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As a hairstylist, you are not just a creative professional but also a businessperson. Understanding the financial aspects of your profession, particularly tax deductions, can significantly impact your bottom line. This guide will walk you through the top 14 tax deductions that hairstylists can claim to reduce their taxable income and increase their savings.
Investing in your skills and knowledge is crucial in the hairstyling industry. Fortunately, the IRS allows you to deduct expenses related to education and training that maintain or improve your skills. This includes costs for attending hairstyling seminars, workshops, and classes.
Remember, the training must be directly related to your current business. For example, a hairstyling course would be deductible, but a course in graphic design would not be.
As a hairstylist, you need various tools and supplies to provide your services. Items like scissors, combs, hair dryers, and styling products are all essential to your work. The good news is, these are all tax-deductible expenses.
Keep in mind that if the equipment will last for more than a year, like a high-quality pair of scissors or a salon chair, it may need to be depreciated over time rather than deducted all at once.
If you rent a chair in a salon or lease a space for your business, you can deduct these costs. This also includes any utilities you pay, such as electricity, water, and even Wi-Fi.
For those who operate their business from home, you may be eligible for a home office deduction. However, the space must be used exclusively for your business to qualify.
Building a successful hairstyling business requires effective marketing. Whether you're paying for online ads, printing flyers, or maintaining a business website, these costs can be deducted. Even smaller expenses, like business cards or promotional items, are deductible. Just make sure to keep detailed records of all your advertising expenses.
Business insurance premiums are another deductible expense. This includes liability insurance, property insurance, and even health insurance if you're self-employed. It's important to note that personal insurance premiums are not deductible. Only those related to your business can be claimed.
Professional fees, such as those paid to accountants, lawyers, or consultants, are deductible. If you hire a professional to help with your taxes, for example, you can deduct their fee. However, these fees must be directly related to your business. Personal legal or accounting fees are not deductible.
As a hairstylist, you likely need various licenses and permits to operate legally. These costs are fully deductible. This includes your cosmetology license, business licenses, and any permits required by your local government.
If you travel for work, such as attending a hair show or visiting a client, you can deduct these costs. This includes airfare, hotel stays, meals, and even tips. However, the trip must be primarily for business. If it's a vacation with some business activities, you may only be able to deduct a portion of the costs.
If you use your vehicle for business purposes, such as driving to clients or picking up supplies, you can claim a deduction. You can choose to deduct actual expenses or use the standard mileage rate.
Remember, only business use of the vehicle is deductible. Commuting to and from work is not considered a business expense.
If you have employees, their wages are deductible. This includes salaries, hourly wages, bonuses, and commissions. However, payments to independent contractors are not considered wages. These are reported separately on your tax return.
If you contribute to a retirement plan, such as a SEP IRA or a solo 401(k), these contributions are deductible. This can be a significant deduction for self-employed hairstylists. Keep in mind that there are limits to how much you can contribute and deduct each year.
If you have a business loan, the interest you pay on that loan is deductible. This can help offset the cost of borrowing to start or expand your business. However, the loan must be used for business purposes. Interest on personal loans is not deductible.
Many hairstylists overlook the fact that they can deduct certain taxes. This includes property taxes on business property, payroll taxes, and even the cost of business licenses and regulatory fees. Remember, federal income taxes and taxes on personal property are not deductible.
If you are self-employed and pay for your own health insurance, you may be able to deduct your premiums. This is a valuable deduction that can significantly reduce your taxable income. However, you can only take this deduction if you are not eligible to participate in a health plan through your spouse's employer.
Understanding and taking advantage of these tax deductions can help you save money and invest more in your hairstyling business. Remember, keeping detailed and accurate records of all your expenses is crucial for claiming these deductions. When in doubt, consult with a tax professional to ensure you're maximizing your savings and staying compliant with tax laws.
Brad Thibeau is the Head of Partnerships at Everlance, and has held that role since 2021, with a focus on helping self employed people save time and money on their taxes.
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