Who doesn’t know it? The new suit, the tie and a new pair of shoes. Bought for the office job. Also worn once at a best friend’s wedding. Tax deductible? Probably not. Items which, objectively speaking, can also be used privately are subject to a tax deduction ban, even if they serve to promote the profession. But there is a fine line. So-called typical professional clothing, such as that of a mortician or chimney sweep, is deductible. In the opinion of the courts, it can be ruled out that this is also used privately. So far so clear?

What does it look like for Creator:innen?

In a ruling dated November 13, 2023 (case no. 3 K 11195/21), the Lower Saxony Tax Court dealt with this issue: the tax deductibility of clothing and accessories for influencers. The plaintiff operated a fashion and lifestyle blog on various social media platforms and its own website. She received products from companies to promote them and also bought clothes and accessories such as handbags from well-known brands. The question was whether these expenses are tax-deductible as business expenses.

Arguments of the tax office and decision of the court

The tax office rejected the business expense deduction because the purchased items could also be used privately and a clear separation between private and business use was not proven. The court agreed with this reasoning and dismissed the claim. It found that it was difficult to draw a clear line between private and business use in the case of ordinary clothing and fashion accessories. According to § 12 No. 1 of the Income Tax Act (EStG), expenses for living expenses that are related to economic or social status are not deductible, even if they are incurred to promote a profession or activity. The court emphasized that the possibility of private use is already sufficient to exclude tax consideration.

Implications of the ruling for creators

The ruling sometimes has far-reaching consequences. They must now pay particular attention to how they treat clothing and accessories for tax purposes. It is not enough to simply purchase them for business purposes. Instead, they must be able to prove that they are used exclusively for their professional activities. This means that they must clearly separate business and private use in order to avoid tax problems. In practice, this is likely to prove difficult, especially with everyday objects. Tax advisors are likely to regularly find themselves in the dilemma of having to inform their clients that they are not allowed to deduct the purchased items for tax purposes, even though they use them to present themselves in front of the camera.

Practical note

Those affected should carefully document which clothing and accessories they use exclusively for their professional activities. This can be achieved by clearly separating business and private use and keeping a detailed record system. From a conservative point of view, it is certainly advisable to initially waive the deduction of business expenses and to fight for the deduction by way of an objection procedure. This avoids unwanted additional payments or visits from tax investigators.

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