The April 15 deadline for income tax returns and first quarterly payment is just a couple of months away. Do you know which tax deductions you might qualify for? Our tax tips can help.
“Don’t assume you can only take deductions if you own your own practice,” said Caylon Ellis, C.M.T., N.C.T.M., N.K.T., P.-D.T.R., 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 (CPA) to make sure you are not missing anything.
“Another bonus … is their fees are tax-deductible,” she added. It’s important to take whatever deductions you’re entitled to so you can maximize 2016’s earnings.
Here are nine tax tips to consider as you prepare 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.
2. Home Office Tax Tips
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 in Martinsville, New Jersey. “And it usually will not work if you are renting an office elsewhere. The home office cannot be for your convenience.”
3. Office Space
“If you have your own office space, you can deduct your rent, utilities, all of the furniture and other supplies you purchase for your space,” said Ellis. “Don’t forget to purchase your bottled water for clients, mints, and snacks you keep in the office on your business credit card. These are often overlooked write-offs.”
4. 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.”
5. Employees Can Take Deductions, Too
For an employee of a practice, ordinary and necessary job related items you must purchase yourself—such as uniforms, liability insurance, or continuing education for licensure—“are classified as miscellaneous itemized deductions,” said Rosen.
You must itemize your deductions instead of taking the standard deduction, and the total must exceed 2 percent of your adjusted gross income.
6. 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] 59½. The contributions immediately reduce your taxable income on the federal and state level.”
7. 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.”
8. 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.”
9. 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.
About the Authors
Caylon Ellis, C.M.T., N.C.T.M., N.K.T., P.-D.T.R., owns Caylon Ellis Therapeutics in Carlsbad, California.
Gail Rosen is a certified public accountant in Martinsville, New Jersey.
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.