Reasonable Expectation of Profit
by Self-Employed
(Hamilton, Ontario)
Uniforms and Tax Deductibility
Can I deduct uniform expenses if I am self-employed?
Hello there!
To answer your question I would like to start with the general rules for tax deductibility.
As I discuss in the series Home Business Taxes - A Tax Planning Opportunity, the Income Tax Act (ITA) has a general rule for deducting a business expense.
An expense is deductible if:
- it was made with the expectation of profit;
- you have original source documentation that can be shown to a tax auditor;
- it is reasonable for the circumstances; and
- it is not personal in nature.
This means that unless the item is specifically subject to limitations or disallowed in the ITA, it is deductible.
So if you are going to claim uniform expenses on Line 9270 of Form T2125 Statement of Business or Professional Activities, it would be wise to follow CRA's guidelines regarding uniforms for employees.
CRA's publication IT-470R Employees' Fringe Benefits explains that the uniform must be distinctive and required to be worn while working or required for safety protection.
This suggests to me that if you have ordinary dress clothes that you could wear elsewhere, the expense would not be deductible.
Generally, uniforms are not considered a taxable benefit to the employee.
You should be aware that if audited, the burden of proof lies with the taxpayer who has to disprove CRA's (re)assessment of taxes ... ... so you should be prepared to explain and show to the tax auditor how the expense contributed to earning business income.
I hope this information helps you decide whether uniforms are deductible in your instance.
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