There are all sorts of small business tax deductions out there. Some are universal, which means people can claim them in just about any line of work, but this post focuses on tax deductions for self-employed hair stylists and barbers.
This doesn’t mean that you have to be the business owner of your own salon — you can be considered a self-employed stylist if you rent a booth in someone else’s salon or are issued a 1099 independent contractor form. Unless you receive a W2 tax form from your employer, you are not considered an employee by the IRS.
Note: This article is only for educational purposes. Consult with a licensed tax professional to guide your specific hairdresser tax situation.
What are hairdresser tax deductions?
When you're a W2 employee, your employer automatically takes taxes out of your pay. However, if you're self-employed, you'll need to figure out what you owe the IRS on your own.
Typically, self-employed people pay quarterly or annually, depending on how their business is structured.
The state and federal taxes you pay are based on how much you earn, your marital status and the state where you do business.
Tax deductions are a way to reduce your taxable income, so you end up paying less in taxes.
For example, if you earn $10,000 in a year and have $2,000 in deductible expenses, you would only need to pay taxes on $8,000 since the rest of it is considered deductible.
In other words, hair stylist tax deductions are a nice way to save money on your taxes because they reduce the taxable amount and lower your tax payments.
Typically, you would use the Schedule C form to report income and expenses from your business.
What can a hair stylist claim on tax write-offs?
Some taxpayers mistakenly think every expense can be used as a tax claim. While that would be terrific, most hair stylist tax write-offs need to be either:
- True business expenses for day-to-day operations or,
- Directly related to helping your business grow
According to the IRS, a deductible business expense must be both “ordinary and necessary.” An ordinary expense is considered commonplace in your industry and that you need to run your business. Similarly, necessary expenses are helpful and appropriate costs for your business.
Also, even when something is tax-deductible, there may be limits on how much you can claim.
For example, you can deduct only so much for automobile mileage, business-related entertainment, charitable donations and even your retirement plan.
Check the IRS’s website or ask your accountant about what is and isn’t deductible.
10 hair stylist tax deductions that may apply to your business
So what can a hairdresser claim to reduce their income tax? Let’s take a look:
1. Tools and supplies
When it comes to hair stylist tax deductions, tools and supplies may be the easiest and most common option. Items can include scissors, smocks, shampoo and conditioner, blow dryers, sinks, mirrors and styling chairs.
All your tools of the trade, from combs to clippers, are likely deductible. Just make sure to keep your receipts in case you get audited.
2. Car mileage and vehicle use
Car expenses like gas, parking and mileage can be tax write-offs if they are directly related to your travel for work, excluding commuting. If you take public transportation, your expenses are similarly deductible.
This is good news if you have a mobile hairdressing business or if you’re on a work-related errand like a supply run. You can deduct certain things like purchasing your vehicle, gas, insurance, licensing, tolls, parking and even your car’s depreciating value.
In an unusual move, the IRS decided to bump up the standard mileage rate during the 2022 tax season due to rising fuel costs. You can deduct 58.5 cents per mile when you use your car, truck, or van for business purposes from January 1 to June 30, 2022. From July 1 through December 31, 2022, the deduction jumps to 62.5 cents per mile.
The rules for calculating the rate are updated every tax year, so it's good to check the IRS site for the latest rate.
3. Continuing education and professional development
Keeping up with hair style trends and improving your skills is always good for business. Plus, it’s good for your taxes. Taking seminars on the latest coloring techniques, attending conventions or workshops and virtual events/webinars counts as deductible expenses.
Similarly, the IRS recognizes relevant trade magazines and professional subscriptions as related expenses.
4. Self-employment tax
As a self-employed person, you'll pay the full 15.3% self-employment tax on your income. This is because you're paying both the employer and employee sides of Social Security and Medicare taxes. Yeah, not great.
The IRS knows this isn’t really fair, so they allow you to deduct half of your self-employment tax when figuring out your adjusted gross income.
If your state or local jurisdiction requires a hair stylist license, you can write off that fee.
6. Hair stylist insurance
Your hair stylist insurance can protect you from the business risks you face when working with clients. It is also usually a deductible expense from your taxes.
Typically, you can deduct premiums for many different kinds of business insurance, including general liability insurance, business vehicles, commercial property insurance and more.
7. Health insurance
Did you know that 100% of your health insurance is one of the many deductible business expenses for self-employed beauty professionals? Like business insurance, you can deduct medical, dental and vision premiums.
As long as your spouse or employer isn’t paying for your health insurance, you can deduct the cost of your premiums. However, if you’re getting a government subsidy, you can only write off what you pay each month (not your plan's original price).
8. Office expenses
Hair stylists have lots of places they can call an office. Maybe you’re a hair salon owner with a brick-and-mortar location, or maybe you rent a chair at a salon space. Thanks to the pandemic, many hairstylists converted their spaces and started offering services from their homes.
Business expenses related to running your office can serve as tax write-offs. They might include your rent if you lease a commercial space or a chair at a salon, utility bills, basic business equipment and even some upgrades.
You can also take advantage of a home office deduction if you run your business from home.
While your workspace needs to meet certain criteria, any space you use exclusively and regularly for your business — regardless of renting or owning — can be deducted. You can calculate your deduction using either the simplified or regular method.
If you use the regular method, which involves keeping track of actual costs, business deductions can include your mortgage interest, insurance, utilities, repairs and depreciation.
9. Marketing expenses
Maybe you’re just starting, or maybe you’re looking to drum up some new business. Great news: any money you’re spending to market or advertise your business can be written off.
Hair stylist tax deductions include buying local ads, printing business cards and flyers, participating in local events and more. Digital advertising such as Facebook, Google or Yelp ads, and website design and maintenance all count.
Don’t forget the promotional swag you might give away to customers, like pens, combs or travel shampoo — they all count.
10. Professional services
You may need extra help running your business as a business owner, whether it’s cleaners who come monthly to tidy your space, to a laundry or linen service to help with chores.
For example, you may need to consult a lawyer who helps you with a client threatening to sue you for damaging their hair. Or you may hire someone to manage your bookkeeping and record your costs and earnings properly.
Whatever the case, if the fees are necessary for operating your business, write them off.
Consult a professional for more self-employed hairdresser tax deductions
There are plenty of tax deductions for self-employed hairstylists available out there. However, determining what qualifies and deducting business expenses on tax returns can sometimes be time-consuming.
It's wise to research and consult with a licensed tax professional or certified public accountant (CPA) to maximize your returns.
How NEXT Insurance helps hair stylists
We offer an easy online option to customize affordable hair stylist insurance to fit your business.
Whether you're looking for basic general liability protection or an insurance package that includes commercial property, we can help you find the right coverage at the right prices.
All you need to do is answer a few basic questions and get a free quote online. You can be insured and have a certificate of insurance in about ten minutes.