Whether you rent a booth or own a salon, managing your taxes as a self-employed stylist doesn’t have to be stressful! Check out our success tips for helping you keep more of your hard-earned money with confidence and clarity.
Independent Contractor or Business Owner?
In the eyes of the Internal Revenue Service (IRS), you’re both. Unlike a traditional W-2 employee whose taxes are removed per paycheck, self-employed stylists are responsible for calculating and sending money to the IRS.
The taxes you end up paying will depend on three factors: how much you earn, marital status, and the state in which you operate. You’ll typically use a Schedule C tax form to report your income and business expenses.
An easy way to stay on top of your tax obligations is by making quarterly estimated tax payments. This helps prevent a large tax bill at the end of the year and any money left over will be refunded to you.
Document Checklist
In order to file your taxes seamlessly, you’ll need information from the following documents.
- W-9, 1099 or complete record of annual income
- Business deductions
- Documentation for dependants (Social Security card & driver’s license)
- Form 1040
- Schedule C and Schedule SE
- Copies of Quarterly Tax Payment Vouchers (if applicable)
What Counts as a Deduction?
The IRS looks for two things when it comes to beauty industry-related deductions: Is it a business expense that keeps your daily operations running or an investment to help your business grow?
While there are many tax-deductible items, there may be a limit to the amount you can claim, so be sure to double-check on the IRS website or with your accountant.
Common Deductions for Stylists
Tools & Supplies
This is likely one of the easiest and most common deductions you may include.
- Scissors & Shears
- Blow dryers & styling tools
- Chairs, stations, sinks, & mirrors
- Haircare and styling products
- Capes, smocks & aprons
Vehicle Use
Keep track of your mileage used for business-related trips like client appointments or work-related errands. Note, this does not include consistently commuting to a primary workplace.
- Gas & Maintenance
- Parking & Tolls
- Vehicle Depreciation
- Auto Insurance Premiums
- Vehicle Registration & Licensing
- Public Transportation
The business standard mileage rate is 67 cents per mile, but this number may be updated each year.
Continued Education & Professional Development
The IRS recognizes continuing education as crucial in running a successful business.
- Workshops & Seminars
- Trade Shows
- Color & Styling Classes
- Industry Certification Programs
- Online courses & Webinars
- Professional Magazine Subscriptions
Licensing
There are certain licenses that must be obtained in order to run a successful salon. The costs associated with keeping these licenses up-to-date can be added to your deductions.
Health Insurance
While health insurance can be costly on your own, self-employed professionals can typically deduct medical, dental and vision insurance premiums. However, if you receive a government subsidy for your health insurance, you would deduct the amount you pay, not the total monthly cost of the plan.
Business Operating Expenses
Expenses related to running your “office” can be deducted.
- Salon Space or Chair Rent
- Utilities & Maintenance
- Basic Business Equipment
- Property Improvements
If you run your business out of your home, you can use the home office deduction. Whether you rent or own, this applies to the space you use exclusively for your business.
Calculating Your Home Offer Tax Deduction
1. Deduct a standard amount per square foot
or
2. *Deduct expenses like mortgage interest, utilities, repairs, and depreciation
*When using this method, be sure to carefully track your expenses throughout the year and save any receipts and documents to support your deduction claim.
Advertising & Marketing
Any money spent towards growing your business can lower your taxable income.
- Buy Local Ads
- Printing Business Cards & Flyers
- Digital Advertising (Facebook, Google, etc.)
- Website Design & Maintenance
Professional Services
As your business grows, you may find yourself seeking assistance from
- Business Cleaning Services
- Laundry Services
- Payroll Management
- Accounting & Bookkeeping
- Legal Consultations
- Professional Tax Assistance
What About Sales Tax?
If you sell goods in one of 45 states, you will be responsible for collecting a filing taxes with your state government. A seller’s permit will be required to legally collect sales tax. To apply, please visit your State Department’s website. There may also be a local sales tax to account for, so be sure to check your county government’s website.
Tips to Prepare for Tax Season
With careful planning, tax season can be a breeze. Here are a few best practices:
- Keep detailed records throughout the year, including receipts related to supplies, rent, and other business expenses.
- Separating your business and personal finances will streamline the tax process and make it easier for you to distinguish between transactions.
- Utilize accounting software to track your income and expenses.
- Seek professional advice if you encounter difficulties to ensure that you and your business can effectively navigate tax season.
With the right knowledge and preparation, you can confidently take control of your taxes. By keeping detailed records and understanding your deductions, you’ll set yourself up for a smooth and stress-free tax season. Remember, investing in professional guidance when needed can save you time and money in the long run. Here’s to mastering your finances and building a strong, sustainable business!
