Do you know which tax deductions you might qualify for?
It’s important to make sure you take whatever deductions you’re entitled to so you can maximum 2018’s earnings.
“Don’t assume you can only take deductions if you own your own practice,” said Caylon Ellis, CMT, owner of a massage practice in Carlsbad, California. “Deductions vary if you are self-employed, have a home office, do outcalls, work as an independent contractor, or work as an employee.”
No matter your status, Ellis recommends hiring a certified public accountant to make sure you are not missing anything. “Another bonus … is their fees are tax-deductible,” she added.
The article is mean to be a general guide for deductions you should consider; it is not a replacement for legal or financial advice. Here are seven areas to consider as you prepare to submit your return.
1. Ordinary and Necessary
“Tax write-offs include anything ordinary and necessary to run your business as a massage therapist,” Ellis said.
“Some of the big ones in this category are your massage table, linens, lotions, oils, creams, bolsters, and tools such as hot stones.” You can also include optional accessories such as table warmers, fleece face cradle or table covers, blankets and aromatherapy.
What the IRS says: An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business.
2. Home Office
If you practice massage out of your home, the home office deduction can bring you tax savings—but there are limitations on qualifying for it. “The business space has to be used strictly for business purposes,” said Gail Rosen, a certified public accountant. “And it usually will not work if you are renting an office elsewhere. The home office cannot be for your convenience.”
What the IRS says: If you use part of your home for business, you may be able to deduct expenses for the business use of your home.
3. Work Wardrobe
“Self-employed massage therapists do not have uniforms, but that does not mean you can’t write off clothes purchased if you wear them specifically for work,” Ellis said.
One way to ensure work clothes are deductible is to have your logo printed on them, she added. “These can also make great gifts for clients and serve a dual purpose to advertise your business.”
What the IRS says: Deductible clothing must be specifically required by your employer and is not suitable for taking the place of your regular clothing.
4. Driving for Business
If you use your vehicle for outcall massage, you can use either the standard or actual method to compute your automobile expense tax deduction, said Rosen.
The standard method, she explained, is 54 cents per business mile, plus tolls and parking fees. With the actual method, you add up your expenses and then multiply by the percentage of time you use your vehicle for business.
“I recommend that the massage therapist try both methods to see which one generates a better tax deduction,” she said. She also noted that there are restrictions on switching between methods after the first year, and that a written mileage log is mandatory.
What the IRS says: If you use the car for both business and personal purposes, you may deduct only the cost of its business use.
5. Continuing Education
In addition to licensing fees and professional association membership dues, you can deduct the cost of continuing education.
“Also, any expenses you incur while continuing your education,” said Joshua Zimmerman, president of Westwood Tax & Consulting LLC in Rockville Centre, New York. “That might include books, videos, classes, seminars and even travel costs from traveling to and from those classes or seminars.”
What the IRS says: Your expenses must be for education that (1) maintains or improves your job skills or (2) a law requires to keep your status or occupation.
6. Promotional Costs
“Advertising is a necessary deduction for any business,” said Ellis. “Be sure to write off the cost to host your website, the fees if you hired a web designer, any print advertising or brochures, and the cost of services such as Google AdWords.”
Events, such as an open house, can also be subject to tax advantages. Any refreshments purchased for the event and fliers to promote the event can be deducted, Ellis said.
Have gift certificates available for purchase at your event, Ellis said, and “don’t forget to write off the cost of printing the gift certificates.”
What the IRS says: You generally can deduct reasonable advertising expenses that are directly related to your business activities.
7. Your Own Retirement
“One of the best deductions is the SEP IRA, which is a contribution that the self-employed therapist can make into an IRA based on the profitability of the business,” said Abby Eisenkraft, CEO of Choice Tax Solutions in New York, New York.
“The money grows tax-deferred until it’s tapped after [you turn age] 59-and-a-half. The contributions immediately reduce your taxable income on the federal and state level.”
What the IRS says: You may deduct payments for self-employed health insurance, and contributions to qualified retirement plans.
About the Author:
Caylon Ellis, CMT, owns Caylon Ellis Therapeutics in Carlsbad, California. Gail Rosen is a certified public accountant. Josh Zimmelman is president of Westwood Tax & Consulting in Rockville Centre, New York. Abby Eisenkraft is CEO of Choice Tax Solutions in New York, New York.