When you're a real estate agent, you need to keep up a professional appearance. This means spending money on things like clothing and getting your hair done. Can you deduct these expenses? Unfortunately, the answer is no.
The rule is that you can deduct the cost of clothing as a business expense only if:
- it is essential for your business
- it is not suitable for ordinary street wear, and
- you don’t wear the clothing outside of business.
Thus, for example, a boutique saleswoman was not allowed to deduct the cost of expensive clothes, even though they were required by her job, because they could be worn outside of work. Similarly, it wouldn't let a tennis pro deduct the cost of tennis clothes, since they could be worn outside of business.
However, the IRS has permitted business deductions for the cost of uniforms or special work clothes not suitable for personal wear, such as nurse’s uniforms, theatrical costumes, and clothing with a company logo.
Thus, you cannot deduct the cost of a regular business suit or other clothing that you can wear outside of business. But if you purchase clothing with a real estate company logo on it, you may deduct the cost because it is not suitable outside of business. If your clothing is deductible, you may also deduct the cost of dry cleaning and other care. Be sure to keep receipts proving what you paid for the clothing.
A real estate agent or broker may not deduct the cost of getting her hair done, make-up, or other expenses to maintain a “professional appearance.” These are considered personal expenses by the IRS, and are therefore not deductible. Only in extremely rare cases have such deductions been allowed. For example, in one case the Tax Court permitted an exotic dancer to deduct as a business expense the cost of getting breast implants. She claimed that her size 56-FF implants were a business expense because having such a huge bust helped her get bigger tips. The IRS agreed, finding that the implants were in effect a type of stage prop.
For more information on this and other tax issues for real estate agents and brokers, refer to The Real Estate Agent's Tax Deduction Guide, by Stephen Fishman (Nolo).