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Saturday, October 31, 2009

Deductibility of Halloween Costumes

Devil Costume Jim Maule, Unmasking the Deductibility of Halloween Costumes:

A few weeks ago, an email came my way that opened with this question: “Can you deduct the cost of your Halloween costume as a business expense?” It then answered the question:

No, if you bought it to go trick-or-treating with your kids.

Yes, if you bought it to attend a client's Halloween party.

For both? Then proportion the cost based on % of use.

You can find this question and answer on the web at Ways Through the Maze: A Tax Guide for Indies.

Though I agree with the first part of the response, I recoil in horror at the second. Unquestionably there is no deduction if the costume is purchased for a Halloween outing with the children. But if the purchase is for a client’s party, the answer depends on whether the cost of attending the party is an ordinary and necessary expense of carrying on a trade or business. And that means that the third part of the response, dealing with percentage of use, requires a more sophisticated determination than simply hours at a party compared to hours with the children, but rather a comparison of deductible use versus non-deductible use. ...

[I]f a costume is purchased for use at a Halloween party, the taxpayer doesn’t have a ghost of a chance when it comes to deducting the cost. Hopefully, people aren’t goblin up the advice being shared by those who claim that the cost of a Halloween costume purchased for use at a client’s party is deductible.

http://taxprof.typepad.com/taxprof_blog/2009/10/deductibility-of.html

Celebrity Tax Lore, Tax | Permalink

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Comments

The devil's in the details.

Posted by: Woody | Oct 31, 2009 2:25:03 PM

Is that you Paul? I always knew.

Posted by: mike livingston | Nov 1, 2009 3:07:25 PM