Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether a self-employed personal trainer can deduct the cost of specialized gymnasium clothing as a business expense.
Position: Question of fact.
Reasons: Expenses incurred by an individual to purchase clothing are considered to be "personal and living expenses", which are not deductible in computing business income pursuant to paragraph 18(1)(h) of the Act. However, a self-employed individual earning business income may be permitted to claim capital cost allowance in respect of certain clothing and costumes, provided they are usable only for business purposes. For example, a wardrobe acquired by an artist specifically to earn self-employment income and which is used solely for that purpose, would be included in Class 8. Since gymnasium clothing is generally usable for personal purposes, the self-employed individual is not entitled to any deduction in respect of its cost in computing business income under the Act.
XXXXXXXXXX 2004-006313
Kathryn McCarthy, CA
May 14, 2004
Dear XXXXXXXXXX,
Re: Self-Employed - Deduction of Specialized Clothing
We are writing in response to your e-mail of February 18, 2004, and our telephone conversation on May 6, 2004 (McCarthy/ XXXXXXXXXX), concerning the above-noted issue.
You described a situation in which a self-employed "personal trainer" wears specialized gymnasium clothing with a business logo for the purpose of earning income from that business. In your opinion, the cost of this specialized clothing should be deductible as a business expense by the self-employed individual because it is only used for business purposes.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. We are, however, prepared to provide the following general comments.
In general terms, expenses incurred by an individual to purchase clothing are considered to be "personal and living expenses", which are not deductible in computing business income pursuant to paragraph 18(1)(h) of the Income Tax Act (the Act). In certain circumstances, however, a self-employed individual earning business income may be permitted to claim capital cost allowance in respect of certain clothing and costumes, provided they are usable only for business purposes. For example, a wardrobe acquired by an artist specifically to earn self-employment income and which is used solely for that purpose, would be included in Class 8 of Schedule II of the Income Tax Regulations (the Regulations). The rate of capital cost allowance for Class 8 is 20% and is calculated on a declining balance, pursuant to subparagraph 1100(1)(a)(viii) of the Regulations. In our view, since the clothing described in your e-mail is generally usable for personal purposes, the self-employed individual is not entitled to any deduction in respect of its cost in computing business income under the Act.
The above noted publication is available on our website at www.cra-arc.gc.ca. We trust our comments will be of assistance to you.
Yours truly,
Randy Hewlett, B. Comm.
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2004
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2004
Email this Content