Lady Gaga’s Potentially Meaty Tax Deduction

Lady Gaga wears her controversial meat dress, ...Last September, Lady Gaga caused quite a stir by showing up to the MTV Video Music Awards in a dress made entirely of meat. The episode set the blogosphere ablaze, earning Gaga admiration from the avant garde and scorn from vegetarians and other opponents of wretched excess.

Strangely enough, the meat dress and other costumes may end up saving Gaga some cash–in the form of a tax deduction. According to the IRS, “musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear.” A meat dress certainly seems to fit that description.

“Her concert wear is far enough out there that it wouldn’t qualify for everyday use,” says Andrew Blackman, an accountant at New York firm Shapiro Lobel, which specializes in representing entertainers. “I’d bet you dollars to donuts that her accountant is deducting everything she wears.”

Blackman estimates that Gaga’s wardrobe expenditures are in the low seven figures, which means she could lower her tax bill quite a bit if her accountant indeed added the cost of her clothing as a business deduction before this week’s tax deadline. Gaga’s income, which totaled $62 million last year and figures to be even higher this year, puts her squarely in the top federal tax bracket of 35%. So if she spent $3 million on clothing and costumes this year–a distinct possibility, given her proclivity for bizarre designer outfits and fire-spewing brassieres–the tax savings could add up to $1 million or so.

There is a bit of gray area, though. The IRS explicitly allows entertainers to deduct unusual outfits used for income-generating performances but frowns on deductions aimed solely at maintaining an image. That didn’t stop Ozzie Nelson from declaring his trademark cardigans as a deduction or Diana Ross for doing the same for evening gowns that were so tight she couldn’t sit down, says Blackman. In Gaga’s case, her offstage behavior is such a part of her income-generating persona any outfit she wears, even when not performing, could be seen as an acceptable tax deduction.

“She may just be the test case the IRS doesn’t want,” says Blackman. “She may be maintaining an image, but she gains so much from being somebody who has the type of image she has. If I’m her accountant, I’d be pushing the envelope.”

If Gaga’s accountant didn’t attempt to claim deductions for costumes this past year, there’s always 2011: it’s safe to say that the giant egg in which Gaga was carted to the Grammys in February doesn’t qualify as “everyday wear.”

By ZACK O’MALLEY GREENBURG (Forbes)
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