The Tax Court found that clothes purchased by a nurse to meet an employer’s requirements that she be dressed in comfortable clothes and in a manner that reflected her profession as a nurse qualified as a deductible business expense in the case of Romana v. Commissioner, TC Summary Opinion 2022-9.[1]

The Law

While you might be objecting at this point that this case is no longer truly relevant, as the taxpayer claimed an employee business expense deduction that is not available at this point following changes to the law in the Tax Cuts and Jobs Act, the underlying issue is still very relevant for self-employed taxpayers and employers who are considering reimbursing employees for such expenditures or providing similar clothing to the employee to wear in a similar situation.

Clothing as a business expense has always been a bit tricky. The problem is that IRC §262(a) provides:

(a) General rule. Except as otherwise expressly provided in this chapter, no deduction shall be allowed for personal, living, or family expenses.

Note the requirement that any item that is a personal, family or living expense will not be allowed unless expressly provided for in this chapter (the income tax provisions of the Internal Revenue Code).

So, this means it’s not enough to show the clothing rises to an “ordinary and necessary business expense” under IRC §162, as that is a general allowance which would be barred as a deduction by IRC §262(a) if also a personal, family or living expense.

The question of whether the clothing required to be worn by Maria Romana was not also a personal, family or living expense is what the Court was looking to decide.

Facts of the Case

Maria was employed as a nurse in a Kaiser Permanente (Kaiser) plastic surgery clinic in California.  Maria faced the following dress code imposed by Kaiser:

Kaiser’s dress code in effect at the location where she worked required that Mrs. Romana be dressed in “comfortable” clothes and in a manner that reflected her profession as a nurse. Neither Kaiser nor the collective bargaining agreement for her nursing union had a policy that allowed reimbursement for the expenses she incurred to purchase clothing that satisfied her employer’s dress code.[2]

The Court described the clothes Maria acquired and wore at her employment:

While at work, Mrs. Romana wore clothing that resembled scrubs that she purchased at her own expense from local department stores. In the operating room she was required to wear scrubs provided by Kaiser. Routinely, depending upon the operation schedule for any given day, she changed back and forth between her scrublike clothing and the operating room scrubs her employer provided.

During 2017 Mrs. Romana also purchased, at her own expense, a white “lab” coat with “Kaiser Permanente” and her name embroidered on it. The purchase was made as part of a bulk purchase along with similar items purchased by fellow employees. The lab coat cost approximately $45, and it was dry cleaned multiple times during the year.[3]

The IRS challenged these deductions (among others claimed by Maria and her husband) and a Tax Court petition was eventually filed.

The Tax Court’s View

The Tax Court notes the basic issues arising when a taxpayer attempts to claim clothes as a business expense:

Generally, the cost of a business wardrobe, even if required as a condition of employment, is considered a nondeductible personal expense within the meaning of section 262. See, e.g., Hynes v. Commissioner, 74 T.C. 1266, 1290 (1980). Those costs are not deductible even when it has been shown that the particular clothes would not have been purchased but for the employment. Id. Clothing costs are deductible as ordinary and necessary business expenses under section 162 only if (1) the clothing is of a type specifically required as a condition of employment, (2) it is not adaptable to general use as ordinary clothing, and (3) it is not so worn. See Yeomans v. Commissioner, 30 T.C. 757, 767 (1958); see also Deihl v. Commissioner, T.C. Memo. 2005-287.[4]

Note that it’s not enough for a taxpayer to claim that they would never actually wear such clothing except in a business setting. Their personal preferences in clothing aren’t enough to make clothing that reasonably could be worn as ordinary clothing by those not in a business setting deductible.

Similarly, the mere fact that clothes could, theoretically, be worn in a non-business setting does not convert otherwise clearly business clothing into a nondeductible expense.

The Tax Court, in what is always going to be a very fact specific holding, found that these particular clothes met the requirements to qualify as a business expense:

Mrs. Romana was required to dress professionally and comfortably for her job as a nurse. To do so, she purchased shirts and pants at department stores. Because the clothing resembled scrubs, we find that the clothing was not adaptable to general use as ordinary clothing outside of her employment. Consequently, the cost of the clothing and the cost to dry clean the clothing are deductible. Mrs. Romana also purchased a white lab coat with “Kaiser Permanente” and her name embroidered on it. This lab coat was not appropriate for general use.[5]

The Tax Court allowed the expenses related to the clothes (costs to acquire them and cleaning expenses) to be treated as deductible expenses for tax purposes.

[1] Romana v. Commissioner, TC Summary Opinion 2022-9, June 16, 2022, https://www.taxnotes.com/research/federal/court-documents/court-opinions-and-orders/tax-court-says-work-clothes-are-business-expenses-for-nurse/7dl0y (retrieved June 17, 2022)

[2] Romana v. Commissioner, TC Summary Opinion 2022-9, June 16, 2022

[3] Romana v. Commissioner, TC Summary Opinion 2022-9, June 16, 2022

[4] Romana v. Commissioner, TC Summary Opinion 2022-9, June 16, 2022

[5] Romana v. Commissioner, TC Summary Opinion 2022-9, June 16, 2022