Understanding Section 162: Why Not All Business Expenses Are Deductible

For social media influencers, the lines between personal and business expenses can blur quickly. Whether it's buying clothes for a photoshoot or getting your hair done before recording a video, many influencers assume these costs are deductible. However, Section 162 of the Internal Revenue Code sets clear boundaries on what expenses qualify as "ordinary and necessary" business expenses, and not all personal grooming expenses make the cut.

What Section 162 Allows

Section 162(a) allows deductions for "ordinary and necessary" expenses incurred in the pursuit of a trade or business. An "ordinary" expense is common and accepted in your field, while a "necessary" expense is helpful and appropriate for your business. This provision covers a wide range of business-related costs, including advertising, rent, supplies, and salaries. However, the IRS draws a firm line when it comes to expenses that could be seen as personal.

Why Getting Your Hair Done Isn’t Deductible

If you're a social media influencer, you might feel that looking your best is part of your brand and therefore a business expense. While it's true that your appearance is key to your content, the IRS generally views personal grooming costs—like haircuts, manicures, and makeup—as personal expenses, even if they also benefit your business.

The reason? These expenses are generally incurred by individuals in everyday life, regardless of their profession. You might need to look good for your brand, but the IRS doesn’t allow deductions for expenses that provide a personal benefit beyond business purposes. Haircuts, for instance, are something everyone needs, not just influencers. Therefore, they don’t meet the "ordinary and necessary" requirement under Section 162.

Case Law: Clarifying What Qualifies

The courts have supported the IRS in denying deductions for personal grooming. Two cases are particularly relevant in this context:

1. Hynes v. Commissioner, 74 T.C. 1266 (1980)

   
   

   In this case, a television news anchor attempted to deduct the cost of her clothing, makeup, and hairdressing as business expenses. The court ruled that these were personal expenses, as they could also be worn outside of work. This case highlighted that personal appearance costs are not deductible, even if they are helpful for one's professional image.

2. Smith v. Commissioner, 40 T.C. 591 (1963)

   
   

   In another pivotal case, a fashion model sought to deduct the cost of maintaining her personal appearance, including clothing and grooming. The court held that such expenses were inherently personal and did not qualify as deductible business expenses under Section 162. This case further cemented the IRS’s stance on personal grooming expenses.

The Fine Line: What Is Deductible?

While general grooming isn’t deductible, some appearance-related costs can be. For example, if an influencer purchases makeup strictly for use in their content, that specific makeup may qualify as a business expense. However, everyday grooming or clothing, even if it enhances your professional image, usually will not. The IRS wants to see a clear connection between the expense and your business activities—and no overlap with personal benefits.

Understand this:

Section 162 is a powerful tool for deducting legitimate business expenses, but it doesn’t cover everything. Influencers and professionals alike must be careful when claiming deductions for personal grooming, as these are generally considered personal, non-deductible expenses. The courts have upheld this principle time and again, reminding taxpayers that even if an expense helps your business, it doesn’t always qualify for a deduction.

Understanding the limitations of Section 162 can help you get smarter about taxes! (cheesiness added for effect)