This question brings to my mind someone that I used to know a few years ago. This particular lady – let’s call her Judy – was a manager in one of the departments at a local hospital. It seemed that every time I happened to see her in the office – which was about once every couple of weeks - she was always very nicely dressed. (“Dressed for success” was how it was termed at the time.) A work colleague of hers later told me that Judy had a very extensive wardrobe and would never wear the same dress or outfit twice within two months. And just to be sure that her professional appearance was retained flawlessly throughout each two-month cycle, every dress or outfit was sent to the dry cleaner immediately after each wearing. I can only imagine how large Judy’s dry-cleaning bill must have been, but I’m sure she would have liked to deduct these expenses on her tax return. But as we shall soon see, these expenses were not deductible for her.
Up until the 2018 tax year, a deduction was available for certain employees who were not reimbursed for the money they spent on laundering and dry-cleaning the clothes they wore to work. However, Congress has suspended this deduction and it will not be available again until 2026 at the earliest – unless our legislators decide to make more changes to the law in the meantime.
The intent of the original law was to help employees who were required to wear a uniform or other specialized clothing to do their job. This would include people such as nurses, police officers, and automobile mechanics, for example. The tests to determine whether the cost of purchasing and laundering a given set of clothing could be deductible were:
- Was it required by the taxpayer’s employer, or essential for their business if the taxpayer was self-employed?
- Was it not suitable for ordinary street wear?
- Did the taxpayer not wear the clothing outside of work?
If the answers to all of the above questions were “yes”, then the costs of buying and maintaining the clothing were potentially deductible – including dry-cleaning.
Coming back to our friend Judy, we can see that she failed all three of the tests because she was able to choose her own outfits to wear to work, and all of these were suitable for use outside of her work setting. Her boss, Rick, was required to wear a dark suit to the office, but he failed the second and third tests because his suits were identical to those worn on the street by men who were not in the same occupation as him. On the other hand, Judy’s local car mechanic, Ron, was required to wear green overalls with his employer’s logo, and he would get covered in grease and oil each day. The last thing he would want to do after finishing work would be to walk down the street in his messy overalls to do some grocery shopping on the way home! Ron met all three of the tests, and thus his laundry expenses would have been eligible for deduction.
Although the deduction for laundry and dry-cleaning is no longer available for employees on their federal individual income tax return, it may be deductible on their state return as many states did not conform to this federal tax change. Taxpayers who qualify for a dry-cleaning deduction may want to check the tax rules in their state. For businesses and taxpayers who are self-employed, dry-cleaning expenses remain a legitimate deduction. This means that although Ron the mechanic could not claim the deduction if he was still an employee at the garage, he would qualify to claim it if he had decided to go out and set up an auto repair business of his own. He would still need to wear his overalls for work – perhaps now with his own logo – and the overalls would be just as unsuitable for street wear as they had always been.
To sum it all up, employees cannot deduct their dry-cleaning costs on their federal return until 2026, but self-employed individuals can take the deduction in the current year provided that they meet the three qualifying tests. But regardless of the tax laws, my only regret from this whole discussion is that I did not buy shares in Judy’s dry cleaner when I had the chance!