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If you've turned on the TV lately, then you've undoubtedly been hit with a barrage of commercials from H&R Block, Turbo Tax, and other big-name tax companies. We're getting into tax season, which means that business owners need to take a good hard look at their numbers to see how much they owe Uncle Sam. But here's something you might want to consider: is custom embroidered clothing tax deductible for your business? Is it tax deductible for the individual?
The Short Answer
Yes... most of the time.
The Long Answer
The litmus test for determining whether or not a uniform is tax deductible boils down to two questions:
-Is the article of clothing specifically mandated by your job?
-Is your job the only place where you can wear the article of clothing?
If you answered yes to both of these questions, then odds are good that the uniform is tax deductible. Let's tackle each of these questions in greater detail to clear things up.
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Is the Uniform Specifically Mandated?
Why do I keep italicizing "specifically?" Well, there's a world of difference between a blue polo shirt with a custom embroidered logo and a regular blue polo shirt. The first is tax deductible and the second one isn't.
Uncle Sam cares about specific articles of clothing when it comes to taxes. If a company requires employees to wear a blue polo shirt, then that isn't tax deductible because they are not requiring one specific blue polo shirt.
If a company gives an employee a polo shirt with an embroidered logo and requires the employee to wear that shirt to work every single day, then that's tax deductible because the company requires a specific polo shirt.
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Is Your Job the Only Place You Can Wear the Clothes?
Suppose that a company gave employees a plain white dress shirt and required employees to wear that shirt every single day. Would that qualify as being tax deductible? No, probably not.
Company clothing can also lose its tax deductible status if employees can use it in non-work situations. A plain white dress shirt can be used just about everywhere -- the same goes for a dress suit or steel-toed boots. As soon as you include a custom company logo, however, the article of clothing now has a specific work-related purpose.
Now, keep in mind that these are all just general rules. Every case is unique, so you might be able to take advantage of a clever loophole that can save you big bucks and avoid filing for bankruptcy. Some people go to court to fight for their deductions -- some win while others aren't so lucky. For the most part, though, custom clothing will prove to be a worthwhile investment this tax season. At the end of the day, just keep in mind that adding a company logo to your business uniform could save you money this tax season.
Who Gets the Deduction? The Employee or the Company?
This is easy. Who has to pay for the uniform? If employers buy the uniforms and hand them out, then the company will probably be able to write off the uniforms. If employers have employees pay for their uniforms, then the employees will be able to take advantage of the deduction. Either way, I certainly hope that you can use this information to get a few extra bucks back from Uncle Sam this tax season!