Whew! The debate on various message boards has been ferocious when it comes to whether or not you can deduct uniform expenses on your income tax return. I’ll tell you what I know, then I’ll tell you what I think. You can decide for yourself how you want to handle it.
Let me preface this entire article by saying that when in doubt, I tend to err on the side of keeping myself out of trouble with the IRS. If the guidelines are unclear, I play it safe. I have not yet been audited by the IRS and I fully expect that it will happen any year now. With rental property, and my self-employment, and random in-and-out of combat zone issues, I feel like our tax return already has an entire field of red flags all over it. Plus, we don’t really pay much in taxes most years. There are plenty of years where we pay no taxes. It is not worth it to me to take a questionable deduction to save $6 on my already low tax bill.
Back to the issue at hand…
What Items Are Deductible?
I’m sure many of you have heard rumors that you can deduct the cost of your uniforms, the cost of insignia, the cost of alterations, and/or the cost of cleaning your military uniforms. I’ve heard those rumors, too. Here’s what I can find, however, from the IRS Publication 529, Miscellaneous Deductions:
Military uniforms.You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses.
If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive.
If you are a student at an armed forces academy, you cannot deduct the cost of your uniforms if they replace regular clothing. However, you can deduct the cost of insignia, shoulder boards, and related items.
You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school.
I’ve highlighted in red the parts of this that I think are most important. For clarification, the part that talks about fatigue uniforms refers to any uniform that your branch or local commander has deemed may not ever be worn off base. If you have a uniform that falls into this category, you know what it is. If you would get in trouble if you wore it home and stopped to pump gas on the way, that is the type of uniform they’re talking about.
You may deduct insignia, corps devices, epaulets, aiguillettes, and swords.
But Will It Lower My Tax Bill?
In addition, even if you had deductible uniform expenses, they are limited to the amount of expenses that exceed 2% of your Adjusted Gross Income (AGI). What this means is that if you AGI is $30,000 for the tax year, your deductible uniform expenses would have to be more than $600 and you would have to itemize your expenses on a 1040 Schedule A in order to benefit from this deduction.
You can probably see where I’m going with this. The way I read the IRS instructions, there are nearly no circumstances in which uniforms are going to be deductible to the point of having any impact on your total tax liability. If you have a low enough income that your uniform expenses exceed 2% of your AGI, then you probably don’t have any tax liability from which to deduct the cost. If your income is high enough that you owe taxes, then the 2% of your AGI is likely to be more than the deductible part of the uniform costs. With all the smoke and mirrors of how the income tax return is structured, even if it appears that you are saving money by deducting your uniforms, it often isn’t making any difference in the number at the bottom of the return.
Kate’s Bottom Line: For 99.99% of the military members out there, saving receipts and filling out extra paperwork is not going to result in an income tax savings. The only people who might benefit from this deduction would be people, usually reservists, who meet the following criteria:
- have exceptionally high deductible uniform costs one year
- itemize their deductions and exceed the standard deduction when they itemized
- have a low adjusted gross income (AGI)
- have a tax liability after the regular exemptions, deductions, and non-refundable credits are calculated.
If you want to save the receipts and do the paperwork, go ahead. I would love to hear if it actually saves anyone any taxes.
EXAMPLE: I’m sure many of you will find my example confusing, but I’m including it for the small percentage of readers who find it helpful.
Let’s say you did have a deductible uniform (that you could not wear off base) that cost $500. (I’m making this up for the example.) Then let’s say that you are male, have been in the military more than 3 years, and you are in the Air Force. Your yearly clothing allowance would be $388.80 per year. Take the $500 of actual deductible cost, subtract the yearly clothing allowance, and you will come up with $111.20.
You then take that number and compare it with 2% of your adjusted gross income. To really stretch this example as far as possible, let’s say you were deployed to a tax-free combat zone for the entire year and therefore your AGI was $0. With an AGI of $0, you could put that $111.20 on your 1040 Schedule A, Itemized Deductions.
You would take that $111.20 and add it to the rest of your itemized deductions (usually only mortgage interest, taxes and charitable deductions) and then see if the entire total was more than your standard deduction (2011 rates: single, $5,800; married filing jointly, $11,600.) Let’s then imagine that you were already over the standard deduction and so you are adding the entire deductible part of this uniform to your itemized deductions, resulting in an addition $111.20 deduction from your AGI before you get to the calculation of the taxes.
It wouldn’t really matter, because you would be deducting from an AGI of $0 and there are no negative numbers permitted before you get to the tax calculation line of the return. Zero minus anything still equals zero up until a certain point in tax calculation, so you haven’t benefited at all.