A July 30, 2025 Tax Court of Canada case considered whether luxury clothing expenses claimed by a commissioned employee for the 2016 to 2018 taxation years were deductible against the individual’s employment income. The taxpayer worked as a sales associate for Holt Renfrew and argued that she was required, either expressly or implicitly, to incur clothing expenses to fulfill her employment duties. The taxpayer also argued that the clothes were only used in the work environment and were depleted quickly due to wear and tear, as well as changes in fashion. To deduct expenses related to commission income or the cost of supplies consumed in employment duties, employees must have received a T2200 and be required by contract to pay for their own expenses.

Taxpayer loses – the Court found that there was no explicit or implicit contractual obligation for the taxpayer to incur such expenses. The employer consistently denied requiring employees to buy any clothing in excess of what was covered by the employer-provided clothing allowance, but rather, only required that clothes worn be clean, fresh and coordinated. No T2200 form was issued as employees were not expected to bear personal costs for work-related clothing. The Court emphasized that, while the taxpayer believed that incurring those expenses helped the taxpayer generate more commission, a strategic and economic choice is not equivalent to a legal obligation under her employment terms. No deduction for clothing was permitted.

The Court also acknowledged that work clothes may be deductible in unique circumstances and noted that it may have been possible that the clothes were used up in a season or two due to wear, tear and changes in fashion. However, that angle was not relevant as the taxpayer lost on the aforementioned grounds, in addition to not providing sufficient support that the expenditures were incurred.

What about clothing expenses for psychotherapists?

Based on Canada Revenue Agency (CRA) guidelines and relevant tax court precedents, clothing expenses are generally considered personal and non-deductible for both employed and self-employed psychotherapists, as they typically involve ordinary attire suitable for everyday wear (e.g., suits, dresses, or business casual clothing used to appear professional). This holds even if the clothing is worn exclusively for work or helps in building client trust, as it does not qualify as a business expense unless it meets strict exceptions.

• Employed Therapists: Deductions are unlikely, similar to the adapted case above. Employees must obtain a signed Form T2200 from their employer confirming a contractual requirement to pay for such expenses without reimbursement. However, ordinary professional clothing does not qualify, as it is not “consumed” in duties or depreciable like tools. Only distinctive uniforms (e.g., with a clinic logo) or protective/special clothing (e.g., for specific therapeutic hazards) might be eligible in rare circumstances.
• Self-Employed Therapists: Also generally not deductible, as CRA treats such attire as personal rather than a reasonable business expense incurred solely to earn income. Exceptions apply only to job-specific items not suitable for personal use, such as protective gear, but standard professional clothing does not qualify. Psychotherapists in private practice can claim other business expenses like office supplies or professional fees, but not attire.