Fashion purchases tax deductible? What if I make YouTube reviews?

[TorontoGirl]

Hi everyone,

I'm a 33 year old female living in the Toronto suburbs and am new to FI and am really interested in building up my wealth. I currently live at home and have about 55k saved (this includes TFSA amount). I don't want to move out since I'd rather pay my parents' mortgage than the landlord's mortgage. I'm looking to move to SV as soon as I get a job and want to continue living the frugal way.

Full disclosure: I went through depression and anxiety and shopping and eating out was my biggest coping mechanism. Right now, after over a year's worth of treatment, I've stopped shopping and am starting to cut down on eating out. I still have about 40 dresses, multiple skirts, tops and light 'fashion' jackets (read: impractical) with their tags on them and am trying to unload or wear them.

I'm going through the standard: closet full of clothes but nothing to wear.

I'm currently working in the corporate world and would like to buy some high quality neutral staples that'll last me a long time. I watched a Toronto YouTuber who stated that she only gets her income from YouTubing and that she gets tax deduction on her clothing purchases. Would that also apply to me if I buy something and review it on YouTube?

Thanks in advance,

[I'm a red panda]

I'd recommend talking to a Canadian tax attorney.

My basic understanding is YouTube would need to be a job, and the clothes serve the primary purpose of your job (not personal) to take a deduction. So, no, unless you built  a really successful channel
 Likelyother YouTuber is wrong. Or has a very successful channel where it is truly a business

[reeshau]

Yes, before you try to take this step, you need a professional opinion.

Assuming you aren't established yet, in the US this would likely be considered a hobby, and the deductions you take for expenses from the hobby are limited up to the money you make from it.  So you can't just post videos to an audience of 5 and deduct your wardrobe.  (in the US)  Unlike so much in the tax code, this makes sense.

[Dictionary Time]

Yes, before you try to take this step, you need a professional opinion.

Agree with that.  But even if it turns out to be possible, I would question if the math works out.  Presumably, you'd be buying pricey items to make your reviews worth watching.

So ...  $100 top (less 20% taxes) = $80
Thrift store top = $40 or less already

Consulting with a tax person is going to take some money off the top, too.  If they say "no, don't try it", you're out that.  If they say "yes", it will be quite a while until you recoup the fee.  It would also make your return more difficult on an on-going basis.

And you wouldn't have to worry about flagging yourself for an audit if you avoid the idea.

[SnackDog]

I don't know way up there in frozen Mooseland, but down here in Trumplandia, the IRS will allow deductions for work clothes only if  1) they are mandated by your employer or to get your job done and 2) they are unsuitable for use outside work.   This pretty much limits it to stuff like safety glasses, boots, harnesses, fire-retardant coveralls, etc.  I suppose if your employer forced you to buy a ridiculous fashion outfit that you would be too embarrassed to wear elsewhere you could try it.  As I understand it in the US, the IRS can audit you and disagree with your deductions but there is no penalty for trying so you have nothing to lose as long as your explanations are plausible.

[Sibley]

If these clothes you have still have tags, can you return any to the store for a refund? Money back + more room in closet.

[TorontoGirl]

Yes, you can deduct the clothes as a business expense if the business is about reviewing clothes, and the reviewing clothes business actually makes money. However, you can only deduct a business expense from income from that business. You can't deduct a business expense from income from someone else's business, that makes absolutely no sense.

I'm self employed in two separate industries.
My deductions each apply only to the income from the industry that they are related to. It's not like my income is all lumped together and my expenses are all lumped together and then deducted from the total.
The medical professional expenses are deducted from my medical income.
My consulting expenses are deducted from my consulting income.

You would have to be remarkably successful at reviewing clothes to make enough money to buy them and deduct them as an expense. Also, if you were that successful, I would expect that you would mostly be given clothes for free to review.

Thanks for the replies, everyone.

I know that FTC has certain regulations in Trumplandia but I don't think that Canada does. I guess it's because we don't have a lot of big fashion bloggers here for CRA to take notice. A lot of Canadian vloggers don't usually state c/o if they're given freebies, whereas in the US they do otherwise they risk being fined.

Malkynn, thank you so much for your response. I called CRA twice and spoke to someone in the business-related department, and neither agent I spoke to was able to give me an answer. I'm guessing that this is a loophole a lot of people don't know about. So, let's say that I made $300 from YT or blogging and use $250 to buy clothes, then I can deduct that amt from $300, and would only be taxed on the remaining total of personal income? Couldn't I just do a sole proprietorship and combine all my income streams and deduct clothing expenses from that as long as I'm making some money from YT/blogging?

I also eat out a lot (cutting down on this by the way) and I was wondering whether I should make a sole proprietorship just to get that expense deducted. I don't keep my receipts but I always pay by either debit or credit as I never carry any cash on me...

[Goldielocks]

I would say that Canada not having a precedent for vloggers is actually NOT in your favor.

I know that even people that are anchors for the news do not get tax deductions for their wardrobes.... and the CRA is on the lookout for people claiming expenses that are not normally allowed, so you would trigger a lot of scrutiny.

I think you might be able to have a tax write off, if you can show that you do not use the clothing outside of the Vlogger work.   Even so, I wonder how all the "unboxing" videos get taxed (or not) for the goods bought.   I suppose if you can document that you give away or discard everything that you review, it could work.

Here is an example -- normally condoms are not allowed as tax deductions.  However, if you are filming a video or running a sex club that requires condoms, and it is a for-profit business, then condoms are allowed tax deductions, just like medical exam gloves are.   Obviously needed for the business, and obviously not used again or keep most of its value after the business use ends.

I think that you would be better off to explain that your expedited shipping or amazon prime charges (to deliver the clothing, to allow faster reviews, when slow shipping is free) are business deductions, but not clothing that you keep.

[TorontoGirl]

Spoke to an accountant today. Though he wasn't 100% sure, he explained to me that the revenue made from YT can be used for shopping for 'reviews' because it fuels more viewership and thus more revenue. But this cannot be combined with other incomes to make purchases and then use as writeoffs.
I need to look into this more deeply.
I mean, there's a ton of tax loopholes and I don't know why people don't take advantage of them:
-writing of certain sqft of your house for 'office space'
-writing off certain vehicle usage as 'business'

I know that I'm writing things in 'quotes' and it may seem like I'm trying to do something sketchy, but these things could easily fall under the YT or self-employed categories. People are just very accounting ignorant.

The accountant and I ruminated on how the Tax Code is as think as a phone book and is written in such technical jargon. It reminds me of Marcuse's One-Dimensional Man and how a lot of things are purposefully written vaguely and in a highly technical manner so that people can't or don't bother to understand. Also reminds me of the book The Big Short where the CDOs are not easily understood by the public thus causing the housing crash.

If I try to decipher the Tax Code and make a 'for dummies' version, I wonder how much time this will take me.

[Goldielocks]

You need to be exact about the vehicle usage written off for business.   Use a log book and record the date, the start od the end od and the purpose.

Meeting with your business accountant, for example, is a good example of business usage.   Just randomly writing off 5k km each year is not.

Note that it is a deduction against your business income, so you need a viable business income first.  Note again that the home sq.ft calculation can not be used to increase a business loss, and also, that if you RENT, there tends to be more opportunities to write off home / business expenses.

I do think that a lot of people do this, especially the home sq.ft. 

--  the Canadian Tax code is nothing like the unreal loop holes in the US tax code.  Here we go to an accountant, there you go to a lawyer to complete your taxes.

[Mmm_Donuts]

I've been self employed for many years (in Canada). You will raise red flags with the CRA if your expenses are almost equal to your income year after year. In other words, if you make $300 a year on YT (which will obviously [to them] not be your sole source of income) and deduct $295 in expenses they will think you do not have a real business and probably flag you. There is very little point in doing all of this to try and cut your taxes on $300 a year of income (so, you are willing to start a YT channel and do all the work associated with that to save ~$15 in tax per year??) You won't be able to use the deductions on your regular T4 income.

[LiveLean]

I used to work in television and our station manager made the female on-air talent wear hideous pastel colors the ladies called "Skittles" clothes, stuff they rarely wore anywhere else. I remember talking to a couple of them who especially resented it because even though accountants told them the clothes were generally tax-deductible, that's not the same as being reimbursed.