Can Real Estate Agents Write Off Clothing?

Understanding tax deductions for business expenses is important for financial management when operating a business or engaging in self-employment. These deductions can reduce taxable income, ultimately impacting the amount of tax owed. The deductibility of various costs, including professional attire, is governed by specific tax regulations.

General Rules for Business Expense Deductions

To qualify as a business expense deduction, an expense must be both “ordinary” and “necessary” according to the Internal Revenue Service (IRS). An ordinary expense is common and accepted in a particular industry, representing a customary cost for similar businesses.

A necessary expense is helpful and appropriate for the business, contributing to its operation and maintenance. Properly categorizing and documenting these expenses is important for accurate tax reporting.

Specific Rules for Clothing Deductions

For clothing to be deductible, it must meet two primary criteria: it must be required or essential for the job, and it cannot be suitable for general or personal wear. This means the clothing should not be adaptable to street wear or take the place of regular clothing.

Examples of deductible clothing include specific uniforms with company logos, which are clearly job-related and not appropriate for personal use. Protective clothing, such as hard hats, safety glasses, and steel-toed boots, are also deductible because they guard against work hazards and are not worn for everyday purposes. It is not sufficient that the clothing is simply distinctive or that the taxpayer chooses not to wear it outside of work; it must objectively not be suitable for everyday use.

Common Scenarios for Real Estate Agents

Most professional attire worn by real estate agents for client meetings or property showings is not deductible. Suits, dresses, blazers, and other typical business clothing are considered adaptable to general wear, even if primarily used for work purposes. Such items are unsuitable for deduction because they can be worn in non-business settings like social events.

Even if an employer requires a specific style or color of professional clothing, it remains non-deductible if it can be worn outside of work. An exception may arise for clothing that functions as a uniform and is not suitable for everyday use, such as branded apparel with a prominent company logo. If a real estate agent’s clothing clearly promotes the business and is designed specifically for that purpose, it might qualify as a promotional or advertising expense.

Record Keeping Requirements

Maintaining accurate and comprehensive records is important for substantiating any claimed business deductions. Taxpayers must keep records that establish the amount, business purpose, and date of the expenditure. This documentation supports entries made in business books and on tax returns.

Supporting documents include receipts, invoices, canceled checks, or other proof of payment. The IRS requires written records for all business expenses exceeding $75. These records should be kept in an organized manner, such as by year and expense type, for at least three years from the date the tax return was filed.