Are you using video to increase your online presence?
Maybe you hit the “big time”?
You know, that point where you’re sought after for on-screen interviews.
Or as a public speaker on your specific area of expertise.
Or as a paid brand representative or spokesperson.
If so, congratulations!
It’s great that you have reached such heights in your business.
Unfortunately, I do have some bad news for you.
Most of that money you spend to look good on camera isn’t a valid business expense.
IRS rules for clothing, hair & makeup
Generally speaking, a business expense is anything that is ordinary and necessary to the operation of that business.
I hate to be the one to break it to you, but the IRS is very clear on this issue.
It isn’t enough that you wear distinctive clothing. The clothing must be specifically required by your employer. Nor is it enough that you don’t, in fact, wear your work clothes away from work. The clothing must not be suitable for taking the place of your regular clothing.
What this all boils down to is one fact:
If it’s suitable for everyday use, it’s not deductible!
That applies to the maintenance too, like dry cleaning and tailoring.
But you’re self-employed, and writing those off as a business expense, right?
Those rules apply to everyone across the board, not just employees complying with their employer’s directives.
But you need to present a certain image so it’s ok to write that stuff off, right?
For several years, Anietra Hamper, a local television station anchor, claimed business deductions for clothing, contact lenses, haircuts, makeup, dry cleaning and other items unrelated to this topic.
She was required by contract to maintain a well-groomed appearance and wear specific styles of clothing and claimed that her clothes were purchased specifically to comply with these conditions and she justified it by saying that she would never buy the items for her own personal use.
She also claimed that the makeup (purchased at a department store) was specific for appearing on-air and the contacts were a different prescription than her normal ones and were just for reading the teleprompter.
The IRS ruled against her.
The Court reasoned that the restriction on the taxpayer’s selection of business attire, however, was not significantly different from that applicable to other business professionals who must also limit their selection of clothing to conservative styles and fashions. The Court further reasoned that the fact that the taxpayer chose not to wear the business clothing while away from the station did not signal that the clothing was not suitable for private and personal wear. In fact, as the Court noted, most professionals typically do not wear their business clothes for private or personal wear. Similarly, petitioner does not satisfy the requirement that her clothing not be suitable for everyday personal wear. Although she is required to purchase conservative business attire, it is not of a fashion that is outrageous or otherwise unsuitable for everyday personal wear. Given the nature of her expenditures, it is evident that petitioner’s clothing is in fact suitable for everyday wear, even if it is not so worn.
Petitioner typically purchased her makeup from Nordstrom’s and drugstores that sell ordinary cosmetics. The receipts offered into evidence do not indicate purchases for special makeup designed for on-camera use but simply indicate purchases for ordinary makeup suitable for everyday wear.
Petitioner’s expenditures for manicures, grooming, teeth whitening and skin care are inherently personal expenditures. Although these expenses may be related to her job, expenses that are inherently personal are nondeductible personal expenses. As in Hynes v. Commissioner, 74 T.C. at 1292, the fact that petitioner’s employment contract with the station required her to maintain a neat appearance does not elevate these personal expenses to a deductible business expense.
Hamper v. Comm’r, TC Summary Opinion 2011-17Hamper v. Comm’r, TC Summary Opinion 2011-17
But you consider yourself as being in the “entertainment” industry, so the rules are different, right?
You’d be wrong yet again (trust me, I don’t take pleasure in that).
Don Teschner, a backup musician for Rod Stewart tried to deduct silk boxers, men’s underwear, leather pants, hats and a vest relating to his stage appearances in 1991. Not surprisingly, he was denied many of those deductions.
The IRS excluded most but did allow for $200 of deductions.
Clearly the underwear does not qualify as a business expense. As to the remaining clothes items, we find that the majority of them are adaptable for general and personal wear and, therefore, are not a deductible employee business expense. Some of the more “flashy” and “loud” items, however, might not be acceptable ordinary wear.
Teschner v. Comm’r, TC Memo 1997-498.Teschner v. Comm’r, TC Memo 1997-498.
Don’t get all crazy just yet, there is good news!
What are deductible business expenses
This is the part you’ve been waiting for.
While you can’t deduct most things relating to personal appearance there are some things you can deduct.
- Marketing – You can deduct the full cost of any clothing item that you have custom-made which contains your brand name or logo. Shirt? Deductible. Hats? Deductible. Bracelets? Deductible. Jewelry? Deductible. And, because they are marketing tools, not only are items themselves deductible but so is the care and maintenance!
- Consultants – We’ve established that clothing, accessories, and makeup isn’t deductible. But what if you hired someone to advise you on how to dress? Or to come in and apply your makeup perfectly? If you pay a style consultant for their talent, that is 100% deductible.
- Rentals – You want to try out a different look without committing to purchasing an outfit. Or you may want to wear a specific item for a specific shoot. You can go to a costume shop and rent any of those for a specific purpose and deduct the full cost of the rental.
- Professional Products – You can deduct the cost of industry-specific professional product lines. Going back to the anchorwoman’s issue above, if you purchase makeup specifically designed to make you appear better on camera, and get it from a specialty seller, then, by all means, deduct it.
- Props – Custom specialty items like backdrops, coffee mugs, accessories or decals that you use in your videos to promote your brand or business.
The IRS itself is sometimes confused
There is also an argument for spending on these items as a “profit-seeker”.
The IRS sees individuals as having two personalities.
…one is a seeker after profit who can deduct the expenses incurred in that search; the other is a creature satisfying his needs as a human and those of his family but who cannot deduct such consumption and related expenditures
That can lead many people to try and blur the line in an attempt to (wrongly) deduct certain non-deductible expenses in an effort to minimize their taxes.
Some try to argue that they need to “look a certain way” in order to promote or sell themselves or their business.
The claim that “I am my business” is heard quite a bit, too.
The IRS quote above makes it seem like the Service agrees with all those people.
And, on the surface that makes some sense, except it doesn’t.
Even if you think you must “always be on” you really don’t.
The best example of that is the people many people point to–celebrities.
You see it all the time: pics of celebrities out in public, dressed in sweats, hair messed or under a cap, the women makeup-less (and the guys too considering how everyone wears makeup to cover imperfections for on-screen work).
That actually shows you, in a very striking way at that, that there are two sides to each person.
That’s exactly why most personal appearance expenses are personal in nature, and not deductible to the “business of you”.
The bottom line sucks for most people.
As much as you’d like to be able to pay for, and deduct, the items you use to look good on camera–whether for tv or your own videos–you simply cannot.
And, as much as you can argue that you “never wear/use that in my regular life”, that argument simply doesn’t hold water.
It’s something that we all have to deal with at one point or another.
Such is the life of an entrepreneur!
Were you aware of these rules? Doesn’t the it sound much easier to rent stuff or pay a consultant a few times when you need it anyway?