this thread but I must say this thread is highly entertaining to read especially when gentlemen with an abundance of knowledge discuss pressing matters such as deducting expensive clothes..... Bravo. Â Keep up the good work. -HitMan009

Hey dude, leave me out of that generalization