When tax season rolls around, all self-employed folks try to minimize how much they'll pay Uncle Sam. You may be a bit worried too after you calculate your 1099 taxes and figure out how much money you'll owe.
Can you add haircuts to your list of tax deductions for the year? In fact, yes you can. It is uncommon but it is possible. In this article, we'll break down the circumstances where you can claim a haircut tax deduction for your particular job. Let's first dive into some of the IRS's rules in regards to personal expenses to necessary business costs.
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The IRS does not let you deduct personal expenses from your taxes. The Court states, expenses such as haircuts, makeup, clothes, manicures, grooming, teeth whitening, hair care, manicures, and other cosmetic surgery are not deductible. However, there are exceptions.
You cannot deduct clothes such as jeans because you can wear those pants for everyday "personal" wear. On the other hand, if you are a circus performer freelancer who needs a specific costume to perform your job or work, then you can deduct your clothing. Models, actresses, theater performers who need specific clothing, not usable for everyday wear, could claim this clothing tax deduction.
The same goes for haircuts.
If your line of work requires you to have a unique hairdo to perform your work, then you can deduct the cost of a haircut. U.S tax courts ruled in Hynes v. Commissioner, you cannot deduct the costs incurred for maintaining a nice appearance. For example, a news reporter who has to maintain a professional appearance on air cannot deduct the cost of a haircut or other cosmetic expenses.
Although they are related to your job or business, these costs are widely personal expenses.
For a business expense to be included as a tax deduction, you'd need to prove it was "ordinary" and "necessary" for your business. Let's quickly go over what that means exactly for U.S. tax laws.
For an expense to be considered "ordinary" if it is commonly accepted in your business or trade. A "necessary" expense is one that is helpful and appropriate for your trade or business. Travel expenses, consultancy fees, internet bills, state taxes, and staff compensation are all examples of this.
Work clothing would only qualify as a deduction if it is in line with industry standards and is necessary to run your business.
On his hit reality show, "The Apprentice", The Times reported that Trump's business wrote off $70,000 of the cost paid to hairstyling/haircuts from their taxes. On top of that, Trump deducted at least $95,464 for the makeup and hairstylist for Ivanka Trump. Trump claiming these deductions and lowering his taxable income stirred a lot of controversies because folks questioned the legitimacy of this.
Trump's tax records were closely monitored during his presidency. In addition to his deduction of $70,000, Trump's business wrote off over $2.2 million in property taxes on his New York estate.
There's one instance where a judge decided in a U.S. tax court case over if clothing expenses were deductible. A West Virginia welder challenged the court's decision to not be able to deduct the cost of steel-toed boots and overalls. The court judge saw that the welder was wearing the exact clothing he was seeking to deduct in the courtroom. The judge merely asked, "are you at work?" and the ruling was upheld.
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If you try to deduct personal expenses from your taxes and you get caught by the IRS in an audit, you run the risk of paying penalties along with interest. Most returns are audited if the system catches too many red flags. It could trigger a deeper look into your deductions by an auditor.
In order to avoid paying fees and interest, simply ask yourself: if you would still take on the expense if there was bo job? Is the expense useful for your professional career? Although the lines may seem blurry for when business expenses related to appearances, in fact, count as a work-related expense, we'll provide some more examples to clear them up.
There has been an outpour of OnlyFans content creators in recent years. Since their business relies on photoshoots and producing content related to their appearance, the make-up they use for photoshoots counts as tax-deductible expenses.
You cannot deduct makeup used for daily wear. The rules around a makeup deduction and expenses related to products for improved appearances are very stringent.
If you are a stage performer, you can write off makeup used for stage or photoshoots, but again, not if you wear the same makeup outside of work. Purchases for makeup should be bought from a professional supplier and not a drug store. A TV production company with makeup folks could deduct the cost of makeup.
Once again, the cost of a hairstylist can only count as a tax deduction if the hairdo is business-related. Meaning, you need a certain look to perform your work or job. It has to be strictly for work. For example, if you need a certain hairstyle for stage or photo shoots, then
The IRS generally does not allow you to deduct the cost of body enhancements.
However, there are exceptions. A good example of this would be a bodybuilder or model trying to take a tax deduction for body oils. The merchandise to improve the appearance of the skin may qualify as a tax-deductible expense.
Between 1999 and 2001, a Wisconsin bodybuilder deducted over $14,000 for the expense of three body oils that boosted his career. The deduction was permitted as a business expense by the Court since the oils were largely advertised in bodybuilding magazines and not offered to the general public.
Athletes cannot deduct the cost of nutritional or dietary supplements to improve performance. This is because the benefits are inherently personal. The benefits are personal as well as professional. However, they can deduct the cost of fitness trainers or coaches as a work-related business expense.
The overwhelming majority of the time, you cannot claim the cost of cosmetic surgery as a tax deduction. However, in extreme circumstances, changes to your appearance may indeed qualify. For instance, in 1994 the Court allowed an exception in the case of Cynthia S. Hess. She was a self-employed exotic dancer in Fort Wayne, Indiana. She was able to claim the cost of breast augmentation surgery as it was a requirement for her profession and it made her more successful. The surgery was deemed unsuitable for day-to-day use. Hess could claim the deduction based on the grounds of her reducing her breast once her stage career was over.
This is a commonly rejected write-off. In order for clothing to qualify as a write-off, the work attire would need to be essential to run your business and in line with industry standards. A new suit or nice dress would not count as a tax deduction. Clothing expenses that may qualify are protective uniforms and costumes. The general rules for attire purchases are if it is suitable for everyday wear, then you cannot deduct the expenses.
We hope this article cleared the lines between personal and business expenses. Don't try to be sneaky and deduct personal expenses from your tax return to stay away from paying taxes. If you get caught, the IRS will make you pay harsh penalties.
Personal maintenance expenses such as skin care, hair salon, and other body maintenance expenses are not deductible. When a taxpayer has a job or freelance business that requires them to buy makeup, hair supplies, contact lens or similar items, these can be deducted as business expenses if they meet the following requirements:
If you don't meet the qualifications of those two rules, the chances are, the expense is probably personal and is not deductible. Also, if a taxpayer claims a large deduction in a category more than the average person in a profession, it may trigger an IRS tax audit.
To sum it up, the IRS can approve tax deductions on maintaining or changing your personal appearance in certain circumstances and professionals. However, the rules for deducting the costs of those makeup and hair cut tax deduction are very strict.
Note: if you want an app to discover expenses from purchases that could be deducted, then try Bonsai Tax. Our 1099 expense tracker will do all the work for you and maximize your tax savings. It'll track all your qualified deductions with clean records in case you ever get audited. Claim your 14-day free trial today.
If you have any questions in regards to IRS tax laws, if haircuts count as a tax-deductible expense, or filing your tax returns, we always recommend you seek tax advice from a professional accountant. An accountant's service can help you stay compliant under the constantly changing tax laws. This post is to be used for informational purposes and is NOT legal advice.
A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.
Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.
Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.
The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.
Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.
For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:
Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.
Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.
If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.
That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.
There are some types of contracts which must be in writing.
The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:
Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.
Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.
Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?
Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!
If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.
Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.
Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.
So, ultimately, the question is: written or verbal agreements?
Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.
Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.
Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.
There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.
A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.
Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.
With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.
Why not secure your business today and sign up for a free trial?