Sep 17, 2024
A Rolex is often considered the ultimate luxury item, but it comes at a hefty price. When you're looking at spending $10K on some bling, naturally you want to find a way to justify the purchase — and writing off your watch may seem like a great idea.
After all, why not claim it as a business expense and get Uncle Sam to subsidize it — especially if you're in the public eye and can claim you need the watch to build your brand?
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The reality, though, is that while the tax code may have some loopholes, you can't just write off anything and everything by claiming it's for "business." Here's what you need to know before getting ahead of yourself.
What can you write off?
The internet is rife with videos of social media personalities claiming they've written off all sorts of things. Sadly, if many of those videos are true, they're probably breaking tax laws and could soon have the IRS knocking on their door.
A write-off isn't a magic wand that erases your tax liabilities. It's another term for a tax deduction, and it refers to a deductible expense a specific law allows you to subtract from your taxable income.
Common write-offs or deductions include mortgage interest, interest on student loans and business equipment. Clothing and accessories can be write-offs, but only in very limited circumstances. Sadly, luxury watches like a Rolex are not on the list.
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The rules for deducting clothing and accessories
The rules for writing off clothing and accessories are simple. You must meet the following criteria:
- The item must be necessary or essential to do your job
- The item must not be suitable for everyday wear outside of work
The IRS has allowed deductions for things like theatrical costumes worn by a working actor in a play. It's also allowed deductions for hard hats. These items meet the criteria because people aren't wearing their hard hats or theatrical costumes around town. Both of these clothing and accessory examples are also essential for the work to be done.
A Rolex, on the other hand, is obviously suitable for everyday wear outside of your job. Since it doesn’t meet the criteria, you can't claim a deduction for its purchase. This is true even if you'll never wear it outside of work.
In fact, in Court of Appeals case Pevsner v Commissioner, the court prohibited an Yves Saint Laurent store manager from deducting designer clothes she was required to wear to work, even though she never wore them elsewhere given her modest lifestyle.
The court ruled that even if she didn't personally wear the items, the rule about suitability for everyday wear wasn't a subjective one. Pevsner still had the option to wear the clothing for ordinary use outside of work.
While it may be bad news to find your Rolex isn't deductible, it's better to discover this now before you shell out the cash and don't get your anticipated tax break — or before you find yourself in tax court to learn the hard way that you can't write off just anything.
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Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
