Allowance for Clothing

The department has determined that an advance or allowance for clothing is subject to tax unless it represents a reimbursement. The employee must report all reimbursements and allowances as compensation unless:

The expenses for which the employee is reimbursed are allowable business expenses; and

The employee is required to and does account for the expenses to his employer; and

The employee is reimbursed by his employer in the exact amount of the allowable business expenses; and

The employee does not report the expenses on PA-40 Schedule UE, Allowable Employee Business Expenses.

The costs of purchasing and maintaining uniforms and work clothing to protect you from bodily injury are allowable business expenses under PA PIT law if the uniforms and clothing are both:

Of a type required by the employer to be purchased as a condition of continued employment; and

Not adaptable to general usage.

An allowance is considered taxable Pennsylvania income if the employee receiving the allowance can use it at his discretion. An allowance for work clothing is included in Pennsylvania compensation, and, thus, is taxed as income. However, a reimbursement paid to the employee for amounts he expended for a particular purpose is not income. Reimbursements for the purchase of work clothing are not income and costs in excess of the reimbursement are deductible to the employee.

Compensation does not include benefits payable by an employer or labor union under a supplemental unemployment benefit plan, whether payable on a periodic basis or in the form of cash, services, or property. Refer to 61 Pa. Code §101.6(c)(14).