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April 9, 2016


Personal versus business expenses: Lessons from Hamper v. Commissioner

The general rule is that personal expenses aren’t deductible on your taxes. But what if you use something partly for business and partly for your own purposes?

In this post, we will explore that question, taking note of a recent Tax Court decision that sheds light on it.

On its website, the IRS gives examples of expenses that are partly for business and partly personal. One of these is of course the home office deduction, for which there are detailed rules. There are also detailed rules on deducting car expenses when you use your personal car for business.

What about clothing? After all, various jobs have various expectations about wardrobe to be worn at work.

In Hamper v. Commissioner, a TV anchorwoman got into a dispute with the IRS about business expense deductions she took for clothes she bought. Between 2005 and 2008, the newscaster deducted tens of thousands of dollars in clothing expense.

To be sure, that’s a lot of money to spend on clothes. As a female in a highly visible profession, however, she contended she was required to follow certain wardrobe guidelines at work. She also kept detailed records of the purchases.

The problem with this was that business clothes that are suitable for personal wear generally aren’t deductible – unless wearing the clothes is required at work.

The Tax Court found that this exception was not met in the TV anchorwoman’s case.
It probably didn’t help the anchorwoman’s argument she also tried to deduct a raft of other expenses, from contact lenses and cosmetics to thong underwear.

Overall, then, the Hamper case shows that the line between personal and business expenses can be a potential source of tax trouble.

Tax Controversy