One of the most frequent questions we get asked is whether this or that can be recorded as a business expenses – Dry cleaning, business suits, car washes, gym memberships, etc. The simple answer is: No.
These costs are not considered business transactions, but are instead classified as personal care expenses. Unfortunately, even if it is a pseudo-requirement of your position or business to present a specific image, the IRS does not allow you to deduct personal expenses as business transactions, including personal care costs.
For example, a business laptop is a viable expense because the utility of the unit is primarily for business purposes. A gym membership’s utility is not for business purposes, and cannot be justified as such. The same with a business suit – Because the suit can also be worn to non-work functions, the line that separates a business owner’s business and personal activities is not clear.
Making sure to only use business funds for business transactions helps to lower your audit risk – The more questionable transactions appear on the books, the more opportunity there is for questions from the tax preparer or auditor.